THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

I-AW  LIBRARY 


THE 

MODERN  LAW 

of 

PARTNERSHIP 

INCLUDING  A   FULL  CONSIDERATION  OF 

JOINT  ADVENTURES,  LIMITED  PARTNERSHIPS,  AND 

JOINT  STOCK  COMPANIES,  TOGETHER 

WITH  A  TREATMENT  OF  THE 

UNIFORM  PARTNERSHIP  ACT 


SCOTT   ROWLEY 

OF  THE  TOLEDO,  OHIO,  BAR 

ASSISTED   BY  THE   PUBLISHERS*  EDITORIAL   STAFF 


IN    TWO    VOLUMES 

VOLUME  II 


INDIANAPOLIS 

THE  BOBBS-MERRILL  COMPANY 

PUBLISHERS 


Copyright  1916 
By  The  Bobbs-Merrill  Company 


TABLE  OF  CONTENTS 

VOLUME  TWO 


CHAPTER  XX 

ADMINISTRATION  OF  PARTNERSHIP  AFFAIRS  AFTER  DEATH  OF 

PARTNER 

Section  Page 

615.  In  general — Dissolution  or. continuation  of  business... 808 

616.  Surviving   partner    809 

617.  Right  of  surviving  partner  to  control  firm  property  and  assets 812 

618.  Power  of  surviving  partner  to  complete  contracts 816 

619.  Effect  of  death  of  partner  on  contract  with  employe 817 

620.  Power  of  alienation  of  firm  property 818 

621.  Power  of  surviving  partner  to  make  assignment  for  benefit  of  cred- 

itors     820 

622.  Payments  to  and  by  surviving  partner 821 

623.  Status  of  partnership  real  estate — Out-and-out  conversion  into  per- 

sonalty     ' 822 

624.  Status  of  partnership  real  estate — Conversion  into  personalty  for 

partnership  purposes  only  827 

625.  Status  of  partnership  real  estate — Time  where  conversion  takes  place  833 

626.  Rights  of  surviving  partner  in  firm  real  estate 837 

627.  Rights  of  heirs,  devisees,  widow  and  personal  representatives  of  de- 

ceased partner  in  partnership  real  estate 841 

628.  Rights  of  heirs  and  surviving  partner  in  surplus  real  estate 844 

629.  Rights  in  firm  real  estate  under  Uniform  Partnership  Act 845 

630.  Liability  of  surviving  partner  and  deceased  partner's  estate  on  firm 

obligations  846 

631.  Surviving  partner's  rights  and  liabilities  as  to  deceased  partner's  es- 

tate      849 

632.  Surviving  partner  and  good  will  of  business 851 

633.  Surviving  partner  as  deceased  partner's  executor  or  administrator..  853 

634.  Partnership  administrator  under  statute 854 

635.  Winding  up  the  business   855 

636.  Interest  and  profits   857 

637.  Compensation    858 

638.  Continuation  of  business  by  surviving  partner 862 

639.  Rights  and  liabilities  of  deceased  partner's  estate,  his  heirs,  and  per- 

sonal representatives,  on  continuation  of  business 866 

640.  Executors  of  deceased  partners 869 

641.  Accounting  by  surviving  partner 870 

642.  Rights  of  creditors    871 

643.  Accrual  of  actions  872 

644.  Limitation  of  actions  against  surviving  partner 872 

iii 


669728 


IV  TABLE    OF    CONTENTS 

CHAPTER  XXI 

ACCOUNTING,    SETTLEMENT   AND   DISTRIBUTION 

Section  Page 

650.  Dissolution  usually  necessary  to  accounting  between  partners 875 

651.  Accounting  or  action  without  dissolution 877 

652.  Accounting  for  secret  profits 880 

653.  Particular  cases  on  secret  profits 881 

654.  Profits  from  independent  transactions 883 

655.  Accounting  where  partnership  is  illegal 884 

656.  Some  leading  cases  on  accounting  where  partnership  is  illegal 886 

657.  Who  may  require  an  accounting 890 

658.  Who  must  account 891 

659.  What  property  must  be  accounted  for 892 

660.  Good  will  of  firm   _. 894 

661.  Other  matters  to  be  included  in  accounting 895 

662.  Distribution,  generally 897 

663.  Rules  for  distribution — Uniform  Partnership  Act 898 

664.  Determining  partner's  share — In  general 899 

665.  Discharge  of  partnership  liabilities 900 

666.  Contribution — Repayment  of  advances 901 

667.  Compensation  for  services  and  expenses  of  winding  up  business. .. .  904 

668.  Interest  906 

669.  Lien  for  advances  or  balances 909 

670.  Apportionment  of  losses   910 

671.  Repayment  of  capital  912 

672.  Partition  of  assets  914 

dlZ.  Division  of  profits  916 

674.  Proportionate  share  of  each  partner  in  profits 919 

675.  Private  settlement 921 

676.  Assumption  of  firm  debts,  indemnity  and  suretyship 926 

677.  Settlement  by  arbitration .j.  ^6 

CHAPTER  XXn 

BANKRUPTCY  OF  PARTNERSHIP 

Section  Page 

685.  Generally— Entity   929 

686.  Test  of  solvency  of  a  partnership 932 

687.  Administration  of  unadjudicated  partner's  individual  estate 935 

688.  Partnership  and  individual  interests 939 

689.  Particular  instances  of  partnership  or  individual  ownership  or  in- 

debtedness     941 

690.  Authority  to  adjudge  partnerships  bankrupt 944 

691.  Commencement  of  proceedings   944 

692.  Result  of  proceedings  where  only  part  of  partners  join 946 

693.  Preferences  948 

694.  Order  of  proof  of  debts 950 

695.  Exception  to  general  rule — Where  no  partnership  estate  and  partners 

are  all  insolvent   951 

696.  Cases  not  recognizing  exception  to  general  rule  where  no  partnership 

estate  and  partners  are  all  insolvent 953 

697.  Proof  against  both  estates 957 

698.  Proof  between  estates 958 

699.  Costs  of  partnership  petition 959 

700.  Time  within  which  firm  may  be  adjudged 959 


TABLE   OF   CONTENTS  V 

SECTioisr  Page 

701.  Acts  of  bankruptcy  960 

702.  Particular  cases  involving  acts  of  bankruptcy  by  partnerships 961 

703.  Place  of  commencing  proceedings   962 

704.  Exemptions  in  partnership  proceedings 963 

705.  Appointment  and  powers  of  trustee  in  partnership  cases 965 

706.  Discharge  in  partnership  cases 966 

707.  Misconduct  of  one  partner  as  affecting  innocent  partner's  right  to 

discharge   970 

708.  Bankruptcy  as  dissolution  of  partnership 972 

CHAPTER  XXIII 

ACTION   FOR  ACCOUNTING  AND  DISSOLUTION 

Section  Page 

715.  Action  for  accounting — In  general 974 

716.  Form  of  remedy  and  jurisdiction 977 

717.  Defenses 980 

718.  Time  to  sue  and  limitation  of  actions 981 

719.  Parties    985 

720.  Injunction   988 

721.  Appointment  of  receiver  989 

722.  Powers  and  duties  of  receiver 994 

723.  Procedure  at  trial 997 

724.  Burden  of  proof 998 

725.  Reference  998 

726.  Manner  of  drawing  account 999 

727.  Partnership  books  and  accounts 1001 

728.  Conversion  of  assets  into  cash 1003 

729.  Charges  and  credits  1007 

730.  Decision  1011 

731.  Decree    1013 

732.  Costs 1016 

733.  Appeal — Conclusiveness  of  judgment 1018 

CHAPTER  XXIV 

CTIONS  BETWEEN  PARTNERS 

Section  Page 

740.  In  general  1022 

741.  Actions  between  firm  and  partner 1022 

742.  Actions  between  firms  having  common  partner 1026 

743.  Actions  at  law  between  partners  in  general 1029 

744.  Matters  outside  partnership 1032 

745.  Partnership  transactions  not  involving  an  accounting 1034 

746.  Action  on  express  stipulation 1035 

747.  Action  on  preliminary  agreement 1036 

748.  Partnership  for  single  transaction 1038 

749.  Action  on  agreement  for  contribution  to  partnership  fund 1038 

750.  Action  on  personal  promises  of  pay  for  services 1041 

751.  Action  upon  account  stated  or  balance  due 1043 

752.  Action  on  promissory  note 1044 

753.  Action    for   damages    for  breach   or   abandonment  of  partnership 

agreement    1045 

754.  Action  upon  one  item  unadjusted 1047 

755.  Assumpsit    1049 


VI  TABLE   OF    CONTENTS 

756.  Action  for  damages  for  fraud  of  partner 1051 

757.  Partition  and  suits  involving  real  estate 1053 

758.  Tort  actions  between  partners 1054 

759.  Trespass,  trover,  and  conversion 1054 

760.  Actions  between  partners  after  dissolution 1055 

761.  Attachment  and  garnishment  1057 

762.  Arrest  of  partner  in  civil  action 1058 

763.  Defenses    1059 

764.  Set-off  and  counterclaim  1060 

765.  Demand — Laches  1061 

766.  Venue — Time  to  sue  1062 

767.  Parties  and  trial  1062 

768.  Damages  for  breach  of  contract  of  partnership^^ 1064 

769.  Profits  as  the  measure  of  damage 1066 

770.  Other  measures  of  damage 1069 

771.  Damages  for  breach  of  contract  to  pay  firm  debts — or  not  to  engage 

in  business 1070 

112.  Judgment  and  execution 1071 

nZ.  Equitable  actions — In  general 1072 

774.  Accounting — Dissolution    1074 

775.  Rescission  of  partnership  contract 1074 

776.  Rescission  of  partnership  contract  under  Uniform  Partnership  Act  1077 
in.  Reformation  of  partnership  contract 1078 

778.  Specific  performance  of  partnership  contract 1078 

779.  Specific  performance  after  dissolution 1082 

780.  Injunctions    1084 

781.  Injunction  to  prevent  breach  of  agreement 1084 

782.  Injunction  to  restrain  change  in  the  application  of  profits 1085 

783.  Injunction  against  change  in  nature  of  partnership  business 1085 

784.  Injunction  against  commencing  legal  actions 1086 

785.  Injunction  against  dissolution   1087 

786.  Other  acts  enjoined 1088 

787.  Injunction  in  action  for  dissolution  or  after  dissolution 1089 

788.  Receiverships    1090 

789.  Receiverships  on  account  of  misconduct  of  a  partner 1092 

CHAPTER  XXV 

ACTIONS  INVOLVING  PARTNERS  AND  PARTNERSHIPS 

Section  Page 

795.  Parties  in  actions  involving  partnerships 1095 

796.  Plaintiffs— General  rule  1098 

797.  Plaintiffs — Nominal  partners   1101 

798.  Plaintiffs— Dormant  partners   1102 

799.  Plaintiffs — Wrongdoing  partner   1103 

800.  Collusion  of  third  parties  and  partners 1104 

801.  One  partner  suing  for  all 1105 

802.  Action  on  contract  made  in  name  of  one  partner 1106 

803.  Plaintiffs  where  contract  assigned 1107 

804.  Surviving  partner  as  plaintiff 1108 

805.  Plaintiffs  in  tort  actions  1109 

806.  Defendants  in  action  against  partnership — In  general 1110 

807.  Defendants — Wife — Dower  interest  1114 

808.  Defendants — Representatives  of  deceased  partner 1114 

809.  Defendants — Outgoing  and  incoming  partners 1116 

810.  Defendants — Dormant  and  nominal  partners 1118 

811.  Nonjoinder  of  defendants  in  contract  obligations 1119 

812.  Nonjoinder  of  defendants  in  tort 1120 


TABLE    OF    CONTENTS  Vll 

Section  Page 

813.  Suit  against  one  partner 1122 

J^^'14.  Equitable  actions  involving  partnerships 1122 

815.  Parties  in  equitable  actions 1 123 

816.  Venue  1124 

817.  Process  and  service  1125 

818.  Appearance  1130 

819.  Dismissal  and  discontinuance 1131 

820.  Attachment  and  garnishment 1132 

821.  Charging  partner's  interest  under  Uniform  Partnership  Act 1138 

822.  Arrest   1139 

823.  Injunction  and  receiver 1139 

824.  Defenses    1141 

825.  Trial    1 143 

826.  Judgment 1146 

827.  Execution 1152 

828.  Injunction  against  enforcement  of  judgment  against  firm 1153 

829.  Injunction  against  sale  of  partnership  property,  under  levy  against 

one  partner  1154 

830.  Levy  on  partnership  property  for  individual  debt  of  a  partner 1156 

831.  Procedure  in  sale  of  partner's  interest  for  one  partner's  debt 1158 

832.  Interest  taken  by  purchaser  upon  sale  of  partnership  property  for 

individual  partner's  debt 1164 

833.  Levy  of  execution  on  firm  property  for  individual  debt — Uniform 

Partnership  Act    1168 

834.  Action  after  a  change  in  membership 1169 

835.  Action  by  or  against  estate  of  surviving  partner 1173 

836.  Proceeding  against  estate  of  deceased  partner 1178 

837.  Surety  on  partnership  bond  1184 

CHAPTER  XXVI 

PLEADING 

Section  Page 

845.  Generally— Parties    1186 

846.  Caption   1186 

847.  Petition,  complaint,  or  declaration — Statement  of  partnership  rela- 

tion    1188 

848.  Complaint  against  partnership  1192 

849.  Complaint  by  or  against  surviving  partner 1194 

850.  Complaints — In  suits  between  partners 1196 

851.  Some  particular  examples  1200 

852.  Alleging  legal  conclusions  1202 

853.  Material  matters   1203 

854.  Answer  1203 

855.  Answer  in  actions  between  partners 1206 

856.  Cross-complaint   1207 

857.  Extent  of  defense   1209 

858.  Defenses  in  suits  between  partners 1210 

859.  Reply 1211 

860.  Departure    1212 

861.  Proof  and  variance 1213 

862.  Separate  pleading  by  one  partner 1218 

863.  Demurrer 1218 

864.  Motion  for  judgment  on  the  pleadings 1219 

865.  Summons    1219 

866.  Verification    1220 


Vlll  TABLE    OF    CONTENTS 

CHAPTER  XXVII 

EVIDENCE 

Section  Page 

875.  Evidence — Generally    1223 

876.  Burden  of  proof  1223 

877.  Proof  of   partnership — Generally 1226 

878.  Presumptions  as  to  partnership  matters 1227 

879.  A  mixed  question  of  law  and  fact 1229 

880.  How  facts  are  proved 1230 

881.  Facts  to  be  proved  _ 1231 

882.  Proof  of  partnership  agreement 1233 

883.  Proof  of  partnership — Uniform  Partnership  Act 1235 

884.  Agreement — Proof  by  assent  and  ratification 1236 

885.  Proof  by  certificate 1237 

886.  Parol  proof  to  establish  partnership 1238 

887.  Proof  of  acts  and  conduct  to  show  partnership 1239 

888.  Admissions  by  partners — Generally 1240 

889.  Admissions  and  declarations  in  actions  by  third  persons   against 

partners    1243 

890.  Representations  made  in  presence  of  partner,  or  in  course  of  busi- 

ness     1246 

891.  Representations  against  interest  1247 

892.  Representations  in  interest  1248 

893.  Admissions  by  judgment  1249 

894.  Records  and  pleadings  in  former  cases 1249 

895.  Proof  of  firm  name  as  prima  facie  evidence  of  partnership 1250 

896.  Use  of  individual  names  of  partners  in  firm  name 1251 

897.  Profit  sharing  as  proof  of  partnership 1252 

898.  Proof  of  sharing  in  profits  and  losses 1254 

899.  Sharing  in  profits,  or  profits  and  losses — Prima  facie  case 1255 

900.  Proof  of  sharing  in  profits  and  losses — Not  conclusive 1256 

901.  Liability  to  third  persons— Proof 1258 

902.  Suits  between  partners — Proof   1260 

903.  Suits  against  third  persons — Proof 1263 

904.  Intention    1264 

905.  Proof  by  holding  out 1265 

906.  Proof  by  holding  out — Nature  and  degree 1266 

907.  Proof  by  holding  out — Estoppel  1266 

908.  Proof  by  holding  out — Acts  constituting  an  estoppel 1267 

909.  Partnership  liability  by  estoppel — Uniform  Partnership  Act 1269 

910.  Proof  by  reputation  1269 

911.  Partnership  in  individual  name  1272 

912.  Admissibility  of  partnership  books — Generally 1272 

913.  Compelling  production  of  partnership  books 1275 

914.  Partnership  books  and  papers  as  evidence — Between  partners 1275 

915.  Presumption  of  access  to  books — Denying  correctness 1277 

916.  Partnership  books  and  papers  as  evidence — Against  partners 1277 

917.  Partnership  books  and  papers  as  evidence — Against  third  persons.  .   1278 

918.  Partnership  books  and  papers  as  evidence — In  favor  of  third  persons  1279 

919.  Authority  of  partner — Presumption  1280 

920.  Liability  of  nominal  partners — First  rule 1282 

921.  Liability  of  nominal  partners — Second  rule 1283 

922.  Liability  of  dormant  partner 1283 

923.  Lia1)ility  of  dormant  partner — Limitation 1285 

924.  Further  of  authority  of  partner — Particular  cases 1286 

925.  Authority  of  partner  after  dissolution 1288 

926.  Dissolution — Notice  of  di.«solution  128!^ 


AJLE    OF    CONTENTS  IX 

Section  _  Page 

927.  Admissions  after  dissolution   1291 

928.  Admissions  of   surviving  partner 1292 

929.  Accounting — Burden  of  proof   1292 


CHAPTER  XXVIII 

TAXATION    OF    PARTNERSHIP   PROPERTY 

Section     _  _  _  Page 

935.  Taxation  of  partnership  property,  in  firm  name 1295 

936.  Taxation  of  good  will  of  partnership 1296 

937.  Place  of  taxation  of  partner's  interest 1296 

938.  Place  of  taxation  of  partnership  property — Generally 1297 

939.  Place  of  taxation  under  statutes  of  different  states 1299 

940.  Massachusetts  cases  1304 

941.  Michigan  cases    1306 

942.  Taxation  after  dissolution  1307 

943.  Taxation  of  property  of  joint  stock  company 1308 

944.  Notice  to  redeem  from  tax  sale 1309 


CHAPTER  XXIX 

CHANGE  OF  PARTNERSHIP  INTO  CORPORATION 

Section  _  _  Page 

950.  Advantages  and  disadvantages  of  corporation  and  partnership  con- 

trasted    1311 

951.  Changing  partnership  into  corporation  1313 

952.  Protection  of  minority  interests 1315 

953.  Liability  of  corporation  succeeding  partn^^rship  for  debts  of  partner- 

ship   1315 

954.  When  corporation  is  liable  for  debts  of  partnership  which  it  suc- 

ceeds     1317 

955.  Corporation  liable  for  debts  of  partnership — Illustrations 1319 

956.  Transfer  of  assets  of  partnership  to  succeeding  corporation 1320 

957.  Transfer  of  partnership  assets  to  corporation — Conveyance  neces- 

sary    1321 

958.  Assumption  of  debts  of  partnership  by  succeeding  corporation 1322 

959.  Liability  of  succeeding  corporation  for  partnership  debts  without 

express  assumption 1324 

960.  Corporation  receiving  partnership  assets — Presumption  as  to  liability 

for  debts   1325 

961.  Statute  of  frauds  as  affecting  assumption  of  debts 1328 

962.  Formation  of  corporation  as  dissolution  of  partnership 1328 

963.  Rights  acquired  by  a  corporation  formed  by  members  of  a  firm. .. .  1330 

964.  Partnership  changed  to  corporation — Rights  of  beneficiaries  of  a 

deceased  partner  1331 

965.  Liability  of  partners  after  incorporation 1331 

966.  Rights  of  partners  among  themselves  after  incorporation 1334 

967.  Rights  of  creditors  when  partnership  property  is  transferred  to  a 

corporation    1335 

968.  Transfer  of  partnership  property  to  corporation  made  to  hinder  and 

delay  creditors  1336 


X  TABLE    OF    CONTENTS 

CHAPTER  XXX 

JOINT  ADVENTURES 

Section  Page 

975.  Definition  and  nature  1339 

976.  Agreement  and  consideration  1341 

977.  Particular  cases 1342 

978.  Good   faith    1345 

979.  Property  involved 1348 

980.  Power  to  bind  coadventurers 1349 

981.  Abandonment  of  the  adventure 1350 

982.  Right  to  profits  1352 

983.  Sharing  of  losses  1354 

984.  Contribution    1355 

985.  Settlement — Expenses    1356 

986.  Settlement— Interest    1358 

987.  Settlement— Advances    1359 

988.  Termination  and  duration  1360 

989.  Adventurer's  lien    1360 

990.  Actions  between  joint  adventurers 1360 

991.  Actions — Illustrations    1362 

992.  Set-off — Limitation  of  actions 1365 

993.  Parties  and  pleading  1366 

994.  Evidence — Judgment    1367 

995.  Actions  by  or  against  third  persons 1368 

CHAPTER  XXXI 

LIMITED  PARTNERSHIPS 

Section                                                                                   _  Page 

1000.  Definition — Distinguished  from  general  partnership 1370 

1001.  Distinguished  from  joint  adventures  and  joint  stock  companies...  1372 

1002.  Origin  and  history  1374 

1003.  Governed  entirely  by  statutes 1376 

1004.  Laws  governing  rights  of  partners 1377 

1005.  Construction  of  limited  partnership  statutes 1378 

1006.  Nature  of  business  prescribed  by  law 1380 

1007.  Certificate  or  partnership  contract 1380 

1008.  What  certificate  must  contain 1381 

1009.  Axcknowledgment  of  certificate   1385 

1010.  Filing  and  recording  of  certificate 1385 

1011.  Affidavit  of  payment  of  contribution  of  limited  partner 1386 

1012.  Publication  of  notice  1388 

1013.  Alteration  of  certificate  prohibited 1388 

1014.  Commencement  and  termination 1389 

1015.  Contribution  of  limited  partner 1390 

1016.  Kind  of  property  contributed 1391 

1017.  Infant  as  partner  1392 

1018.  Use  of  the  word  "limited,"  etc 1392 

1019.  Firm  name  and  sign 1393 

1020.  Liability  of  partners  on  contracts 1394 

1021.  Effect  of  noncompliance  with  statute 1396 

1022.  Estoppel 1396 

1023.  Insolvency  of  partnership   1398 

1024.  Assets  applied  to  liabilities  1399 

1025.  Dealings  between  general  and  limited  partners 1400 


TABLE   OF    CONTENTS  XI 

Section  Page 

1026.  Renewal  of  limited  partnership 1400 

1027.  Change  of  membership  or  nature  of  business  conducted 1402 

1028.  Impairment  of  capital  1404 

1029.  Changing  general  to  limited  partnership 1405 

1030.  Actions  by  or  against  partnership 1405 

1031.  Injunction — Receiver,  pleadings  and  trial 1407 

1032.  Rights  of  creditors  of  limited  partnership 1408 

1033.  Assignment  for  benefit  of  creditors 1409 

1034.  Limited  partner  as  creditor 1410 

1035.  Causes  for  dissolution  1411 

1036.  Rights  and  liabilities  of  partners 1413 

1037.  Rights  of  partners  on  dissolution 1415 

CHAPTER  XXXII 

JOINT  STOCK  COMPANIES 

Section  Page 

1045.  Definition  and  general  nature 1417 

1046.  Distinguished  from  corporations  1420 

1047.  Distinguished  from  ordinary  partnerships 1425 

1048.  Distinguished  from  mining  companies 1427 

1049.  Legal  status   1429 

1050.  Taxation    1433 

1051.  Statutory  provisions    1434 

1052.  Articles  of  association  or  constitution  and  by-lavv^s 1436 

1053.  Membership  and  its  incidents 1438 

1054.  Organization — Meetings  and  election 1442 

1055.  Capital  stock — Issue  and  transfer  of  certificates,  etc 1443 

1056.  Property  and  funds  ; 1447 

1057.  Power  to  make  contracts  1448 

1058.  Actions  by  and  against  joint  stock  companies 1449 

1059.  Dissolution 1451 

CHAPTER  XXXIII 

FORMS 

Section  Page 

1065.  Introductory  1456 

1066.  Body  of  contract 1457 

Particular  Clauses  in  Partnership  Agreements. 

1067.  Firm  name 1458 

1068.  Duration    1458 

1069.  Firm  name  and  duration 1458 

1070.  Partnership  to  continue  after  retirement  or  death  of  partner 1459 

1071.  Where  business  is  to  be  conducted 1459 

1072.  Purposes 1459 

1073.  Capital    1459 

1074.  One  partner  furnishing  capital 1460 

1075.  One  partner  without  capital 1460 

1076.  Additional  money  contributed  by  one  partner 1460 

1077.  Increase  of  capital  1461 

1078.  Patents  as  partnership  property 1462 

1079.  Interest  on  capital  1462 

1080.  Rent  paid  to  one  partner 1462 


XU  TABLE    OF    CONTENTS 

Section  Page 

1081.  Deposit  of  partnership  moneys 1463 

1082.  Expenses    1463 

1083.  Division  of  profits  and  losses 1463 

1084.  Guaranty  of  profits 1464 

1085.  Advances  to  partners   1465 

1086.  Overdrawing  accounts    1466 

1087.  Expense  accounts  1466 

1088.  Advances  by  partner  to  firm 1466 

1089.  Dormant  partner 1466 

1090.  Regular  meetings   1467 

1091.  Bond  of  partner  1467 

1092.  Time  to  be  devoted  to  firm 1467 

1093.  Vacations  _ ._ 1468 

1094.  Engaging  in  other  business 1468 

1095.  Managing  partner    1469 

1096.  Salary  to  come  only  from  profits 1469 

1097.  Limit  upon  contracts  by  one  partner 1469 

1098.  Negotiable  paper 1470 

1099.  Bonds  and  securities  1470 

1100.  Suretyship    1471 

1101.  Extending  credit 1471 

1102.  Pledging  credit  1471 

1103.  Causing  attachment  of  property 1471 

1104.  Release  of  debts  1472 

1 105.  Hiring  employes  1472 

1 106.  Giving  information    1472 

1107.  Indemnity  against  individual  debts 1472 

1 108.  Keeping  trade  secrets  1472 

1 109.  Keeping  accounts  1473 

1110.  Taking  accounts   1473 

1111.  Majority  to  rule 1474 

1112.  Power  to  expel  partner 1474 

1113.  Sale  or  assignment  of  partner's  share 1475 

1114.  Retiring  partner  not  to  compete  with  business 1476 

1115.  Admission  of  sons  into  firm 1476 

1116.  Survivorship  1476 

1117.  Purchase  of  deceased  partner's  share  by  surviving  partners 1477 

1118.  Dissolution  in  case  of  loss 1477 

1119.  Withdrawal  of  partner 1478 

1120.  Dissolution  on  bankruptcy  of  partner 1479 

1121.  Dormant  partner's  share  on  dissolution 1479 

1122.  Good  will   1480 

1123.  Purchase  of  partner's  share  in  good  v^^ill 1480 

1124.  Sale  of  deceased  partner's  interest 1481 

1125.  Purchase  of  share  of  deceased  or  bankrupt  partner 1481 

1126.  Paj'ment  of  deceased  partner's  share  to  his  representatives 1482 

1127.  Continuation  in  business  by  deceased  partner's  representatives...   1482 

1 128.  Winding  up  business  1483 

1129.  Division  of  property  upon  dissolution 1483 

1 130.  Final  accounting  1484 

1131.  Purchase  by  one  partner  on  dissolution 1485 

1132.  Purchase  of  retiring  partner's  interest 1485 

1133.  Retiring  partner's  covenant  as  to  debts 1486 

1134.  Indemnity  to  retiring  partner   1486 

1135.  Amending  partnership  agreement 1487 

1136.  Arbitration  clauses  in  partnership  agreements 1488 

1137.  Reference  to  attorney  to  settle  disputed  rights 1490 

1 138.  Close  of  contract  1490 


TABLE    OF    CONTENTS  XIH 

Notices. 
Section  Page 

1139.  Of  intention  to  withdraw 1490 

1140.  Of  desire  to  sell  1491 

1141.  Of  intention  to  purchase 1492 

1142.  Of  intention  to  expel 1492 

1143.  Of  demand  for  inspection  of  business 1493 

1144.  Of  dissohition    1493 

1145.  Of  retirement  of  partner  1493 

1146.  Of  sale  of  business 1493 

1147.  To  firm  debtor  after  dissolution 1494 

Complete  Agreements. 

1148.  Farm  partnership  contract 1494 

1149.  Agreement  for  mercantile  partnership 1495 

1150.  Mercantile  partnership  contract 1497 

1151.  Agreement  between  merchants ' 1499 

1152.  Professional  partnership  contract 1503 

1153.  Short  form,  partnership  agreement  between  lawyers 1504 

1154.  Agreement  between  attorneys — Long  form 1505 

1155.  Agreement  where  one  partner  is  dormant 1509 

1156.  Extension  of  partnership  term  indorsed  on  articles 1513 

1157.  Continuation  of  business  under  new  agreement 1514 

1158.  Admission  of  new  partner 1517 

Miscellaneous  Agreements  and  Forms. 

1159.  Indorsement  on  articles  of  agreement  to  admit  new  partner 1518 

1160.  Admission  of  partner's  son  into  firm 1519 

1161.  Admission  of  partner's  legatee  into  firm 1520 

1162.  Agreement  by  continuing  partners  to  purchase  retiring  partner's 

share   1521 

1163.  Agreement  for  sale  by  retiring  partner  of  his  share  in  partnership 

to  incoming  partner,  with  concurrence  of  continuing  partners. ..   1523 

1164.  Assignment  by  retiring  partner  to  continuing  partner 1525 

1165.  Assignment  to  surviving  partner  of  deceased  partner's  share 1528 

1166.  Conveyance  of  share  of  retiring  partner  to  copartners 1530 

1167.  Charge  on  partner's  profits 1531 

1168.  Bond  indemnifying  retiring  partner  against  partnership  debts....   1532 

1169.  Bond  by  surviving  partners  to  secure  payment  of  share  of  deceased 

partner  and  for  indemnity 1533 

1170.  Partnership  bond  with  sureties  to  secure  banking  account 1534 

1171.  Bond  by  partner  to  copartner  and  inventor  for  protection  of  secret 

process    1536 

1172.  Composition  agreement  between  partners  and  partnership  creditors 

with  covenant  not  to  sue 1536 

1173.  Assignment  by  partners  for  benefit  of  creditors,  with  preferences  1538 

1174.  Assignment  of  leasehold  by  one  partner  to  another  on  dissolution 

of  partnership — After  recitals  of  partners  and  of  lease  and  of 
dissolution  of  partnership  1540 

1175.  Habendum  clause  in  deed,  to  hold  as  partnership  property 1541 

1176.  Mortgage  of  partner's  interest 1541 

1177.  Option  to  one  partner  to  buy  partnership  property 1543 

1178.  Appointment  of  an  arbitrator  in  purusance  of  arbitration  clause  in 

articles  of  partnership    1544 

1179.  Award  on  reference  to  settle  terms  of  dissolution  of  partnership  1544 

1180.  Agreement  for  joint  adventure  or  syndicate 1546 

1181.  Preliminary  agreement  between  partners  as  to  formation  of  cor- 

poration     1547 


XIV  TABLE    OF    CONTENTS 

Section  Page 

1182.  Promoter's  agreement  with  partners  to  form  corporation 1548 

1183.  Limited  partnership  1551 

1184.  Certificate  of  formation  1551 

Bankruptcy. 

1185.  Proof  of  claim  in  oankruptcy  by  partnership 1552 

1186.  Partnership  petition — (Official  form)    1553 

Pleadings  Generally. 

1187.  Caption 1557 

1188.  Petition  for  accounting 1557 

1189.  Petition  for  dissolution 1558 

Pleading  Causes  for  Dissolution. 

1190.  Transfer  of  one  partner's  interest 1559 

1191.  Assignment  for  benefit  of  creditors 1559 

1192.  Breach  of  contract  by  one  partner 1559 

1193.  Dissolution  under  terms  of  contract 1559 

A  nswer. 

1194.  Admission  and  general  denial 1559 

1195.  Specific  denial  1560 


APPENDIX. 
Text  of  Uniform  Partnership  Act pp.  1561-1581 


THE 
LAW  OF  PARTNERSHIP 


CHAPTER  XX 


ADMINISTRATION  OF  PARTNERSHIP  AFFAIRS  AFTER  DEATH  OF 

PARTNER 


SECTION 

615.  In  general — Dissolution  or   con- 

tinuation of  business. 

616.  Surviving  partner. 

617.  Right    of    surviving    partner    to 

control  firm  property  and  as- 
sets. 

618.  Power    of    surviving   partner    to 

complete  contracts. 

619.  Effect    of    death    of    partner    on 

contract  with  employe. 

620.  Power     of     alienation     of     firm 

property. 

621.  Power    of    surviving   partner    to 

make  assignment  for  benefit  of 
creditors. 

622.  Payments    to    and    by    surviving 

partner. 

623.  Status  of  partnership  real  estate 

— Out-and-out  conversion  into 
personalty. 

624.  Status  of  partnership  real  estate 

— Conversion  into  personalty 
for  partnership  purposes  only. 

625.  Status  of  partnership  real  estate 

— Time  where  conversion  takes 
place. 

626.  Rights    of    surviving   partner    in 

firm  real  estate, 

627.  Rights  of  heirs,  devisees,  vi^idow 

and  personal  representatives  of 
deceased  partner  in  partnership 
real  estate. 


SECTION 

628.  Rights    of    heirs    and    surviving 

partner  in  surplus  real  estate. 

629.  Rights  in  firm  real  estate  under 

Uniform   Partnership  Act. 

630.  Liability     of     surviving     partner 

and  deceased  partner's  estate 
on  firm  obligations. 

631.  Surviving    partner's    rights    and 

liabilities  as  to  deceased  part- 
ner's estate. 

632.  Surviving  partner  and  good-will 

of  business. 

633.  Surviving    partner    as    deceased 

partner's  executor  or  admin- 
istrator. 

634.  Partnership  administrator  under 

statute. 

635.  Winding  up  the  business. 

636.  Interest  and  profits. 

637.  Compensation. 

638.  Continuation  of  business  by  sur- 

viving partner. 

639.  Rights  and  liabilities  of  deceased 

partner's  estate,  his  heirs,  and 
personal  representatives,  on 
continuation  of  business. 

640.  Executors  of  deceased  partners. 

641.  Accounting  by  surviving  partner. 

642.  Rights  of  creditors. 

643.  Accrual  of  actions. 

644.  Limitation  of  actions  against  sur- 

viving partner. 


807 


615 


LAW    OF    PARTNERSHIP 


808 


§  615.  In  general — Dissolution  or  continuation  of  busi- 
ness.— As  was  seen  in  the  preceding  chapter,  death  of  a  part- 
ner dissolves  the  partnership,  without  any  notice  or  judicial  decree 
simply  by  operation  of  law.^  However,  the  business  may  be 
continued  after  the  death  of  a  partner  if  it  is  so  provided  by  the 
partnership  agreement,  and  such  a  provision  is  binding  on  the 
estate  of  the  deceased  partner,"  or  if  it  is  so  directed  in  the  will 
of  a  deceased  partner.^  Otherwise,  as  in  the  case  of  any  other 
dissolution,  there  can  be  only  limited  continuance  of  the  business 
for  the  purpose  of  winding  it  up.*  But  a  mere  provision  in  part- 
nership articles  that  the  partnership  is  to  continue  for  a  fixed 


iMcCall  V.  Moss,  112  111.  493;  Mc- 
Kinzie  v.  United  States,  34  Ct.  CI. 
(U.  S.)  278;  Washburn  v.  Goodman, 
17  Pick.  (Mass.)  519;  Durant  v.  Pier- 
son,   124  N.  Y.  444,  26  N.   E.   1095, 

12  L.  R.  A.  146,  21  Am.  St.  686; 
McGrath  v.  Cowen,  57  Ohio  St.  385, 
49  N.  E.  338;  Landa  v.  Shook,  87 
Tex.  608,  30  S.  W.  536;  Davis  v. 
Christian,  15  Grat.  (Va.)  11 ;  Phillips 
V.  Alhambra  Palace  Co.,  70  L.  J.  Q.  B. 
26,  L.  R.  [1900]  1  Q.  B.  59.  See  also 
Painter  v.  Painter,  133  Cal.  XIX,  65 
Pac.  135 ;  Bass  Dry  Goods  Co.  v. 
Granite  City  Mfg.  Co.,  116  Ga.  176, 
42  S.  E.  415;  Mulherin  v.  Rice,  106 
Ga.  810,  32  S.  E.  865;  Douthart  v. 
Logan,  190  111.  243,  60  N.  E.  507; 
Dexter  v.  Dexter,  43  App.  Div.  (N. 
Y.)  268,  60  N.  Y.  S.  371.  See  cases 
cited  in  note  57,  ante  §  579. 

2  Brew  V.  Hastings,  196  Pa.  St.  222, 
46  Atl.  257,  79  Am.  St.  706;  Schole- 
field  V.  Eichelberger,  7  Pet.  (U.  S.) 
586,  8  L.  ed.  793;  Vincent  v.  Martin, 
79  Ala.  540 ;  Rand  v.  Wright,  141  Ind. 
226,  39  N.  E.  447 ;  Powell  v.  Hopson, 

13  La.  Ann.  626;  Stanwood  v.  Owen, 

14  Gray  (Mass.)  195;  Berry  v. 
Folkes,  60  Miss.  576;  Exchange  Bank 
V.  Tracy,  11  Mo.  594 ;  Edwards  v. 
Thomas,  66  Mo.  468;  In  re  Laney,  50 


Hun  15,  2  N.  Y.  S.  443,  18  N.  Y.  St. 
463  (affd.  119  N.  Y.  607,  23  N.  E. 
1143)  ;  Gratz  v.  Bayard,  11  Serg.  &  R. 
(Pa.)  41;  Wilcox  v.  Derickson,  168 
Pa.  St.  331,  31  Atl.  1080;  Alexander 
V.  Lewis,  47  Tex.  481 ;  McNeish  v. 
United  States  &c.  Oat  Co.,  57  Vt. 
316;  Davis  v.  Christian,  15  Grat. 
(Va.)  11 ;  Kirkman  v.  Booth,  11  Beav. 

3  Pitkin  v.  Pitkin,  7  Conn.  307,  18 
Am.  Dec.  Ill;  Burwell  v.  Mande- 
ville,  2  How.  (U.  S.)  560,  11  L.  ed. 
378;  Berry  v.  Folkes,  60  Miss.  576; 
Citizens'  Mut.  Ins.  Co.  v.  Ligon,  59 
Miss.  305 ;  Exchange  Bank  v.  Tracy, 
11  Mo.  594;  Ballantine  v.  Freling- 
huysen,  38  N.  J.  Eq.  266;  Wilson  v. 
Simpson,  89  N.  Y.  619;  Davis  v. 
Christian,  15  Grat.  (Va.)  11;  Kirk- 
man v.  Booth,  11  Beav.  273. 

4  Johnson  v.  Totten,  3  Cal.  343,  58 
Am.  Dec.  412 ;  Maynard  v.  Richards, 
166  111.  466,  46  N.  E.  1138,  57  Am.  St. 
145 ;  Western  Stage  Co.  v.  Walker, 
2  Iowa  504,  65  Am.  Dec.  789;  Powell 
v.  Hopson,  13  La.  Ann.  626;  Davis 
v.  Megroz,  55  N.  J.  L.  427,  26  Atl. 
1009 ;  Kinsler  v.  McCauts,  4  Rich.  L. 
(S.  Car.)  46,  5  Rich.  L.  608,  53  Am. 
Dec.  711;  Brown  v.  Higginbotham,  5 
Leigh  (Va.)  583,  27  Am.  Dec.  618. 


809  ADMINISTRATION  AFTER  DEATH  §  616 

period  does  not  prevent  a  dissolution  of  a  partnership  upon  the 
death  of  a  partner.^  A  provision,  it  has  been  held,  for  the  con- 
tinuation of  the  firm  in  case  of  the  death  of  one  partner,  sub- 
stituting another  in  his  stead,  while  valid,  does  not  work  a  con- 
tinuation of  the  old  firm,  but  in  reality  creates  a  new  one  where 
the  new  person  enters  thereunder.^  Hence  the  rule  that  every 
partnership  must  dissolve  upon  death  of  a  partner/  An  Indiana 
case^  has  indicated  that  a  continuance  of  a  partnership  may  be 
authorized  by  a  court  of  equity  after  the  death  of  a  partner,  on 
behalf  of  infants.  It  is  doubtful,  however,  if  courts  of  equity 
in  most  jurisdictions  would  recognize  such  power,  at  least  to  a 
greater  extent  than  a  mere  temporary  order.  Certain  it  is  that, 
any  court  of  equity,  in  view  of  the  accepted  general  rule,  even 
though  it  might  recognize  the  rule  in  the  Indiana  case,  would 
nevertheless  refuse  to  exercise  the  right  unless  the  necessity  there- 
for was  very  apparent,  and  the  evidence  thereof  very  plain. 

§  616.  Surviving  partner. — In  general  the  character  of  a 
surviving  partner^  is  not  so  peculiar  as  to  exclude  him  from  the 
scope  and  meaning  of  the  principles  noted  in  the  preceding  chap- 
ter concerning  the  winding  up  of  partnership  business  after 
dissolution.^^  Upon  such  a  one  devolves  the  duty  of  winding  up 
the  partnership  affairs  and  of  accounting  to  the  personal  repre- 

5  Hornaday  v.  Cowgill,  54  Ind.  App.  tio  personse,  see  Swing  v.  Hill,  44 
631,  101  N.  E.  1030;  Scholefield  v.  Ind.  App.  140,  88  N.  E.  721;  Murphy 
Eichelberger,  7  Pet.  (U.  S.)  586,  8  v.  Cochran,  146  Iowa  443,  123  N.  W. 
L.  ed.  793 ;  Knapp  v.  McBride,  7  Ala.  349. 

19;  Hoard  v.  Clum,  31  Minn.  186,  17  lo  "The  winding  up  or  settling  of 

N.  W.  275.  the  partnership  affairs  after  the  death 

6  Kennedy  v.  Porter,  109  N.  Y.  526,  of  one  of  the  partners  may  be  said 
17  N.  E.  426;  McGrath  v.  Cowan,  57  to  consist,  as  a  general  thing,  in  sell- 
Ohio  St.  385,  49  N.  E.  338;  Horna-  ing  the  property,  receiving  moneys 
day  V.  Cowgill,  54  Ind.  App.  631,  101  due  the  firm,  paying  the  firm  debts 
N.  E.  1030.  and  the  advances  of  the  partners,  re- 

''Laney  V.  Laney,  6  Dem.  Surr.  (N.  turning    the    capital    contributed    by 

Y.)  241.  each      partner,      and      dividing      the 

8  Powell  V.   North,  3   Ind.  392,  56  profits."     Maynard   v.    Richards,    166 

Am.  Dec.  513.  111.  466,  46  N.  E.   1138,  57  Am.   St. 

^  For   character   of   words   "surviv-  145. 
ing  partner"  in  pleadings,  as  descrip- 


§    616  LAW    OF    PARTNERSHIP  810 

sentative  of  his  deceased  associate/^  The  right  of  the  surviving 
partner  to  wind  up  the  business  after  the  death  of  a  partner  is 
well  settled  in  the  general  law.  Such  right  is  governed  in  some 
states  by  statute,  which  differs  considerably  as  to  details.  The 
Ohio  law,  for  example,  relating  to  the  rights  and  duties  of  sur- 
viving partners,  is  made  very  explicit  by  express  statute,  which 
provides  that  upon  the  death  of  a  member  of  any  partnership  in 
the  state,  the  surviving  partners  shall  immediately  after  the  ap- 
pointment of  an  administrator  or  executor  of  the  deceased  part- 
ner's estate,  make  application  to  the  probate  court  for  the  ap- 
pointment of  appraisers  of  the  partnership  assets  and  liabilities, 
and,  with  the  consent  of  the  executor  or  administrator  and  the 
court,  may  take  the  deceased  partner's  interest  in  the  firm  assets 
at  the  appraised  value,  by  making  satisfactory  arrangements  for 
the  payment  of  the  firm  debts,  unless  by  the  articles  of  partner- 
ship or  will  of  the  deceased  partner  a  different  mode  is  pre- 
scribed. If  the  surviving  partner  does  not,  within  the  time  and 
in  the  manner  prescribed,  take  the  assets  of  the  firm,  then  a 
receiver  is  appointed  upon  the  application  of  the  executor  or  ad- 
ministrator, to  wind  up  and  dispose  of  the  partnership  assets. 

iiTillery  v.  Tillery,  155  Ala.  495,  437,  36  N.  E.  498,  38  Am.  St.  807; 
46  So.  582;  Didlake  v.  Roden  Gro-  McPherson  v.  Swift,  22  S.  Dak.  165, 
eery  Co.,  160  Ala.  484,  49  So.  384;  116  N.  W.  76,  133  Am.  St.  907;  Rob- 
In  re  Dobert,  165  Fed.  749;  Cooley  v.  erts  v.  Nunn  (Tex.  Civ.  App.),  169 
Miller  (Cal.),  142  Pac.  83;  Raisch  v.  S.  W.  1086;  Goldstein  v.  Susholtz, 
Warren,  18  Cal.  App.  665,  124  Pac.  95 ;  46  Tex.  Civ.  App.  582,  105  S.  W.  219. 
Whitaker  v.  Jordan,  104  Maine  516,  However,  the  "right"  of  a  surviving 
72  Atl.  682;  Lanahan  v.  Lanahan,  110  partner  to  administer  the  afifairs  of 
Md.  176,  72  Atl.  672 ;  Hewitt  v.  the  dissolved  firm  may,  it  seems,  be 
Hayes,  204  Mass.  586,  90  N.  E.  985,  waived.  Barnes  v.  Stone,  198  Mo. 
27  L.  R.  A.  (N.  S.)  154;  Drucke  v.  471,  95  S.  W.  915.  See  further  Wel- 
Boylon  (Mich.),  125  N.  W.  416;  Bar-  born  v.  Coon,  57  Ind.  270.  Surviving 
ton  V.  Lovejoy,  56  Minn.  380,  57  N.  partner  may  borrow  money  when  nec- 
W.  935,  45  Am.  St.  482;  Weiss  v.  essary  to  the  winding  up  of  the  part- 
Hamilton,  40  Mont.  99,  105  Pac.  74;  nership  concerns.  Rosenthal  v.  Has- 
Peck  V.  Knapp,  137  N.  Y.  S.  70;  Jo-  berg,  84  N.  Y.  S.  290;  Herron  v. 
seph  v.  Herzig,  135  App.  Div.  141,  Wampler,  194  Pa.  St.  277,  45  Atl.  81 ; 
120  N.  Y.  S.  34;  Reinhardt  v.  Rein-  Kenney  v.  Howard,  68  Vt.  194,  34 
hardt.  134  App.  Div.  440,  119  N.  Y.  Atl.  700. 
S.  285 ;  Russell  v.  McCall,  141  N.  Y. 


811  ADMINISTRATION    AFTER    DEATH  §    616 

It  is  seen  that  the  Ohio  statute  designates  the  exact  rights  and 
duties  of  the  surviving  partner  as  to  method  of  procedure, ^^  but 
in  so  doing  differs  somewhat  in  detail  from  the  old  English 
law,  which  has  been  carried  down  into  the  law  of  many  of  our 
states.  The  English  rule  as  stated  by  Mr.  Lindley  is  that  "On 
the  death  of  a  partner  the  surviving  members  of  the  firm  are  the 
proper  persons  to  get  in  and  pay  its  debts."^^  The  law  in  the 
various  states  varies,  in  some  respects,  from  the  English  rule,  but 
in  the  great  majority  of  instances  follows  the  general  rule  that 
the  survivors  have  the  power  to  close  up  the  partnership  affairs. 
The  federal  cases  hold^'^  that  on  the  death  of  a  partner  all  the 
personal  estate  and  assets  of  the  firm,  including  choses  in  action, 
vest  in  the  surviving  partner.  Much  the  same  rule  has  been  ad- 
hered to  in  Arkansas,  California,  Connecticut,  Florida,  Illinois, 
Michigan  and  New  York,  where  it  has  been  held  that  the  sur- 
vivor has  authority  to  receive  the  firm  assets  and  settle  up  its 
affairs. ^'^  It  has  been  held,  however,  in  numerous  instances,  that 
the  survivor,  when  he  takes  the  assets,  takes  the  decedent's  in- 
terest in  a  trust  capacity,  and  must  act  in  all  due  fairness  and 
keep  the  representative  of  the  decedent  fully  advised  as  to  the 
condition  of  the  firm.^°  The  Ohio  statute,  above  cited,  would  ap- 
pear .to  change  entirely  the  general  rule,  but  it  is  held  not  to  do 
so,"  and  that  the  right  of  surviving  partners  at  common  law 
to  take  the  assets  of  the  firm,  close  up  the  business,  and  account 
to  the  executors  of  a  deceased  partner,  and  to  carry  on  the  busi- 
ness after  the  death  of  one  partner  who  so  directs  in  his  will, 

i2Cooley  V.  Miller  (Cal.),  142  Pac.  443;  Allen  v.  Hill,  16  Cal.  113;  Til- 

83 ;    National    Safe    Deposit    Co.    v.  lotson    v.    Tillotson,    34    Conn.    335 ; 

Stead,  250  111.  584,  95  N.  E.  973,  Ann.  Florida  Terr.  v.  Redding,  1  Fla.  242 ; 

Cas.  1913  E,  305n ;  Dow  v.  Simpson,  Miller  v.  Jones,  39  111.  54;  Connor  v. 

17  N.  Mex.  357,  132  Pac.  568;  Sherrod  Allen,  Harr.  (Mich.)  371 ;  Murray  v. 

V.    Mayo    (N.    Car.),    72    S.    E.   216;  Mum  ford,  6  Cow.  (N.  Y.)  441. 

Thomas  v.   Mann    (Wyo.),   135   Pac.  i"  Qgden  v.  Aster,  6  N.  Y.  Super. 

1088.  Ct.  311;  Heath  v.  Waters,  40  Mich. 

13  Lindley  Partnership,  p.  591.  457. 

1*  Bischoffsheim  v.  Baltzer,  20  Fed.  ^^  Covington   City  Bank  v.  Wright, 

890.  6  Ohio  Dec.  350,  4  N.  P.  173. 

i"'  Marlatt    v.     Scantland,     19    Ark. 


§    617  LAW    OF    rARTNERSIIIP  812 

and  to  make  obligations  to  bind  individual  property  of  the  de- 
ceased partner,  was  not  abolished  by  the  Ohio  statute  providing 
how  an  executor  should  proceed  as  to  partnership  property,  and 
that,  if  the  survivor  fails  to  elect  to  take  the  partnership  prop- 
erty under  the  statute,  the  business  be  wound  up  by  proceedings 
in  court  by  the  survivor  or  executor.  The  same  case  holds  that, 
even  under  a  will  to  continue  the  business,  made  by  the  deceased 
partner,  the  surviving  partner  can  not  bind  that  part  of  the 
estate  of  the  deceased  partner  not  engaged  in  the  business  at  the 
time  of  his  death.  It  is  difficult,  however,  to  follow  the  reason- 
ing of  the  court  in  the  above  case,  or  to  see  its  logic.  The  mere 
fact  that  the  statute  does  provide  certain  steps  to  be  pursued  by 
the  executor  or  administrator,  in  case  the  survivor  does  not  elect 
to  take  the  deceased  partner's  share  according  to  the  statute,  shows 
that,  to  this  extent  (and  probably  no  further)  the  common  law 
was  abolished.  In  the  second  place,  under  the  accepted  principles 
of  partnership  law,  it  is  difficult  to  see  how  the  estate  could  con- 
tinue as  a  member  of  the  firm,  without  assuming  the  liability  of  a 
partner  for  losses  which  might  extend  to  property  of  the  deceased 
partner's  estate  outside  of  the  partnership.  As  a  corollary  to  the 
surviving  partner's  right  to  wind  up  the  business,  the  law  per- 
mits a  surviving  partner  to  continue  the  business  for  a  reasonable 
length  of  time  for  the  purpose  of  executing  existing  firm  con- 
tracts" and,  it  has  been  declared,  for  the  purpose  of  disposing 
of  the  stock  of  goods  on  hand.^^ 

§  617.  Rights  of  surviving  partner  to  control  firm  prop- 
erty and  assets. — Generally,  it  may  be  said  that  in  the  sur- 
viving partner,  to  the  end  that  he  may  liquidate  the  partnership 

18  Little  V.   Caldwell,   101   Cal.  553,  117  N.  W.  647;  Weiss  v.  Hamilton, 

36  Pac.  107,  40  Am.  St.  89;  Jackson-  40    Mont.   99,    105    Pac.   74;    King  v. 

ville,  M.  P.  R.  &  Nav.  Co.  v.  War-  Leighton,  100  N.  Y.  386,  3  N.  E.  594 ; 

riner,  35  Fla.  197,  16  So.  898 ;  Mason  Rowell  v.  Adams,  83  S.  Car.  124,  65 

V.  Tiffany,  45  111.  392 ;  Culbertson  v.  S.  E.  207.    See  also  Denver  v.  Roane, 

Salinger   (Iowa),  117  N.  W.  6;  Rust  99  U.  S.  355,  25  L.  ed.  476. 

V.  Chisolm,  57  Md.  376;  Cowham  v.  i^  Didlake   v.    Roden    Grocery    Co., 

Shipman,   151   Mich.  673,   115   N.  W.  160  Ala.  484,  49  So.  384. 
991 ;  GaskiU  v.  Weeks,  154  Mich.  223, 


813 


ADMINISTRATION    AFTER    DEATH 


617 


affairs,  temporarily  reposes  the  title,  legal  and  equitable  respect- 
ively, to  the  personalty  and  realty  formerly  belonging  to  the 
firm.-**  But  it  was  held  in  some  earlier  cases,"^  and  is  still  the 
rule  in  Louisiana,^^  that  the  surviving  partner  is  only  a  tenant 
in  common  with  the  personal  representatives  of  the  deceased  in 
partnership  property,  in  possession.  And,  the  decisions  follow- 
ing the  general  rule  are  not  in  harmony  as  to  the  exact  terms  to 
be  used  in  describing  the  nature  of  a  surviving  partner's  interest 
in  firm  property,  as  is  apparent  from  the  following  quotations : 
"The  surviving  partner  takes  the  firm  property  as  its  absolute 
owner,  though  subject  to  a  liability  to  account  for  its  proceeds 
and  for  their  application  to  the  payment  of  the  firm  debts  and 
the  settlement  of  the  partnership  accounts.""^     "On  the  death 


20Tillery  v.  Tillery,  155  Ala.  495, 
46  So.  582;  Rice  v.  Merchants'  & 
Planters'  Nat.  Bank,  100  Ala.  617,  13 
So.  659;  Clay  v.  Field,  34  Fed.  375; 
Anderson  v.  Goodwin,  125  Ga.  663, 
54  S.  E.  679;  Galbraith  v.  Tracy,  153 
111.  54,  38  N.  E.  937,  28  L.  R.  A.  129, 
46  Am.  St.  867;  American  Bonding 
Co.  V.  State,  40  Ind.  App.  559,  82  N. 
E.  548;  Jones  v.  Dulaney,  27  Ky.  L. 
702,  86  S.  W.  547 ;  Bassett  v.  Miller, 
39  Mich.  133 ;  Priest  v.  Chouteau,  85 
Mo.  398,  55  Am.  Rep.  373;  Clark  v. 
Fleischmann,  81  Nebr.  445,  116  N.  W. 
290;  Haggerty  v.  Bodkin,  72  N.  J. 
Eq.  473,  66  Atl.  420;  Reinhardt  v. 
Reinhardt,  134  App.  Div.  440,  119  N. 
Y.  S.  285 ;  In  re  Weir,  59  Misc.  320, 
112  N.  Y.  S.  278;  In  re  Thieriot,  102 
N.  Y.  S.  952 ;  Callanan  v.  Keesville 
&c.  R.  Co.,  48  Misc.  476,  95  N.  Y.  S. 
513;  Bauchle  v.  Smylie,  104  App.  Div. 
513,  93  N.  Y,  S.  709;  Secor  v.  Trades- 
men's Nat.  Bank,  92  App.  Div.  294, 
87  N.  Y.  S.  181 ;  Leary  v.  Boggs,  41 
Hun  643,  1  N.  Y.  S.  571;  Fairchild 
V.  Fairchild,  64  N.  Y.  471;  Betts  v. 
June,  51  N.  Y.  274;  Hiscock  v. 
Phelps,  49  N.  Y.  97;   Tillinghast  v. 


Champlin,  4  R.  I.  173,  67  Am.  Dec. 
510;  Roweli  v.  Adams,  83  S.  Car.  124, 
65  S.  E.  207;  Weld  v.  Johnson  Mfg. 
Co.,  86  Wis.  552,  57  N.  W.  374. 

2iCanfield  v.  Hard,  6  Conn.  180; 
Adams  v.  Ward,  26  Ark.  135 ;  Wilson 
V.  Soper,  13  B.  Mon.  (Ky.)  411,  56 
Am.  Dec.  573 ;  Strathy  v.  Crooks,  2 
U.  C.  Q.  B.  51. 

22Junek  V.  Hezeau,  11  La.  Ann. 
731 ;  Shipman  v.  Hickman,  9  Rob. 
(La.)  149;  Notrebe  v.  McKinney,  6 
Rob.  (La.)  13;  Mathison  v.  Field,  3 
Rob.  (La.)  44;  Flower  v.  O'Conner, 
7  La.  198;  Simmins  v.  Parker,  4 
Mart.  (N.  S.)  (La.)  200;  Jones  v. 
Thorn,  2  Mart.  (N.  S.)  (La.)  463; 
Wyer  v.  Winchester,  2  Mart.  (N.  S.) 
(La.)  69. 

23  Hewitt  V.  Hayes,  204  Mass.  586, 
90  N.  E.  985,  27  L.  R.  A.  (N.  S.)  154, 
in  which  the  court  also  said :  "It  fol- 
lows that  upon  the  death  of  Wells 
[the  managing  partner].  Bangs  as  the 
sole  surviving  partner  at  once  became 
the  owner  of  all  the  partnership  prop- 
erty, and  charged  with  the  duty  of 
winding  up  the  affairs  of  the  firm, 
turning  its  assets  into  money  and  ap- 


§617  LAW    CF    PARTNERSHIP  814 

of  a  partner  the  surviving  partners  succeed  to  all  partnership 
property,  whether  real  or  personal,  in  trust  for  the  purposes  of 
liquidation,  even  though  the  deceased  was  appointed  by  agree- 
ment sole  liquidator.'"*     The  survivors  do  not  take  such  [per- 
sonal] assets  as  trustees,  but,  as  survivors,  hold  the  legal  title, 
subject  to  such  equitable  rights  as  the  representatives  have  in  the 
due  application  of  the  proceeds.'""    "He  [the  surviving  partner] 
had  the  legal  title  to  the  assets,  and  he  held  them  as  the  legal 
owner,  and  not  as  trustee,  in  the  strict  sense  of  that  term.     In 
equity,  however,  he  was  to  be  regarded,  to  some  extent,  as  a 
trustee.     *     *     *     The  position  is  somewhat  anomalous — not 
exactly  and  wholly  a  trustee,  and  yet  not  a  full  owner  of  the 
assets  which  he  takes  or  retains  possession  of  by  reason  of  sur- 
vivorship."-*^    The  right  of  the  surviving  partner  to  the  real 
estate  of  the  copartnership  "is  an  equitable  right,  accompanied 
by  an  equitable  title.""   It  follows  from  the  nature  of  the  surviv- 
ing partner's  title  to  firm  property  that,  until  he  has  performed 
his  functions,  he  is  entitled  to  quiet  and  exclusive  possession  of 
all  the  firm  assets."^     Neither  heirs  nor  personal  representatives 
have  a  right  to  possession  of  partnership  property,  until  the  part- 
plying  such  money  to  the  payment  of     been,  so  far  as  may  be  necessary  to 
its  debts.     *     *     *     For  this  purpose     wind  up  its  affairs,  pay  its  debts,  and 
he   was   entitled   to   demand   and   re-     settle  the  partnership  accoounts." 
ceive  from  the  defendants,  the  execu-         24  McPherson  v.  Swift,  22  S.  Dak. 
tors  of  the  will  of  his  deceased  [man-     165,  116  N.  W.  76,  133  Am.  St.  907. 
aging]  partner,  whatever  property  of         ^^  Wilson    v.     International     Bank, 
the  firm  might  come  into  their  hands.     125  App.  Div.  568,  109  N.  Y.  S.  1027. 
*     *    *    As  was  said  by  Colt,  J.,  in         26  Russell  v.  McCall,  141  N.  Y.  437, 
Shearer  v.  Paine,   12  Allen  289,  291,     36  N.  E.  498,  38  Am.  St.  807.    Quoted 
this  right  of  the  surviving  partner  is     with  approval  in  Callanan  v.  Keese- 
'a   right   incident   to   all   partnerships     ville  &c.  R.  Co.,  48  Misc.  476,  95  N. 
and  one  of  which  he  can  not  be  de-     Y.  S.  513.     See  also  Costello  v.  Cos- 
prived  by  the  personal  representative     tello,  209  N.  Y.  252,   103   N.   E.   148 
of    the   deceased   partner   in    the   ab-     (affg.   judgment    152   App.    Div.   280, 
sence  of   any  allegation   of   misman-     137  N.  Y.  S.  132). 
agement    or    want    of    capacity,'    and         ^~  Shanks  v.  Klein,  104  U.  S.  18,  26 
there  is  no  such  allegation  here.  *  *  *     L.   ed.   635.      Cited   with   approval    in 
This    right   extends    also    to    all   real     Alegibben  v.  Perin,  49  Fed.  183  (revd. 
estate  of  the  partnership,   in  whoso-     53  Fed.  86,  3  C.  C.  A.  443). 
ever  name  the   legal   title   may  have         ^s  j^  re  Capria's  Estate,  151  N.  Y. 


815 


ADMINISTRATION    AFTER    DEATH 


617 


nership  affairs  are  liquidated  by  the  surviving  partner  and  he 
has  dehvered  the  balance  to  them.^^  Where  the  surviving  partner 
has  the  legal  right  to  the  possession  of  partnership  property,  the 
court  will  not  deprive  him  of  that  right,  ordinarily,  but  if  there  is 
proof  that  he  is  mismanaging  the  affairs  of  the  firm,  or  that  there 
is  danger  to  the  partnership  assets  by  reason  of  his  possession,  the 
court  may  deprive  him  of  the  right  to  possession  of  the  firm 
assets,  and  appoint  a  receiver.^"  The  surviving  partner,  along 
with  the  right  to  possession  and  control  of  firm  property,  natu- 
rally has  the  right  to  collect  all  the  claims  due  the  partnership."^ 


S.  38"  Wicklifife  v.  Eve,  17  How. 
(U.  Sj  468,  15  L.  ed.  163;  In  re  Coe, 
157  Fed.  308 ;  Dickens  v.  Dickens,  154 
Ala.  440,  45  So.  630;  Evans  v.  Silvey, 
144  Ala.  398,  42  So.  62;  Franklin  v. 
Trickey,  9  Ariz.  282,  80  Pac.  352; 
Adams  v.  Ward,  26  Ark.  135 ;  McKay 
V.  Joy,  70  Cal.  581,  11  Pac.  832;  Filley 
V.  Phelps,  18  Conn.  294;  Price  v. 
Hicks,  14  Fla.  565 ;  Huggins  v.  Hug- 
gins,  117  Ga.  151,  43  S.  E.  759;  Har- 
rah  V.  State,  38  Ind.  App.  495,  76  N. 
E.  443,  n  N.  E.  747;  Commercial 
Nat.  Bank  v.  Proctor,  98  111.  558; 
Starr  v.  Case,  59  Iowa  491,  13  N.  W. 
645 ;  Whittaker  v.  Jordan,  104  Maine 
516,  72  Atl.  682;  Hewitt  v.  Hayes,  204 
Mass.  586,  90  N.  E.  985,  27  L.  R.  A. 
(N.  S.)  154;  Pfeffer  v.  Steiner,  27 
Mich.  537 ;  Robertshaw  v.  Hanway, 
52  Miss.  713;  Barnes  v.  Stone,  198 
Mo.  471,  95  S.  W.  915;  Holman  v. 
Nance,  84  Mo.  674;  Loeb  v.  Huston 
(Nebr.),  152  N.  W.  553;  Reinhardt 
V.  Reinhardt,  134  App.  Div.  440,  119 
N.  Y.  S.  285 ;  In  re  Thieriot,  102  N. 
Y.  S.  952 ;  Enck  v.  Gerding,  67  Ohio 
St.  245,  65  N.  E.  880 ;  Shipe's  Appeal, 
114  Pa.  St.  205,  6  Atl.  103;  Hawkins 
V.  Capron,  17  R.  I.  679,  24  Atl.  466; 
Gant  v.  Reed,  24  Tex.  46,  76  Am. 
Dec.  94 ;  Amarillo  Nat.  Bank  v.  Har- 
rell  (Tex.  Civ.  App.),  159  S.  W.  858; 


In  re  Auerbach,  23  Utah  529,  65  Pac. 
488;  Stearns  v.  Houghton,  38  Vt. 
583;  Dyer  v.  Morse,  10  Wash.  492, 
39  Pac.  138,  28  L.  R.  A.  89.  And 
compare  Flynn  v.  Scale,  2  Cal.  App, 
665,  84  Pac.  263;  Campbell  v.  Hart, 
118  La.  871,  43  So.  533.  Surviving 
partners  may  waive  the  exclusive 
right  to  the  possession  of  the  partner- 
ship property,  to  sell  and  dispose  of 
the  same.  Welborn  v.  Coon,  57  Ind. 
270.  See  further  Stubbings  v.  O'Con- 
nor, 102  Wis.  352,  78  N.  W.  577. 
Quaere — Has  a  surviving  dormant 
partner  this  right  of  possession  and 
the  right  to  settle  the  firm  business? 
Johnson  v.  Ames,  6  Pick.  (Mass.) 
330. 

-oCooley  v.  Miller  (Cal.),  142  Pac. 
83. 

3<>  Connor  v.  Allen,  Harr.  (Mich.) 
371;  Shad  v.  Fuller,  R.  M.  Charlt. 
(Ga.)  501;  Walker  v.  House,  4  Md. 
Ch.  39;  Evans  v.  Evans,  9  Paige  (N. 
Y.)  178;  Collins  v.  Young,  1  Macq. 
385 ;  Hartz  v.  Schrader,  8  Ves.  Jr.  317. 

31  Davis  v.  Sowell,  11  Ala.  262; 
Cockerham  v.  Bostey,  52  La.  Ann.  65, 
26  So.  814;  Peters  v.  Davis,  7  Mass. 
257;  O'Connell  v.  Schwanabeck,  76 
Mich.  517,  43  N.  W.  599;  Bernard  v. 
Wilcox,  2  Johns.  Cas.  (N.  Y.)  374; 
Rice   V.    Richards,    45    N.    Car.   277; 


§    618  LAW    OF    TARTNERSHIP  816 

A  surviving  partner  may  sue  and  recover  the  entire  value  of  the 
property.'"'-  The  surviving  partner  may  under  the  Utah  code  sue 
and  recover  payments  of  usury  made  by  the  firm,^^  But  the 
personal  representatives  of  a  deceased  partner  are  entitled  to 
personal  property  owned  by  him  individually  and  used  by  the 
firm.^* 

§  618.     Power  of  surviving  partner  to  complete  contracts. 

— Does  the  winding  up  of  the  affairs  of  a  firm  by  a  surviving 
partner  include  the  completion  of  unfinished  contracts?  The 
general  rule  of  law  is  that  contracts  for  personal  skill' of  the  de- 
ceased die  at  the  death  of  the  party  who  contracted  to  exercise 
the  skill,  but  that  where  the  contract  does  not  call  for  such  per- 
sonal services,  it  does  not  expire  at  his  death.  For  example,  a 
noted  lecturer,  musician,  or  business  man,  might  die,  while  un- 
der a  contract  for  personal  skill  and  services,  and  the  contract, 
as  a  result,  would  become  of  no  effect,  from  that  time.  On  the 
contrary,  a  sewer  contractor  might  die  while  under  a  contract 
to  construct  a  sewer,  without  ending  the  contract,  as  his  contract 
could,  as  a  rule,  be  performed  by  others,  while  the  first  class  above 
named  could  not  delegate  their  duties. ^^  Winding  up  the  part- 
nership business  must  necessarily  include  the  closing  up  of  those 
obhgations  which  are  binding  upon  the  firm,  hence  the  surviving 
partner  has  the  authority,  in  general,  to  complete  such  contracts, 
existing  at  the  death  of  the  deceased  partner,  as  do  not  call  for 
the  personal  skill  and  efforts  of  the  deceased  partner,^®  and  he 

Davis  V.  Church,  1  Watts  &  S.  (Pa.)  34  Van  Damm  v.  Van  Damm,   140 

240;  Younts  v.  Starnes,  42  S.  Car.  22,  N.  Y.  S.  1005;  Bane  v.  Adair  (Va.), 

19  S.  E.  1011 ;   Grether  v.  Smith,   17  82  S.  E.  734. 

S.  Dak.  279,  96  N.  W.  93 ;  Potter  v.  ^s  Starr   v.    Cosgrave   Brewing   &c. 

Stransky,  48  Wis.  235,  4  N.  W.  95;  Co.,   12  Can.   Sup.   Ct.  571    (revg.   11 

Dixon  V.  Hamond,  2  B.  &  Aid.  310;  Ont.  App.  156,  restoring  5  Ont.  189)  ; 

Kempe  v.  Andrews,  Carth.  170,  3  Lev.  Burnet  v.  Hope,  9  Ont.  10. 

290;  Martin  v.  Crompe,  1  Ld.  Raym.  as  Weiss  v.  Hamilton,  40  Mont.  99, 

340,  2  Salk.  444.  105  Pac.  74 ;  Davis  v.  Sowell,  11  Ala. 

32Amarillo    Nat.    Bank   v.    Harrell  262;  Hughes  v.  Gross,  166  Mass.  61, 

(Tex.  Civ.  App.),  159  S.  W.  858.  AZ  N.  E.  1031,  32  L.  R.  A.  620,  55  Am. 

33Cobh  V.  Hartenstein  (Utah),  152  St.    375;    United     States    v.    United 

Pac.  424.  States  Fidelity  &c.  Co.,  123  N.  Y.  S. 


817  ADMINISTRATION    AFTER    DEATH  §    619 

may  borrow,  in  the  firm  name  and  upon  firm  property,  for  such 
purpose.^^  It  has  often  been  held  that  where  a  member  of  a 
law  firm  dies,  the  client  may  look  to  the  surviving  member  to 
complete  the  services,  and  such  partner  may  recover  a  fair  com- 
pensation.^^ This  rule  does  not  hold  if  the  contract  is  specially 
for  the  services  of  the  deceased  partner.^**  No  new  obligations 
are  to  be  incurred  by  the  surviving  partner,  however,  unless  for 
the  purpose  of  winding  up  unfinished  obligations  in  a  proper  man- 
ner, and  to  avoid  loss  to  the  estate/'' 

§  619.    Effect  of  death  of  partner  on  contract  with  employe. 

— It  has  been  held  that  the  death  of  a  partner,  since  it  dis- 
solves the  partnership,  terminates  the  contract  of  an  employe  of 
the  partnership,  such  a  contract  being  dependent  upon  the  life 
of  the  employe  and  the  life  of  the  partnership,  if  death  in 
either  case  was  not  voluntary.*^  The  reason  for  this  rule  is 
thus  given  by  a  text-writer.*-  "Where  a  servant  is  employed 
by  a  firm,  a  dissolution  of  the  firm  dissolves  the  contract,  so 
that  a  servant  is  absolved  therefrom,  but  if  the  dissolution  re- 
sults from  the  act  of  the  parties  they  are  liable  to  the  servant  for 
his  loss  therefrom,  but  if  the  dissolution  results  from  the  death 

938;  Phillips  v.  Alhambra  Palace  Co.,  judgment  164  111.  App.  25)  ;  Exchange 

[1901]  1  K.  B.  59.  Bank  v.  Tracey,  11  Mo.  594;   Castle 

s^Butchart  v.  Dresser,  10  Hare  453.  v.  Reynolds,  10  Watts  (Pa.)  51. 

3s  Smith  V.  Hill,  13  Ark.  173 ;  Moses  ^i  Louis   v.   Elf  elt,   89   Cal.   547,   26 

V.    Bagley,    55    Ga.    283;    Walker    v.  Pac.    1095;    Griggs   v.    Swift,   82    Ga. 

Goodrich,  16  111.  341 ;  Clifton  v.  Clark,  392,  9  S.  E.  1062,  5  L.  R.  A.  405,  14 

83  Miss.  446,  36  So.  251,  66  L.  R.  A.  Am.  St.  176;  Redheffer  v.  Leathe,  15 

821,  102  Am.  St.  458 ;  Dowd  v.  Troup,  Mo.  App.  12 ;  Greenburg  v.  Early,  4 

57  Miss.  204;   McCoon  v.  Galbraith,  Misc.  99,  23  N.  Y.  S.  1009,  SZ  N.  Y. 

29  Pa.  St.  293.  St.  130,  30  Abb.  N.  Cas.  300;  Burnet 

39  Clifton  V.  Clark,  83  Miss.  446,  v.  Hope,  9  Ont.  10.  See  also  Mason 
Zd  So.  251,  66  L.  R.  A.  821,  102  Am.  v.  Secor,  16  Hun  178,  27  N.  Y.  S.  570, 
St.  458 ;  Landa  v.  Shook,  87  Tex.  608,  57  N.  Y.  St.  2>Z2>.     Compare  Connell 

30  S.  W.  536;  Wright  v.  McCampbell,  v.  Owen,  4  U.  C.  C.  P.  113. 

75  Tex.  644,  13  S.  W.  293.     See  also         ^2  Wood,      Master      and      Servant, 

McGill  V.  McGill,  2  Met.    (Ky.)   258.  §  163,  quoted  in  Griggs  v.  Swift,  82 

40  Oliver  v.  Forrester,  96  111.  315 ;  Ga.  392,  9  S.  E.  1062,  5  L.  R.  A.  405, 
Andrews  v.  Stinson,  254  111.  Ill,  98  N.  4  Am.  St.  176. 

E.  222,  Ann.  Cas.  1913  B,  927n  (revg. 


§    620  LAW    OF    PARTNERSHIP  818 

of  a  member  of  the  firm,  the  dissohition  resulting  by  operation 
of  law,  and  not  from  the  act  of  the  parties,  no  action  for  dam- 
ages will  lie.  *  *  *  So,  if  a  firm  consists  of  two  or  more 
persons,  and  one  or  more  of  them  dies,  but  the  firm  is  not  thereby 
dissolved,  the  contract  still  subsists,  because  one  or  more  of  his 
partners  is  still  in  the  firm,  and  this  is  so  even  though  other 
persons  are  taken  into  the  firm.  The  test  is  whether  the  firm  is 
dissolved.  So  long  as  it  exists,  the  contract  is  in  force ;  but  when 
it  is  dissolved  the  contract  is  dissolved  with  it,  and  the  question 
as  to  whether  damages  can  be  recovered  therefor  will  depend 
upon  the  question  whether  the  dissolution  resulted  from  the  act  of 
God,  the  operation  of  law  or  the  act  of  the  parties."  But  there  are 
cases  which  hold  that  where  the  business  is  continued  after  the 
death  of  a  partner,  a  contract  of  employment  previously  made 
is  binding  on  the  surviving  partners  who  continue  the  business, 
and  they  are  liable  in  damages  for  a  breach  of  it,  the  theory  being 
that  a  contract  for  services  for  a  specified  time  is  a  subsisting 
contract,  which  can  not  be  annulled  except  with  the  consent  of 
both  parties,  and  from  liability  on  which  the  partnership  is  not 
relieved  by  the  death  of  a  partner.*^  In  England  it  has  been 
held  that  the  death  of  a  partner  terminated  a  contract  of  em- 
ployment with  a  partnership,  since  it  was  entered  into  with  the 
implied  condition  that  all  the  parties  should  live.'** 

§  620.  Power  of  alienation  of  firm  property. — The  power 
of  alienation,  whether  direct,  by  sale,  or  indirect,  by  incumbrance, 
of  firm  property  by  a  surviving  partner,  when  for  proper 
purposes,  is  too  well  settled  to  raise  serious  question.  There 
seems  to  be,  however,  in  most  jurisdictions,  a  distinction  be- 
tween real  and  personal  property  of  the  firm,  as  regards  the  pur- 
pose for  which  such  sale  may  be  effected.  Personal  property 
and,  it  seems,  real  property  when  considered  as  personalty,  may 
be  sold  by  the  surviving  partner  both  for  the  purpose  of  satis- 

*3  Hughes  V.  Gross,   166  Mass.  61,     Super,  Ct.  137.     See  Martin  v.  Hunt, 
43  N.  E.  1031,  32  L.  R.  A.  620,  55  Am.     1  Allen  (Mass.)  418. 
St.    375 ;    Johnson   v.   Judge,    16    Pa.         ^*  Tasker  v.  Shepherd,  6  H.  &   N. 

575. 


819 


ADMINISTRATION    AFTER    DEATH 


620 


fying  firm  obligations,  and  also  for  the  purpose  of  distribution/' 
but  he  can  sell  the  firm  property  for  no  other  purpose/"  Such 
sale  may  be  made  even  though  the  partnership  and  its  members 
are  insolvent/^  A  surviving  partner  may  assign  judgment  be- 
longing to  the  firm/^  As  to  firm  real  estate,  the  general  rule 
seems  to  be  that  it  can  only  be  sold  to  pay  debts,^"  this  being 
analogous  to  administration  of  estates,  where  the  title  descends 
to  the  heirs,  unless  it  becomes  necessary  for  the  personal  repre- 
sentative, acting  within  statutory  requirements,  to  sell  the  real 
property  to  pay  the  debts  of  the  decedent.  A  surviving  partner 
may  likewise  incumber  by  mortgage  or  pledge  property  of  the 
firm,  when  it  is  necessary,  and  is  done  for  the  benefit  of  the 
firm,  and  when  this  is  done  in  good  faith,  it  has  been  held  that 
the  mortgage  is  effectual  against  the  partnership  creditors  as  well 
as   against   the   representatives   of   the   deceased    partner,    even 


45  Lindner  v.  Bank,  49  Nebr.  735,  68 
N.  W.  1028 ;  Bohler  v.  Tappan,  1  Fed. 
469,  1  McCrary  (U.  S.)  134; 
Loeschigk  v.  Hatfield,  51  N.  Y.  660; 
In  re  Bourne  [1906],  2  Ch.  427.  See 
also  Shanks  v.  Klein,  104  U.  S.  18,  26 
L.  ed.  635;  Perin  v.  Megibben,  53 
Fed.  86,  3  C.  C.  A.  443 ;  Clay  v.  Field, 
34  Fed.  375;  Burchinell  v.  Koon,  8 
Colo.  App.  463,  46  Pac.  932 ;  Hartnett 
V.  Stillwell,  121  Ga.  386,  49  S.  E.  276, 
104  Am.  St.  151;  Bass  Dry  Goods 
Co.  V.  Granite  City  Mfg.  Co.,  116  Ga. 
176,  42  S.  E.  415;  McKean  v.  Vick, 
108  111.  Z72,;  Hughes  v.  Trahern,  64 
111.  48;  Ives  v.  Ashelby,  26  111.  App. 
244 ;  Walling  v.  Burgess,  122  Ind.  299, 
22  N.  E.  419,  23  N.  E.  1076,  7  L.  R. 
A.  481 ;  Welborn  v.  Coon,  57  Ind. 
270;  Milner  v.  Cooper,  65  Iowa  190, 

21  N.  W.  558;  Carter  v.  Flexner,  92 
Ky.  400,  17  S.  W.  851,  13  Ky.  L.  608; 
Cockerham  v.  Bosley,  52  La.  Ann.  65, 
26  So.  814;  Thayer  v.  Badger,  171 
Mass.  279,  50  N.  E.  541;  Bassett  v. 
Miller.  39  Mich.  133 ;  Barry  v.  Briggs, 

22  Mich.  201 ;  Stewart  v.  Burkhalter, 


28  Miss.  396;  Priest  v.  Chouteau,  12 
Mo.  App.  252  (affd.  83  Mo.  398,  55 
Am.  Rep.  2)7Z)  ;  Durant  v.  Pierson, 
124  N.  Y.  444,  26  N.  E.  1095,  12  L. 
R.  A.  146,  21  Am.  St.  686;  Williams 
V.  Whedon,  109  N.  Y.  22,2,  16  N.  E. 
365,  4  Am.  St.  460;  Herd  v.  Delp,  1 
Heisk.  (Tenn.)  530. 

46  Miller  v.  Kingsbury,  128  111.  45. 
21  N.  E.  209;  Brown  v.  Watson,  66 
Mich.  223,  2,Z  N.  W.  493 ;  Stewart  v. 
Burkhalter,  28  Miss.  396;  Scott  v. 
Tupper,  8  Smed.  &  M.  (Miss.)  280. 
See  also  Titman  v.  Twelfth  Ward 
Bank,  12  N.  Y.  S.  634,  58  Hun  610, 
35  N.  Y.  St.  660  (affd.  124  N.  Y.  667, 
27  N.  E.  855). 

47  Burchinell  v.  Koon,  25  Colo.  59, 
52  Pac.  1100  (affg.  8  Colo.  App.  463, 
46  Pac.  932)  ;  Hadley  v.  Milligan,  100 
Ind.  49;  Willson  v.  Nicholson,  61  Ind. 
241. 

48  Loeb  V.  Huston's  Estate  (Nebr.). 
152  N.  W.  553. 

49  Shanks  v.  Klein,  104  U.  S.  18,  26 
L.  ed.  635.    See  §  626. 


§621  LAW    OF    PARTNERSHIP  820 

though  the  effect  is  to  prefer  one  creditor.^"  And  it  has  been 
held  that  if  necessary  to  prevent  sacrifice,  he  may  give  a  trust 
deed  upon  partnership  real  estate  to  secure  a  firm  debt.^^  But 
it  is  held  that  a  surviving  partner  can  not  mortgage  firm  real 
estate  of  an  insolvent  firm  thus  preferring  one  creditor.^^  Some 
cases  have  held  a  mortgage  by  a  surviving  partner  valid  where 
part  of  the  debt  was  contracted  by  the  surviving  partner,  if  for 
the  benefit  of  the  firm.^^  In  another  case  such  mortgage  to  secure 
a  loan  made  by  the  surviving  partner  for  paying  off  a  firm  debt, 
has  been  held  a  new  contract  and  invalid.^*  A  mortgage  by  a  sur- 
viving partner  who  is  engaged  in  winding  up  the  firm  business  is, 
it  seems,  valid  as  to  strangers  to  the  partnership  affairs  and  not 
subject  to  attack  by  them/^  A  mortgage  of  firm  property  to 
secure  the  individual  debt  of  a  surviving  partner  conveys  only 
his  interest.^®  The  same  is  true  where  a  surviving  partner  by  a 
quitclaim  deed  purported  to  convey  all  the  partnership  assets  and 
all  his  rights  as  surviving  partner,  and  only  his  individual  in- 
terest was  held  to  pass.^^ 

§  621.     Power  of  surviving  partner  to  make  assignment 
for  benefit  of  creditors. — As  a  general  rule,  when  not  prohib- 

.     soBurchinell  v.  Koon,  8  Colo.  App.  [1906]  2  Ch.  427,  3  B.  R.  C.  569  and 

463,  46  Pac.  932;   Bohler  v.  Tappan,  note    (affg.    [1906]    1   Ch.   113).     See 

1  McCrary   (U.  S.)    134,  1  Fed.  469;  Espy  v.  Comer,  80  Ala.  333. 

Courtland  Forging  Co.  v.  First  Nat.  ^^  Breen  v.  Richardson,  6  Colo.  605. 

Bank,    141    Ind.   518,  40  N.   E.   1070;  ^2  Anderson     v.     Norton,     15     Lea 

First  Nat.  Bank  v.  Parsons,  128  Ind.  (Tenn.)  14,  54  Am.  Rep.  400. 

147,  27  N.  E.  486 ;  People's  Nat.  Bank  ss  Burchinell  v.  Koon,  8  Colo.  App. 

V.  Wilcox,  136  Mich.  567,  100  N.  W.  463,  46  Pac.  932;  Durant  v.  Pierson, 

24,  4  Ann.  Cas.  465n;   Bell  v.  Hep-  124  N.  Y.  444,  26  N.  E.  1095,  12  L. 

worth,  134  N.  Y.  442,  31  N.  E.  918;  R.  A.  146,  21  Am.  St.  686. 

Durant  v.  Pierson,  124  N.  Y.  444,  26  ^*  Bank  of   Port  Gibson  v.  Baugh, 

N.    E.    1095,    12    L.    R.    A.    146,    21  9  Smed.  &  M.  (Miss.)  290. 

Am.    St.   686;    Williams   v.    Whedon,  ^^  Spri„gfield  Grocer  Co.  v.  Shack- 

109    N.    Y.    333,    16    N.    E.    365,    4  elford,  56  Mo.  App.  642. 

Am.    St.   460;    In    re    Crane,    4   Ohio  s^  Ramsbottom   v.   Bailey,    124   Cal. 

S.  &  C.  P.  Dec.  398,  29  Wkly.  Law  259,  56  Pac.  1036. 

Bui.    93;    In    re    Clough,    L.    R.    31  "Jackson  v.  Gunton,  218  Pa.  275, 

Ch.  Div.  324 ;  Butchart  v.  Dresser,  4  67  Atl.  467. 
DeG.,   M.  &  G.  542;   In  re  Bourne, 


821 


ADMINISTRATION    AFTER   DEATH 


622 


ited  by  statute,  a  surviving  partner  may  make  a  valid  assignment 
of  all  the  firm  assets  for  the  benefit  of  all  firm  creditors,^'*  and 
prefer  some  of  those  creditors  in  such  assignment.^^  And  he 
may  transfer  the  assets  of  the  firm  to  one  creditor  in  payment 
of  his  debt,  although  the  effect  of  this  would  be  to  give  that 
creditor  a  preference  over  other  creditors. ^*^ 

§  622.  Payments  to  and  by  surviving  partner. — A  surviv- 
ing partner  has  no  right  to  transfer  firm  assets  in  payment  of  his 
individual  debts."^  One  who  has  taken  firm  property  from  a 
surviving  partner  in  satisfaction  of  an  individual  debt,  or  as  se- 
curity for  such  debt  is  chargeable  as  a  trustee  therefor  at  the 
suit  of  the  representatives  of  the  deceased  partner,  or  of  the  firm 
creditors.''^  If  a  survivor  has  conducted  the  business  after  dis- 
solution payments  made  by  him  to  one  who  is  a  creditor  of  both 
the  old  firm,  and  of  the  subsequent  business,  should  be  applied 


58  Espy  V.  Comer,  80  Ala.  333; 
Atchison  v.  Jones,  1  S.  W.  406,  8  Ky. 
L.  (abstract)  259 ;  Riley  v.  Carter,  76 
Md.  581,  25  Atl.  667,  19  L.  R.  A.  489, 
35  Am.  St.  443;  Hanson  v.  Metcalf, 
46  Minn.  25,  48  N.  W.  441 ;  Haynes 
V.  Brooks,  116  N.  Y.  487,  22  N.  E. 
1083  (affg.  42  Hun  528,  4  N.  Y.  St. 
587)  ;  Hutchison  v.  Smith,  7  Paige 
(N.  Y.)  26;  Farmers'  Bank  v.  Ritter 
(Pa.),  12  Atl.  659,  9  Sad.  433,  22 
Wkly.  Notes  Cas.  128;  White  v. 
Union  Ins.  Co.,  1  Nott  &  McC.  (S. 
Car.)  556,  9  Am.  Dec.  726;  Davidson 
V.  Papps,  28  Grant  Ch.  (U.  C.)  91. 

59  Havens  &c.  Co.  v.  Harris,  140 
Ind.  387,  39  N.  E.  49;  Emerson  v. 
Senter,  118  U.  S.  3,  6  Sup.  Ct.  981,  30 
L.  ed.  49 ;  Hoyt  v.  Sprague,  103  U.  S. 
613,  26  L.  ed.  585 ;  Tompkins  v. 
Wheeler,  16  Pet.  (U.  S.)  106,  10  L. 
ed.  903;  Brooks  v.  Marbury,  11 
Wheat.  (U.  S.)  78,  9  L.  ed.  423; 
Miller  V.  Pierson,  124  N.  Y.  654,  27 
N.  E.  413  (revg.  58  Hun  190.  605,  11 
N.  Y.  S.  842)  ;  Durant  v.  Pierson,  124 


N.  Y.  444,  26  N.  E.  1095,  12  L.  R.  A. 
146,  21  Am.  St.  686 ;  Haynes  v.  Brooks, 
116  N.  Y.  487,  22  N.  E.  1083  (afifg. 
42  Hun  528,  4  N.  Y.  St.  587)  ;  Beste 
V.  Burger,  110  N.  Y.  644,  17  N.  E. 
734  (affg.  13  Daly  317,  17  Abb.  N. 
Cas.  162)  ;  Williams  v.  Whedon,  109 
N.  Y.  333,  16  N.  E.  365,  4  Am.  St. 
460  (affg.  39  Hun  98)  ;  Loeschigk  v. 
Hatfield,  51  N.  Y.  660;  Egberts  v. 
Wood,  3  Paige  (N.  Y.)  517,  24  Am. 
Dec.  236;  Patton  v.  Leftwich,  86  Va. 
421,  10  S.  E.  686,  6  L.  R.  A.  569,  19 
Am.  St.  902. 

^^  Salsbury  v.  Ellison,  7  Colo.  167, 
2  Pac.  906,  49  Am.  Rep.  347; 
Loeschigk  v.  Hatfield,  51  N.  Y.  660. 
See  Mills  v.  Argall,  6  Paige  (N.  Y.) 
577. 

♦'I  Hutchinson  v.  Smith,  7  Paige  (N. 
Y.)  26;  Knox  v.  Schepler,  2  Hill  (S. 
Car.)  595 ;  Allen  v.  Nashville  Second 
Nat.  Bank,  6  Lea  (Tenn.)  558; 
Rogers  v.  Flournoy,  21  Tex.  Civ. 
App.  556,  54  S.  W.  386. 

G2  Hill  V.  Draper,  54  Ark.  395,  15  S. 


§    623  LAW    OF    rARTXERSIIIP  822 

to  the  earliest  item  of  debt.''"  And  if  one  who  is  a  debtor  to 
both  the  old  firm  and  the  subsequently  conducted  business  makes 
payments  to  the  surviving  partner,  these  should  be  imputed  also 
to  the  oldest  item  of  the  account.*'* 

§  623.  Status  of  partnership  real  estate — Out  and  out  con- 
version into  personalty. — Questions  as  to  the  character  of 
partnership  real  estate  and  as  to  whether  it  is  converted  into  per- 
sonalty arise  most  frequently  after  the  death  of  a  partner  in  con- 
nection with  the  rights  of  the  surviving  partner,  and  of  the  de- 
ceased partner's  heirs  and  personal  representatives.  The  rules  of 
law  on  this  subject  have  long  been  in  some  conflict  in  this  coun- 
try, and  the  general  American  rule  has  been  opposed  to  the 
English  doctrine.  However,  the  Uniform  Partnership  Act 
changes  the  American  rule  in  favor  of  the  English  doctrine.  In 
view  of  these  facts,  although  the  subject  was  previously  consid- 
ered,*'^ the  conflicting  general  doctrines  and  the  reasons  assigned 
in  support  of  each,  will  here  be  reviewed  from  the  standpoint  of 
rights  after  death  of  a  partner.  In  England  the  rule  is  that 
whenever  land  is  partnership  property,  it  is  treated  as  personal 
estate  for  all  purposes,  including  the  determination  of  the  rights 
of  heirs  and  personal  representatives  of  deceased  partners.  This 
rule  is  now  settled  by  the  English  Partnership  Act,^®  and  is  ap- 
plied in  Scotland,*'"  and  the  English-speaking  British  colonies.*'^ 

\V.  1025 ;  Brown  v.  Watson,  66  Alich.  ^7  Young  v.  Campbell,  10  Fac.  Dec. 

223,  33  N.  W.  493.  196 ;    Corse    v.    Corse,    13    Fac.    Dec. 

''^  Stanwood     v.     Owen,     14     Gray  162 ;  Murrays  v.  Murray,  13  Fac.  Dec. 

(Mass.)   195;  Wiesenfeld  v.  Byrd,  17  441;    Irvine  v.   Irvine,    13   Sess.   Cas. 

S.    Car.    106;    Tootle    v.    Jenkins,    82  (2d  Series)  1367. 

Tex.  29,  17  S.  W.  519 ;  Clayton's  Case,  '^^  Ex  parte  Banks,  1  Newfoundland 

1    Merw.   572,    15    Rev.    161,   35    Eng.  R.   349;    Prentiss  v.    Brennan,    1    Gr. 

Reprint  781.  Ch.  484;  Wylie  v.  Wylie,  4  Gr.   Ch. 

•^*  Dick   V.    Laird,    5    Cranch    C.    C.  278;  Sanborn  v.  Sanborn,  11  Gr.  Ch. 

328,    Fed.    Cas.    No.    3892 ;    Boyd    v.  359 ;  Conger  v.  Piatt,  25  U.  C.  Q.  B. 

Webster,  59  N.  H.  89;  Cain  v.  Dietz,  277;    Cameron   v.   Cameron,    1    N.   Z. 

3  Ohio  Cir.  Ct.  R.  612,  2  O.  C.  D.  355.  App.  24 ;  In  re  Music  Hall  Block,  8 

•'^  See  ch.  11,  Ont.  225;   In   re  Cushing's   Estate,   1 

•50  English   Partnership  Act,    §§   20,  New     Bruns.    Eq.     102;     Walker    v. 

22.  Creaven,  25  N.  Z.  L.  R.  329. 


823  ADMINISTRATION  AFTER  DEATH  §  623 

The  doctrine,  however,  was  well  settled  by  the  decisions  before 
the  passage  of  the  Partnership  Act.  The  leading  case  is  that 
of  Darby  v.  Darby."''  In  which  Vice-Chancellor  Kindersley  thus 
stated  the  reasons  for  the  rule :  "Now,  it  appears  to  me  that,  irre- 
spective of  authority,  and  looking  at  the  matter  with  reference 
to  principles  well  established  in  this  court,  if  partners  purchase 
land  merely  for  the  purpose  of  their  trade,  and  pay  for  it  out 
of  the  partnership  property,  that  transaction  makes  the  property 
personalty,  and  effects  a  conversion  out  and  out.  What  is  the 
clear  principle  of  this  court  as  to  the  law  of  partnership?  It  is, 
that  on  the  dissolution  of  the  partnership  all  the  property  belong- 
ing to  the  partnership  shall  be  sold,  and  the  proceeds  of  the 
sale,  after  discharging  all  the  partnership  debts  and  liabilities, 
shall  be  divided  among  the  partners,  according  to  their  respective 
shares  in  the  capital.  That  is  the  general  rule ;  it  requires  no 
special  stipulation;  it  is  inherent  in  the  very  contract  of  part- 
nership. That  the  rule  applies  to  all  ordinary  partnership  prop- 
erty is  beyond  all  question,  and  no  one  partner  has  a  right  to 
insist' that  any  particular  part  or  item  of  the  partnership  prop- 
erty shall  remain  unsold,  and  that  he  shall  retain  his  own  share 
of  it  in  specie.  =5^  *  *  The  right  of  each  partner  to  insist  on 
a  sale  of  all  the  partnership  property,  which  arises  from  what 
is  implied  in  the  contract  of  partnership,  is  just  as  stringent  as 
a  special  contract  would  be.  If,  then,  this  rule  applies  to  or- 
dinary stock-in-trade,  why  should  it  not  apply  to  all  kinds  of 
partnership  property?  Suppose  that  partners,  for  the  purpose 
of  carrying  on  their  business,  purchase,  out  of  the  funds  of  the 
partnership,  leasehold  estate,  or  take  a  lease  of  land,  paying  the 
rent  out  of  the  partnership  funds,  can  it  be  doubted  that  the 
same  rule  which  applies  to  ordinary  chattels  would  apply  to  such 
leasehold  property?  I  do  not  think  it  was  ever  questioned  that, 
on  a  dissolution,  the  right  of  each  partner  to  have  the  partnership 
effects  sold  applies  to  leasehold  property  belonging  to  the  part- 
nership as  much  as  to  any  other  stock-in-trade.     No  one  partner 

6^  Darby  v.  Darby   (1856),  3  Drew. 
495. 

2 — Row.  ON  Partn. — Vol.  2 


§    623  LAW    OF    PARTNERSHIP  824 

can  insist  on  retaining  his  share  unsold.  Nor  would  it  make  any 
difference  in  whom  the  legal  estate  was  vested,  whether  in  one 
of  the  partners  or  in  all;  this  court  would  regulate  the  matter  ac- 
cording to  the  equities.  *  *  *  If,  then,  the  rule  applies  not 
only  to  ordinary  stock-in-trade,  but  also  to  a  lease  for  years, — 
suppose  next,  that  the  partnership,  instead  of  purchasing  a  term 
of  years,  were  (whether  from  necessity  or  choice)  to  purchase 
land  in  fee;  if  the  land  is  necessary  for  the  partnership  business, 
and  bought  with  the  partnership  assets,  what  difference  can  it 
make  whether  the  real  estate  bought  is  leasehold  or  in  fee? 
Let  it  be  once  established  that  the  property  purchased  is  partner- 
ship property,  and  it  then  comes  under  the  operation  of  those 
principles  which  arise  out  of  the  partnership  contract;  and  there 
seems  to  -be  no  reason  why  the  operation  of  those  principles  is 
to  be  restricted  to  any  particular  class  or  species  of  partnership 
property.  *  >is  *  '^qj-  could  it  be  material  in  this  case,  any 
more  than  on  the  purchase  of  a  leasehold  interest,  in  whom  the 
legal  estate  was  vested.  I  should,  therefore,  feel  no  hesitation 
in  coming  to  this  conclusion,  that  the  mere  contract  of  partner- 
ship, without  any  express  stipulation,  involves  in  it  an  implied 
contract,  quite  as  stringent  as  if  it  were  expressed,  that,  at  the 
dissolution  of  the  partnership,  all  the  property  then  belonging  to 
the  partnership,  whether  it  be  ordinary  stock-in-trade,  or  a  lease- 
hold interest,  or  a  fee  simple  estate  in  land,  shall  be  sold,  and 
the  net  proceeds,  after  satisfying  all  the  partnership  debts  and 
liabilities,  be  divided  among  the  partners ;  and  that  each  partner, 
and  the  representatives  of  any  deceased  partner,  have  a  right  to 
insist  on  this  being  done.  Next,  what  is  the  doctrine  of  this 
court  as  to  conversion?  If  a  testator  seized  of  real  estate  de- 
vises it  for  sale,  and  directs  that  the  proceeds  of  the  sale  shall  be 
divided  among  certain  persons,  so  that  each  of  the  cestuis  que 
trustent  is  entitled  to  say  he  will  have  it  sold,  and  will  take  his 
share  of  the  proceeds,  that  real  estate  is  in  equity  converted  into 
personalty;  and  so,  if  three  persons  contract  that  certain  real 
property  belonging  to  them  shall  be  sold,  and  the  proceeds  be  di- 
vided among  them,  so  that  each  one  of  them  has  a  right  to  insist 


825  ADMINISTRATION    AFTER    DEATH  §    623 

that  it  shall  be  sold,  and  that  he  shall  have  his  share  of  the 
proceeds  as  money,  that  real  property  is  in  equity  converted  into 
personalty,  and  if  any  one  of  them  dies  while  the  property  re- 
mains unsold,  his  share  is  personalty  as  between  his  heir  and 
his  personal  representatives.  Now,  if  it  be  established  that,  by 
the  contract  of  partnership,  all  the  partnership  property  is  to 
be  sold  at  the  dissolution  of  the  partnership,  then  any  real  prop- 
erty which  has  become  the  property  of  the  partnership  becomes, 
by  force  of  the  partnership  contract,  converted  into  personalty ; 
and  that,  not  merely  as  between  the  partners,  to  the  extent  of 
discharging  the  partnership  debts,  but  as  between  the  real  and 
personal  representatives  of  any  deceased  partner."  There  were 
a  few  decisions^"  earlier  than  this  one  which  laid  down  the  rule 
of  conversion  only  for  partnership  purposes  and  that  a  special 
contract  was  necessary  to  make  an  out  and  out  conversion  sub- 
stantially the  same  doctrine  followed  by  the  greater  number  of 
American  cases.  There  were  also  decisions  earlier  than  that 
of  Darby  v.  Darby,  many  of  them  by  Lord  Eldon,  which  favored 
the  doctrine  of  out  and  out  conversion,  and  on  which  the  decision 
in  Darby  v.  Darby  was  based. '^  The  rule  of  out  and  out  con- 
version had  also,  it  seemed,  always  been  followed  in  the  cases 
which  adhered  closely  to  the  law  merchant. ^^  Some  of  the  earlier 
American  decisions  and  texts  followed  the  doctrine  of  out  and 

'J'o  Thornton  v.  Dixon,  3  Bro.  C.  C.  subnom. ;  Lake  v.  Craddock,  3  P.  W. 

199;  Bell  v.  Phyn,  7  Ves.  453;   Bal-  158;  Usher  v.  Ayleward,  1  Vern.  360, 

main  v.  Shore,  9  Ves.  500;  Randall  v.  361;  Kempe  v.  Andrews,  Carth.  170; 

Randall  (1835),  7  Sim.  271;  Darby  v.  Martin  v.  Crompe,  1  Ld.  Raym.  340, 

Darby,  3  Drew.  495.  2     Salk.    444 ;     Elliot    v.     Brown,    3 

'1  Fereday  V.  Wightwick,  1  Russ.  &  Swanst.    489;    Lyster    v.    Dolland,    1 

Myl.     45;     Crawshay     v.     Maule,     1  Ves.  Jr.  431,  3   Bro.   C.  C.  478,  480; 

Swanst.  495 ;   Kirkpatrick  v.  Lime,  5  Morley  v.  Bird,  3  Ves.  Jr.  628 ;  Jack- 

Paton   Scotch  Ap.   Cas.  525 ;    Selkrig  son  v.  Jackson,  9  Ves.  591,  596 ;  Petty 

\'.    Davies,    2    Dow.   230;    Phillips    v.  v.  Sty  ward,  1  Rep.  Cas.  in  ch.  57,  1 

Phillips,  1  Myl.  &  K.  649;  Broom  v.  Eq.   Cas.   Abr.  290;    Rigden   v.   Val- 

Broom,  3  Myl.  &  K.  443.  lier,  2  Ves.  Sen.  252,  258 ;  Steeds  v. 

"Jeffreys    v.    Small,    1    Vern.   217,  Steeds,  L.  R.  22  Q.  B.  D.  537,  541,  58 

Eq.  Cas.  Abr.  370,  pi.  1 ;  Lake  v.  Gib-  L.  J.  Q.  B.  302. 
son,  1  Ch.  Cas.  Abr.  290,  pi.  3,  s.  c. 


§  623 


LAW    OF    rARTNERSHIP 


826 


out  conversion,"  and  in  Texas/*  Ohio,'^  Kentucky,^^  Connecti- 
cut," and  in  some  other  states,  statements  favoring  the  rule  are 
found  in  opinions.'^  It  is  generally  held  that  lands  owned  by 
the  partnership  may  be  converted  into  personalty  by  agreement 
between  the  parties,  either  written,'^*  or  implied  from  the  na- 
ture of  the  business,  as  selling  real  estate  f°  or  from  the  acts  of 
the  partners  in  relation  to  the  lands.^^    The  former  rule  in  Penn- 


"3  Hoxie  V.  Carr,  1  Sumn.  (U.  S.) 
173,  Fed.  Cas.  No.  680  (1832)  ;  Mc- 
Alister  v.  Montgomery,  3  Hayw. 
(Tenn.)  94;  3  Kent  Com.,  pp.  37,  39; 
Story  Eq.  Jur.  (1  ed)   (1835),  §  674. 

^■4  Baldwin  v,  Richardson,  33  Tex. 
16. 

'^  Sumner  v.  Hampson,  8  Ohio  328, 
32  Am.  Dec.  722;  Ludlow  v.  Cooper, 
4  Ohio  St.  1 ;  Rammelsberg  v. 
Mitchell,  29  Ohio  St.  22. 

''^  Divine  v.  Mitchum,  4  B.  Mon. 
(Ky.)  488,  41  Am.  Dec.  241;  Garth 
V.  Davis,  120  Ky.  106,  85  S.  W.  692, 
27  Ky.  L.  505,  117  Am.  St.  571; 
Holmes  v.  Self,  79  Ky.  297,  2  Ky.  L. 
(abstract)  322,  2  Ky.  L.  380.  Com- 
pare Galbraith  v.  Gedge,  16  B.  Mon. 
(Ky.)  631;  Carter  v.  Flexner,  92  Ky. 
400,  17  S.  W.  851,  13  Ky.  L.  608. 

'"  Sigourney  v.  Munn,  7  Conn.  11 ; 
Beecher  v.  Stevens,  43  Conn.  587; 
Dickinson  v.  Dickinson,  29  Conn.  600. 

"^  Breen  v.  Richardson,  6  Colo. 
605;  Allen  v.  Withrow,  110  U.  S.  119, 
3  Sup.  Ct.  517,  28  L.  ed.  90;  Claggett 
V.  Kilbourne,  1  Black  (U.  S.)  346, 
17  L.  ed.  213;  McKee  v.  Covalt,  71 
Kans.  772,  81  Pac.  475;  Merritt  v. 
Dickey,  38  Mich.  41 ;  Moran  v. 
Palmer,  13  Mich.  367;  Richardson  v. 
Wyatt,  2  Desaus.  Eq.  (S.  Car.)  471; 
Boyce  v.  Coster,  4  Strobh.  Eq.  (S. 
Car.)  25;  Betts  v.  Letcher,  1  S.  Dak. 
182,  46  N.  W.  193 ;  Comp.  Laws  Utah, 
§  3918;  Rice  v.  Barnard,  20  Vt.  479, 


50  Am.  Dec.  54;  Zane  v.  Sawtell,  11 
W.  Va.  43;  Makee  v.  Dominis,  3 
Haw.  579. 

"Rovelsky  v.  Brown,  92  Ala.  522, 
9  So.  182,  25  Am.  St.  83;  Davis  v. 
Smith,  82  Ala.  198,  2  So.  897 ;  Ferris 
V.  Van  Ingen,  110  Ga.  102,  35  S.  E. 
347;  Nicoll  v.  Ogden,  29  111.  323,  81 
Am.  Dec.  311 ;  Maddock  v.  Astbury, 
32  N.  J.  Eq.  181 ;  Darrow  v.  Calkins, 
154  N.  Y.  503,  49  N.  E.  61,  48  L.  R.  A. 
299,  61  Am.  St.  637  (affg.  6  App.  Div. 
28,  39  N.  Y.  S.  527)  ;  Greene  v. 
Greene,  1  Ohio  535. 

so  Smith  v.  Burnham,  3  Sumn.  (U. 
S.)  435,  Fed.  Cas.  13019;  Claggett  v. 
Kilbourne,  1  Black  (U.  S.)  346,  17 
L.  ed.  213;  Holliday  v.  Land  &  River 
Imp.  Co.,  57  Fed.  774,  6  C.  C.  A.  560; 
Patrick  v.  Patrick,  71  N.  J.  Eq.  347, 
63  Atl.  848 ;  Buckley  v.  Doig,  188  N. 
Y.  238,  80  N.  E.  913;  Sumner  v. 
Hampson,  8  Ohio  328,  32  Am.  Dec. 
722;  Flower  v.  Barnekoff,  20  Ore. 
132,  25  Pac.  370,  11  L.  R.  A.  149; 
Boyce  v.  Coster,  4  Strobh.  Eq.  (S. 
Car.)  25 ;  Case  v.  Seger,  4  Wash.  492, 
30  Pac.  646. 

81  Allen  v.  Withrow,  110  U.  S.  119, 
3  Sup.  Ct.  517,  28  L.  ed.  90;  Sprague 
Mfg.  Co.  V.  Hoyt,  29  Fed.  421 ;  Ram- 
melsberg V.  Mitchell,  29  Ohio  St.  22 ; 
Ludlow  V.  Cooper,  4  Ohio  St.  1 ;  Wil- 
son V.  Wilson,  74  S.  Car.  30,  54  S.  E. 
227.     • 


827 


ADMINISTRATION    AFTER    DEATH 


§  624 


sylvania  was  that  such  a  conversion  must  be  made  by  a  deed 
or  writing  placed  on  record.^^ 

§  624.  Status  of  partnership  real  estate — Conversion  into 
personalty  for  partnership  purposes  only. — As  a  general  rule 
American  courts  hold  that  firm  real  estate  is  converted  into  per- 
sonalty so  far  as  is  necessary  to  pay  firm  debts.^^     It  is  also  the 


"Hale  V.  Henrie,  2  Watts  (Pa.) 
143,  27  Am.  Dec.  289;  McDermot  v. 
Laurence,  7  Serg.  &  R.  (Pa.)  438; 
Connelly  v.  Withers,  9  Lane.  Bar. 
117;  Cundey  v.  Hall,  208  Pa.  335,  57 
Atl.  761,  101  Am.  St.  938;  In  re 
Shafer's  Appeal,  106  Pa.  St.  49; 
Hayes  v.  Treat,  178  Pa.  St.  310,  35 
Atl.  987;  Moore  v.  Wood,  171  Pa. 
St.  365, 33  Atl.  63;  Collner  v.  Greig, 
137  Pa.  St.  606,  20  Atl.  938,  21  Am. 
St.  899;  Kepler  v.  Erie  Dime  Savings 
Bank,  101  Pa.  St.  602 ;  In  re  Second 
Nat.  Bank's  Appeal,  83  Pa.  St,  203; 
Meily  v.  Wood,  71  Pa.  St.  488,  10  Am. 
Rep.  719;  Ebbert's  Appeal,  70  Pa.  St. 
79 ;  Kramer  v.  Arthurs,  7  Pa.  St.  165. 

^^  Lang's  Heirs  v.  Waring,  Sur- 
vivor, 25  Ala.  625,  60  Am.  Dec.  533; 
Murphy  v.  Abrams,  50  Ala.  293; 
Butts  V.  Cooper,  152  Ala.  375,  44  So. 
616 ;  Clagett  v.  Kilbourne,  1  Black  (U. 
S.)  346,  17  L.  ed.  213;  Riddle  v. 
Whitehill,  135  U.  S.  621,  10  Sup.  Ct. 
924,  34  L.  ed.  283 ;  Bates  v.  Babcock, 
95  Cal.  479,  30  Pac.  605,  16  L.  R.  A. 
745,  29  Am.  St.  133  ;  Dupuy  v.  Leaven- 
worth, 17  Cal.  262;  Bank  of  S.  W. 
Georgia  v.  McGarrah,  120  Ga.  944,  48 
S.  E.  393  (.applying  Ga.  Code,  §  2649)  ; 
Taylor  v.  McLaughlin,  120  Ga.  703, 
48  S.  E.  203 ;  Black  v.  Black,  15  Ga. 
445;  Trowbridge  v.  Cross,  117  111. 
109,  7  N.  E.  347 ;  Meridian  Nat.  Bank 
V.  Brandt,  51  Ind.  56;  Roberts  v. 
McCarty,  9  Ind.  16,  68  Am.  Dec.  604 ; 
Paige  V.  Paige,  71  Iowa  318,  32  N. 
W.  360,  60  Am.  Rep.  799;  Hewitt  v. 


Rankin,  41  Iowa  35 ;  McKee  v.  Co- 
valt,  71  Kans.  772,  81  Pac.  475 ;  Buf- 
fum  v.  Buffum,  49  Maine  108,  17  Am. 
Dec.  249;  Dyer  v.  Clark,  5  Met. 
(Mass.)  562,  39  Am.  Dec.  697;  Way 
V.  Stebbins,  47  Mich.  296,  11  N.  W. 
166;  Woodward-Holmes  Co.  v.  Nudd, 
58  Minn.  236,  59  N.  W.  1010,  27  L. 
R.  A.  340,  49  Am.  St.  503 ;  Hanway 
V.  Robertshaw,  49  Miss.  758  (1876)  ; 
Young  V.  Thrasher,  115  Mo.  222,  21 
S.  W.  1104;  Smith  v.  Jones,  18  Nebr. 
481,  25  N.  W.  624;  Jones  v.  Beek- 
man  (N.  J.),  47  Atl.  71;  Craighead 
V.  Pike,  58  N.  J.  Eq.  15,  43  Atl.  424 
(affd.  60  N,  J.  Eq.  443,  45  Atl.  1091)  ; 
Smith  V.  Jackson,  2  Edw.  Ch.  (N.  Y.) 
28 ;  Buchan  v.  Sumner,  2  Barb.  Ch. 
(N.  Y.)  165,  47  Am.  Dec.  305 ;  Green- 
wood V.  Marvin,  111  N.  Y.  423,  19  N. 
E.  228;  Fairchild  v.  Fairchild,  64  N. 
Y.  471;  Smith  v.  Cowles,  81  App. 
Div.  328,  81  N.  Y.  S.  524;  Stroud  v. 
Stroud,  61  N.  Car.  525  (applying 
Code,  ch.  43,  §  2,  now  Rev.  Stat. 
(1905),  ch.  2Z,  §  1579)  ;  Adams  v. 
Church,  42  Ore.  270,  70  Pac.  1037,  59 
L.  R.  A.  782,  95  Am.  St.  740;  Mc- 
Alister  v.  Montgomery,  3  Hayw. 
(Tenn.)  94;  Piper  v.  Smith,  1  Head 
(Tenn.)  93;  State  v.  Neal,  29  Wash. 
391,  69  Pac.  1103;  Cunningham  v. 
Ward,  30  W.  Va.  572,  5  S.  E.  646; 
Weld  V.  Johnson  Mfg.  Co.,  86  Wis. 
552,  57  N.  W.  374 ;  Martin  v.  Morris. 
62  Wis.  418,  22  N.  W.  525;  Aldrich 
V.  Robinson,  2  Haw.  606. 


§  624 


LAW    OF    PARTNERSHIP 


828 


general  rule  adhered  to  by  American  courts  that  lands  which 
have  been  treated  by  the  partners  as  firm  property,  are  treated 
by  courts  as  firm  property  and  so  far  considered  as  personalty, 
that  they  may  be  sold  to  the  extent  which  is  necessary  for  pay- 
ing firm  debts  and  the  adjustment  of  equities  between  the  part- 
ners.^^  It  is  often  held  that  the  intention  with  which  real  prop- 
erty is  purchased  by  a  firm,  and  not  the  use  to  which  it  is  put, 
determines  the  question  whether  it  shall  be  deemed  real  or  per- 
sonal property.^^     But  some  courts  hold  there  is  a  presumption 


84Gillett  V.  Gaffney,  3  Colo.  351; 
Breen  v.  Richardson,  6  Colo.  605 ; 
McCauley  v.  Fulton,  44  Cal.  355 ;  Du- 
puy  V.  Leavenworth,  17  Cal.  262; 
Price  V.  Hicks,  14  Fla.  565;  Robert- 
son V.  Baker,  11  Fla.  192;  Loubat  v. 
Nourse,  5  Fla.  350;  Bopp  v.  Fox,  63 
111.  540;  Faulds  v.  Yates,  57  111.  416, 
11  Am.  Rep.  24;  Mauck  v.  Mauck,  54 
111.  281;  Hyman  v.  Peters,  30  111. 
App.  134;  Dickey  v.  Shirk,  128  Ind. 
278,  27  N.  E.  yZZ ;  Walling  v.  Burgess, 
122  Ind.  299,  22  N.  E.  419,  23  N.  E. 
1076,  '/  L.  R.  A.  481;  Johnson  v. 
Clark,  18  Kans.  157;  Buffum  v.  Buf- 
fum,  49  Maine  108,  77  Am.  Dec.  249; 
Fall  River  Whaling  Co.  v.  Borden, 
10  Cush.  (Mass.)  458;  Merritt  v. 
Dickey,  38  Mich.  41 ;  Moran  v. 
Palmer,  13  Mich.  367;  Quinn  v. 
Quinn,  22  Mont.  403,  56  Pac.  824; 
Thorne  v.  Bowen,  13  Nebr.  445,  14 
N.  W.  155;  Bowen  v.  Billings,  13 
Nebr.  439,  14  N.  W.  152;  Foster  v. 
Sargent,  72  N.  H.  170,  55  Atl.  423; 
Cilley  v.  Huse,  40  N.  H.  358;  Jarvis 
V.  Brooks,  27  N.  H.  Z7,  59  Am.  Dec. 
359;  Baldwin  v.  Johnson,  1  N.  J.  Eq. 
441 ;  Deveney  v.  Mahoney,  8  C.  E. 
Or.  (N.  J.)  247;  Van  Brocklen  v. 
Smeallie,  140  N.  Y.  70,  35  N.  E.  415, 
55  N.  Y.  St.  263  (revg.  64  Hun  467, 
46  N.  Y.  St.  230)  ;  Fairchild  v.  Fair- 
child,  64  N.  Y.  471 ;  Dawson  v.  Par- 


sons, 10  Misc.  428,  31  N.  Y.  S.  78,  62, 
N.  Y.  St.  320;  Delmonico  v.  Guil- 
laume,  2  Sandf.  Ch.  (N.  Y.)  366; 
Sage  v.  Sherman,  2  N.  Y.  417;  Spar- 
ger V.  Moore,  117  N.  Car.  449,  23  S.  E. 
359;  Baird  v.  Baird,  21  N.  Car.  524,  31 
Am.  Dec.  399;  Page  v.  Thomas,  43 
Ohio  St.  38,  1  N.  E.  79,  54  Am.  Rep. 
788;  Sumner  v.  Hampson,  8  Ohio 
328,  32  Am.  Dec.  722;  Ludlow  v. 
.  Cooper,  4  Ohio  St.  1 ;  Greene  v. 
Greene,  1  Ohio  535 ;  Rammelsberg  v. 
Mitchell,  29  Ohio  St.  22 ;  Abbott's  Ap- 
peal, 50  Pa.  St.  234 ;  Lime  Rock  Bank 
V.  Phetteplace,  8  R.  I.  56;  Tillinghast 
V.  Champlin,  4  R.  I.  173,  67  Am.  Dec. 
510;  Wilson  v.  Wilson,  74  S.  Car.  30, 
54  S.  E.  227 ;  Richardson  v.  Wyatt,  2 
Des.  Eq.  (S.  Car.)  471;  Winslow  v. 
Chiffelle,  Harp.  Eq.  (S.  Car.)  25; 
Betts  V.  Letcher,  1  S.  Dak.  182,  46 
N.  W.  193;  McAlister  v.  Montgom- 
ery, 3  Hay  (Tenn.)  94;  Boyers  v. 
Elliott,  7  Humph.  (Tenn.)  204;  Hunt 
V.  Benson,  2  Humph.  (21  Tenn.)  459; 
Baldwin  v.  Richardson,  Zi  Tex.  16; 
Diggs  V.  Brown,  78  Va.  292;  Wash- 
burn V.  Washburn,  23  Vt.  576;  Zane 
V.  Sawtell,  11  W.  Va.  43;  Riedeburg 
V.  Schmitt,  71  Wis.  644,  38  N.  W. 
326;  Fowler  v.  Bailley,  14  Wis.  125; 
Bird  v.  Morrison,  12  Wis.  138;  Makee 
V.  Dominis,  3  Haw.  579. 

85  Holmes    v.    Self,   79   Ky.   297,   2 


829 


ADMINISTRATION    AFTER    DEATH 


624 


that  land  deeded  to  partners  is  held  by  them  as  tenants  in  com- 
mon, individually,  and  one  who  claims  such  land  to  be  part  of 
the  firm  assets  must  offer  evidence  to  overcome  such  presump- 
tion,^*^ M^hich,  it  is  held  in  some  jurisdictions,  may  be  done  by 
proof  that  the  lands  were  bought  with  partnership  money ,*^  in 
others,  by  proof  that  the  lands  were  bought  for  the  partnership 
and  used  in  partnership  business.®^  It  follows  as  a  result  of  this 
theory  of  partial  conversion  that  whatever  remains  of  partnership 
lands  or  of  their  proceeds  after  all  partnership  debts  have  been 
paid  and  the  equities  between  partners  have  been  adjusted,  re- 
tains the  character  of  realty  and  passes  as  such.^"     The  reason 


Ky.  L.  (abstract)  322,  2  Ky.  L.  380. 
See  also  Hiscock  v.  Phelps,  44  N.  Y. 
97;  Lane  v.  Tyler,  49  Maine  252; 
Ludlow  V.  Cooper,  4  Ohio  St.  1 ; 
Providence  v.  Bullock,  14  R.  L  353. 

ssLang  v.  Waring,  17  Ala.  145; 
Brewer  v.  Browne,  68  Ala.  210 ;  Hart- 
nett  V.  Stillwell,  121  Ga.  386,  49  S. 
E.  276,  104  Am.  St.  151;  Thompson 
V.  Holden,  117  Mo.  118,  22  S.  W.  905; 
Tregea  v.  Mills,  11  Wyo.  438,  72  Pac. 
578,.  IZ  Pac.  209. 

87  Morrill  V.  Colehour,  82  111.  618 ; 
Bopp  V.  Fox,  63  111.  540;  Evans  v. 
Hawley,  35  Iowa  83 ;  Quinn  v.  Quinn, 
22  Mont.  403,  56  Pac.  824,  Rev.  Code, 
§  5473  (Civil  Code,  §  3195)  ;  Jarvis 
V.  Brooks,  27  N.  H.  Z7 ,  59  Am.  Dec. 
359;  Hill  V.  Beach,  1  Beas.  (12  N.  J. 
Eq.)  31 ;  Smith  v.  Jackson,  2  Edw. 
Ch.  (N.  Y.)  28;  Collumb  v.  Read,  24 
N.  Y.  505;  King  v.  Weeks,  70  N. 
Car.  372;  Col.  Civil  Code,  §  2406; 
North  Dak.  Civil  Code,  §  5826;  South 
Dak.  Civil  Code,  §  1731. 

88  Pugh  V.  Currie,  5  Ala.  446;  Bank 
of  S.  W.  Georgia  v.  McGarrah,  120 
Ga.  944,  48  S.  E.  393;  Chandler  v. 
Jessup,  132  Ind.  351,  31  N.  E.  1109; 
Morgan  v.  Olvey,  53  Ind.  6;  Fordyce 
V.  Hicks,  80  Iowa  272,  45  N.  W.  750 ; 
Crooker  v.   Crooker,   46   Maine   250; 


Richards  v.  Manson,  101  Mass.  482; 
Burnside  v.  Merrick,  4  Met.  (Mass.) 
537;  Arnold  v.  Wainwright,  6  Minn. 
358,  80  Am.  Dec.  448;  Whitney  v. 
Gotten,  53  Miss.  689;  Alexander  v. 
Kimbro,  49  Miss.  529 ;  Sykes  v.  Sykes, 
49  Miss.  190 ;  Willet  v.  Brown,  65  Mo. 
138,  27  Am.  Rep.  265;  Parker  v. 
Bowles,  57  N.  H.  491 ;  Coles  v.  Coles, 
15  Johns.  (N.  Y.)  159,  8  Am.  Dec. 
231;  Buckley  v.  Buckley,  11  Barb. 
(N.  Y.)  43;  Smith  v.  Cowles,  81  App. 
Div.  328,  81  N.  Y.  S.  524;  Patton  v. 
Patton,  60  N.  Car.  572,  86  Am.  Dec. 
448,  Win.  Eq.  20;  Dodson  v.  Dod- 
son,  26  Ore.  349,  Z1  Pac.  542 ;  Provi- 
dence V.  Bullock,  14  R.  I.  353. 

89  Espy  V.  Comer,  1^  Ala.  501; 
Power  V.  Robinson,  90  Ala.  225,  8  So. 
10;  Shanks  v.  Klein,  104  U.  S.  18, 
26  L.  ed.  635;  Percifull  v.  Piatt,  Z^ 
Ark.  456;  Matlock  v.  Matlock,  5  Ind. 
403;  Hewitt  v.  Rankin,  41  Iowa  35; 
Galbraith  v.  Gedge,  16  B.  Mon. 
(Ky.)  631;  Dyer  v.  Clark,  5  Met. 
(Mass.)  562,  39  Am.  Dec.  697;  Corn- 
stock  V.  McDonald,  126  Mich.  142, 
85  N.  W.  579;  Scruggs  v.  Blair,  44 
Miss.  406;  Uhler  v.  Semple,  20  N. 
J.  Eq.  288 ;  Buchan  v.  Sumner,  2 
Barb.  Ch.  (N.  Y.)  165,  47  Am.  Dec. 
305;    Greenwood   v.   Marvin,    111    N. 


§    624  LAW    OF    PARTNERSHIP  830 

for  so  holding  is  thus  stated  in  the  leading  case:^°  "In  Wil- 
cox V.  Wilcox/"*  it  was  held  that  where  after  all  debts  and 
balances  between  the  partners  are  satisfied,  there  remains 
real  estate  of  the  copartnership,  in  which  the  legal  title  of  each 
partner  corresponds  to  his  interest  or  share  in  the  partnership, 
equity  will  not  interfere  for  the  purpose  of  converting  such  real 
estate  into  personalty.  In  the  present  case  the  legal  title  does 
not  correspond  with  the  beneficial  interests  of  the  several  part- 
ners. Not  only  are  the  shares  of  the  partners  unequal  under 
the  partnership  agreements,  but  much  of  the  real  estate  is  held 
without  regard  to  the  beneficial  interest,  either  in  the  sole  name 
of  Paine,  or  otherwise,  as  convenience  suggested  at  the  time 
of  purchase.  Assuming  that  the  force  of  the  decision  in  Wil- 
cox V.  Wilcox  is  to  be  limited  to  the  precise  state  of  facts  there 
presented,  the  question  now  is  whether  its  principle  extends  to 
cases  where  a  proper  adjustment  of  the  rights  of  the  partners 
is  not  secured  by  descent  of  the  legal  title,  but  requires  the  vol- 
untary recognition  or  judicial  determination  of  equitable  rights 
more  extensive  than  the  legal  title.  That  decision  proceeded 
upon  the  ground  that  the  application  of  the  principles  of  implied 
trusts  to  the  real  estate  of  partnerships  constituted  the  whole 
foundation  and  the  origin  of  the  doctrine  of  equitable  conversion ; 
and  that  those  trusts  are  to  be  administered  solely  for  the  pur- 
pose of  enforcing  the  obligations  and  securing  the  rights  of  the 
partners,  as  between  themselves.  When  the  legal  title  is  held 
b}^  one  partner  in  excess  of  his  beneficial  interest,  it  is  held  in 
trust  for  the  purposes  of  the  partnership,  and  is  chargeable,  in 
equity,  Avith  all  obligations  growing  out  of  that  relation.  Against 
such  party,  and  against  his  widow  and  heirs,  equity  will  interpose 
to  secure  to  his  copartners  their  actual  beneficial  interest.  Neither 
the  ground  of  interposition  nor  the  mode  of  its  exercise  is 
changed  by  the  decease  of  the  party  in  whose  behalf  it  is  re- 
quired.    His  representatives  are  substituted  in  his  place.     Their 

Y.    423,    19    N.    E.    228;    Martin    v.        9°  Shearer    v.     Shearer,    98     Mass. 

Morris,  62  Wis.  418,  22  N.  W.  525;     107. 

Ga.   Code,   §  2649.  ^oa  13  Allen    (Mass.)   252. 


831  ADMINISTRATION    AFTER    DEATH  §    624 

rights  are  derivative  merely.  Equities  between  them,  if  any 
there  be,  are  subordinate  and  posterior  to  those  which  spring 
from  the  relation  of  copartnership.  The  conversion  of  real 
estate  into  personalty  is  worked,  if  at  all,  for  the  purpose  of 
adjusting  the  affairs  of  the  partnership.  It  would  seem,  there- 
fore, that  the  conversion  should  be  made  only  when  and  so  far 
as  required  for  that  purpose ;  and  that  the  effect  upon  the  descent 
or  distribution  of  the  share  of  a  deceased  partner  among  his 
representatives  should  be  regarded  as  incidental  merely,  and 
not  an  end  for  which  the  interference  of  a  court  of  equity  is  to 
be  sought.  In  this  view  of  the  grounds  and  purposes  of  such 
equitable  conversion,  even  regarding  all  partnership  real  estate, 
however  the  legal  title  may  be  held,  as  held  in  trust  for  the  part- 
nership, this  court  are  disposed  to  hold,  notwithstanding  the 
great  weight  of  authority  to  the  contrary  elsewhere,  that  such 
real  estate  is  to  be  converted  into  personalty  only  when  such  con- 
version is  required  for  the  payment  of  claims  against  the  part- 
nership which  are  in  the  nature  of  debt.  Balances  due  to  indi- 
vidual partners,  for  advances  to  the  firm,  or  for  payments  made 
in  its  behalf,  come  within  this  definition.  So  also  may  capital, 
furnished  by  one  partner,  when  by  the  terms  upon  which  it  was 
furnished,  or  from  the  nature  and  necessity  of  the  case,  it  is  to 
be  repaid  in  specific  amounts,  in  order  to  reach  the  net  result,  or 
body  of  the  partnership  interests,  to  which  the  proportional 
rights  or  shares  of  the  several  partners  attach.  In  short,  what- 
ever is  required  to  be  paid  or  measured  in  precise  sums  must  be 
so  adjusted;  and  real  estate,  converted  for  that  purpose,  un- 
doubtedly becomes  personalty,  and  is  to  be  distributed  as  such 
when  paid  over  to  the  party  entitled.  But  the  shares  in  the 
body  of  the  partnership  property,  those  interests  which  not  meas- 
ured by  precise  amounts,  but  consist  in  a  common  proprietorship 
after  all  special  claims  are  satisfied,  stand  upon  different  footing. 
These  interests  are  determined  by  the  proportions  fixed  by  the 
articles  or  organic  law  of  the  partnership.  When  the  beneficial 
interests  and  the  legal  title  correspond,  it  has  already  been  decided 
that  the  rights  of  the  partners  in  real  estate  so  held  will  be  left  to 


§    624  LAW    OF    PARTNERSHIP  i:^32 

adjust  themselves  by  the  descent  of  the  legal  title,  with  its  inci- 
dents, as  real  estate  of  the  several  partners,  held  in  common. ''°'' 
When  the  legal  title  is  otherwise  held,  It  is  held  in  trust ; 
and  the  equitable  title  descends  in  like  manner  and  with 
like  incidents,  except  as  to  dower.  The  office  of  equity  in 
such  case  is  merely  to  declare  the  trusts,  and  compel  the  legal 
title  to  serve  the  equitable  interests.  This  is  accomplished 
by  directing  such  conveyances  as  will  make  the  legal  title  of 
the  several  parties  conform  to  their  respective  beneficial  in- 
terests. By  the  rule  above  indicated,  all  partnership  rights  and 
obligations  are  secured,  and  all  equities  growing  out  of  that  re- 
lation are  met  and  answered.  To  require  equitable  interference 
to  go  further,  and  convert  all  real  estate  into  personalty,  for 
the  mere  purpose  of  a  division,  seems  to  us  to  be  an  unnecessary 
invasion  of  the  rights  of  the  copartners,  and,  when  undertaken 
in  the  interest  of  one  class  of  the  representatives  of  a  deceased 
partner,  against  another  class  of  representatives  of  the  same  part- 
ner, it  seems  to  be  a  departure  from  the  legitimate  sphere  of 
equitable  jurisdiction.  It  is  not  the  province  of  equity  to  seek 
to  counteract  or  modify  the  operation  of  the  laws  of  descent  and 
distribution.  The  widow's  right  of  dower  in  her  husband's  in- 
terest in  partnership  real  estate,  is  not  held  subject  to  the  payment 
of  his  private  debts.  As  a  general  fact,  this  incident  makes 
dower  a  more  valuable  interest  than  the  distributive  share  of  the 
widow  would  be  if  the  real  estate  were  to  be  converted.  But  we 
do  not  regard  that  circumstance  as  of  any  weight  in  determining 
the  general  rule  against  such  conversion.  On  the  other  hand, 
in  our  view,  the  special  facts,  which,  in  the  present  case,  would 
make  it  more  advantageous  for  the  widow  that  the  partnership 
realty  should  be  converted  into  personal  estate,  furnish  no  ground 
for  such  conversion.  The  equitable  powers  of  the  court  are  not 
called  into  exercise  for  the  settlement  of  the  estate  of  the  deceased 
partner.  There  are  no  equities  between  heirs  and  distributees, 
under  our  laws,  which  can  call  into  exercise  or  quicken  the  powers 
of  the  court  for  the  conversion  of  realty  into  personalty.'"'^ 

^^^  Citing    Wilcox    v.     Wilcox,     13         ^^  The   court    said    further,    in    dis- 
Allen   (Mass.)   252.  cussing  some  arguments  in  favor  of 


833 


ADMINISTRATION    AFTER    DEATH 


§  625 


§  625.  Status  of  partnership  real  estate — Time  when  con- 
version takes  place. — The  general  holding  is  that  real  prop- 
erty of  a  partnership  is  changed  into  personalty  upon  being 


the  other  rule :  "We  do  not  under- 
stand that,  in  the  EngHsh  courts, 
any  such  supposed  equities  have 
ever  been  made  a  ground  for  the 
doctrine  of  equitable  conversion,  as 
held  there.  In  the  case  of  Cook- 
son  V.  Cookson,  8  Sim.  529,  such 
a  ground  of  interference  was  em- 
phatically discarded.  That  case, 
however,  is  not  one  in  which  the 
full  extent  of  the  English  doctrine 
was  asserted.  Conversion  into  per- 
sonalty is  not  necessary  to  enable 
creditors  of  the  individual  partner 
to  secure  payment  of  their  debts  out 
of  the  share  of  their  debtor  in  real 
estate  held  in  copartnership.  By  our 
laws,  all  property  of  a  debtor, 
whether  personal  or  real,  is  liable 
for  payment  of  all  his  debts.  Cred- 
itors, therefore,  require  no  equitable 
interposition,  except  such  as  may  be 
necessary  for  the  assertion  of  the 
partner  himself.  Their  rights  are 
secured,  in  respect  to  real  estate 
held  in  copartnership,  through  the 
equities  which  pertain  to  their  debtor. 
In  this  particular  the  laws  of  Eng- 
land differ.  The  inheritance  there, 
being  exempt  from  liability  for  debts 
by  simple  contract,  it  is  only  by  con- 
version and  payment  of  the  proceeds 
to  the  personal  representatives  of  a 
deceased  partner  that  his  private 
creditors  can  receive  payment  out  of 
such  property.  How  far,  if  at  all, 
this  consideration  may  have  been  in- 
fluential in  determining  the  extent  to 
which  the  doctrine  of  equitable  con- 
version should  be  carried,  and  in 
establishing  the  right  of  the  personal 
representative    to    require    it    to    be 


made  in  his  favor,  we  are  unable  to 
judge.  The  cases  in  which  the  per- 
sonal representative  of  a  deceased 
partner  has  been  held  entitled  to  en- 
force this  right  against  the  heir,  do 
not  indicate,  so  far  as  we  have  been 
able  to  examine  them,  whether  it  is 
done  in  behalf  of  creditors  or  of  dis- 
tributees. The  doctrine,  however, 
seems  now  to  be  fully  established, 
without  regard  to  the  consideration 
whether  there  are  private  creditors  or 
not.  Darby  v.  Darby,  3  Drewry  495.. 
This  may  perhaps  be  regarded  as  the 
most  natural  result  of  the  rule  holding 
such  property  liable  for  the  payment 
of  all  partnership  obligations,  when 
it  is  considered  how  far  that  liability 
deprived  partnership  real  estate  of 
the  fixedness  and  permanency  of 
ownership  which  characterize  the  in- 
heritance in  realty  there.  We  can 
not  dismiss  the  subject  without  ad- 
verting to  some  of  the  considerations 
upon  which  the  rule  of  conversion 
'out  and  out'  is  maintained  in  the  case 
last  cited,  and  which  have  been 
pressed  in  the  argument  before  us. 
One  reason  for  such  conversion  is 
said  to  be  that  courts  know  no 
mode  of  estimating  the  property, 
and  making  division  of  the  shares 
between  the  partners,  except  by 
sale  and  reduction  to  money;  and, 
furthermore,  that  one  partner  has 
no  right  to  claim,  and  can  not 
be  required  to  accept,  his  share 
of  the  capital  or  profits  in  the 
form  of  an  undivided  interest  in  spe- 
cific property.  But  this  assumes  the 
whole  question.  In  relation  to  per- 
sonal   property,    there    is    a  practical 


625 


LAW    OF    PARTNERSHIP 


834 


difF.culty  in  this  respect.  The  law 
recognizes  it,  and,  upon  the  death 
of  one  partner,  vests  the  whole  title 
in  the  survivor.  Even  during  the 
continuance  of  the  copartnership,  one 
partner  may  transfer  the  entire  title 
of  the  firm  by  sale  of  any  of  its 
personal  property  in  the  course  of 
its  business.  In  regard  to  such  prop- 
erty, the  rule  that  it  is  to  be  in  all 
cases  converted  into  money  is  un- 
doubtedly well  established  and  en- 
tirely uniform  everywhere.  In  this, 
equity  follows  the  analogies  of  the 
law.  On  the  other  hand,  neither 
partner  can  convey  the  interest  of 
his  copartner  in  real  estate.  The 
law  provides  for  its  transmission  in 
undivided  shares ;  for  its  partition ; 
for  its  descent  to  the  heirs  of  a  de- 
ceased partner.  It  seems  to  us  best 
to  accord  with  the  general  principles 
of  equitable  interference  that  equity 
should  recognize  the  division  of  real 
estate  held  by  copartners  as  already 
effected  by  operation  of  law,  unless 
and  except  so  far  as  the  terms  of 
the  copartnership  and  the  state  of 
the  accounts  require  its  interposition 
in  order  to  make  the  legal  title  con- 
form to  the  equitable  or  beneficial 
interest.  When  this  is  accomplished, 
equity  has  no  longer  any  office  to 
perform  toward  it.  Again,  it  is  said 
'that  the  mere  contract  of  partner- 
ship, without  any  express  stipulation, 
involves  in  it  an  implied  contract 
quite  as  stringent  as  if  it  were  ex- 
pressed, that,  at  the  dissolution  of 
the  partnership,  all  the  property  then 
belonging  to  the  partnership, 
whether  it  be  ordinary  stock-in-trade, 
or  a  leasehold  interest,  or  a  fee-simple 
estate  in  land,  shall  be  sold,  and  the 
net  proceeds,  after  satisfying  all  the 
partnership  debts  and  liabilities,  be 
divided  among  the  partners ;  and  that 


each  partner  and  the  representatives 
of  any  deceased  partner  have  a  riglit 
to  insist  on  this  being  done.'  In  our 
view,  there  are  several  objections  to 
such  an  implication  of  agreement,  as 
the  foundation  of  a  rule  of  equitable 
conversion.  In  the  first  place,  it 
seems  necessary  to  assume  in  the 
outset  that  such  is  the  established 
rule,  and  that  parties  are  to  be  pre- 
sumed to  become  partners  in  refer- 
ence to  its  operation,  in  order  to 
predicate  such  an  inference  from  the 
mere  fact  of  engaging  in  a  joint 
business.  It  would  be  especially  diffi- 
cult, without  such  assumption,  to  find 
a  pretext  for  the  inference,  where 
the  parties  have  entered  into  written 
articles  and  omitted  all  provision  of 
that  character.  If  the  inference  of 
such  an  agreement  is  to  be  made  as 
part  of  the  transaction  of  purchasing 
real  estate  with  partnership  funds,  for 
partnership  use,  it  is  equally  incon- 
sistent with  the  failure  to  express 
such  a  term  in  the  deed  of  convej^- 
ance.  The  inconsistency  is  even 
greater  than  that ;  for,  by  the  ex- 
press terms  of  the  deed  and  by  tlie 
well-known  operation  of  law,  the 
estate  is  limited  to  the  heirs  of  the 
several  copartners,  whose  estate  is, 
at  law,  the  ordinary  one  of  tenants 
in  common.  In  the  second  place,  con- 
ceding the  agreement  as  supposed, 
either  express  (provided  it  be  not  in 
writing)  or  implied,  it  is  not  such  a 
contract  as  entitled  the  parties  to  a 
specific  performance,  and  it  does  not 
create  the  trust  required  for  the  con- 
version of  real  estate.  The  statute 
demands  a  written  agreement  for  that 
purpose.  Gen.  Stats.,  ch.  100,  §  19. 
The  English  statute  seems  equally  to 
require  it.  The  implied  trust,  which  is 
enforced  in  equity  for  the  adjustment 
of     partnership     obligations,     results 


835 


ADMINISTRATION    AFTER    DEATH 


625 


acquired  by  the  firm,  and  that  portion  of  it  not  required  to  be 
sold  in  the  adjustment  of  partnership  affairs,  becomes  recon- 
verted into  real  estate  after  settlement.""  Some  courts  state  that 
the  legal  title  is  held  by  the  partners  in  trust  for  the  adjustment 
and  settlement  of  partnership  debts  and  equities,  and  that  until 
such  adjustment  is  had  and  the  trust  carried  out,  no  rights  of 


from  the  investment  of  the  funds  of 
the  partnership  in  the  real  estate  in 
question,  for  the  use  of  the  partner- 
ship. Regarding  it  in  that  light,  the 
court  have  but  to  inquire  to  what 
use  the  funds,  represented  in  the 
land,  are  devoted ;  to  whom  and  in 
what  proportions  the  beneficial  inter- 
ests belong;  and  the  execution  of  the 
trust  will  follow  according  to  the  na- 
ture of  the  rights  to  be  secured.  It 
is  not  necessary  to  resort  to  inven- 
tions to  work  out  the  equities  of  the 
case  through  some  implied  contract, 
or  supposed  intentions  of  the  parties 
in  entering  into  the  relation  of  part- 
nership, or  in  applying  it  to  the  own- 
ership of  land.  The  ordinary,  well- 
known  and  generally  recognized 
principles  of  equity,  as  applied  to 
trusts  resulting  by  implication  of 
law,  are  sufficient  for  all  the  require- 
ments of  that  relation.  We  are  sat- 
isfied that  the  principles  which  we 
have  indicated  apply  equally  to  every 
condition  in  which  the  legal  title  may 
be  placed,  and  to  every  degree  and 
proportion  of  interest  to  which  the 
several  partners  may  be  entitled.  It 
was  the  right  of  the  surviving  part- 
ner to  apply  partnership  funds  for 
the  liquidation  of  any  obligations  of 
the  firm,  and  for  the  discharge  of  all 
liens  upon  the  joint  property.  Tlie 
payment  of  money  to  release  partner- 
ship real  estate  from  incumbrances 
which  existed  thereon  at  the  time  of 
its    purchase,    although    not    a    debt 


which  they  were  otherwise  bound  to 
pay,  was  in  accordance  with  the  rights 
and  interests  of  the  copartners,  as 
such,  and  might  properly  be  done  as 
a  part  of  the  adjustment  of  the  part- 
nership affairs  before  division.  We 
do  not  see  that  the  plaintiff,  either  as 
widow  or  as  administratrix,  can 
claim  to  have  such  real  estate  inter- 
est converted  back  again  into  per- 
sonalty. The  bonds,  or  contracts  fo^ 
the  purchase  of  real  estate,  may  prop^ 
erly  be  fulfilled;  and,  if  fulfilled  by 
a  conveyance  according  to  their  terms, 
or  if  specifically  enforced,  the  rights 
of  the  widow  and  heirs  in  the  land 
thereby  acquired  attach  in  the  same 
manner  as  if  the  land  had  been  con- 
veyed in  the  lifetime  of  the  deceased 
partner.  Reed  v.  Whitney,  7  Gray 
(Mass.)    533. 

92  Lenow  v.  Fones,  48  Ark.  557,  4 
S.  W.  56 ;  French  v.  Vanatta,  83  Ark. 
306,  104  S.  W.  141,  8  Columbia  L. 
Rev.  208 ;  Coolidge  v.  Burke,  69  Ark, 
237,  62  S.  W.  583 ;  Simpson  v.  Leech, 
86  111.  286 ;  Bopp  v.  Fox,  63  111.  540 ; 
Manuck  v.  Alanuck,  54  111.  281 ;  Hus- 
ton V.  Neil,  41  Ind.  504  ;  Paige  v.  Paige, 
71  Iowa  318,  32  N.  W.  360,  60  Am. 
Rep.  799 ;  Evans  v.  Hawley,  35  Iowa 
83;  McKee  v.  Covalt,  71  Kans.  772, 
81  Pac.  475;  Crooker  v.  Crooker,  46 
Maine  250 ;  Comstock  v.  McDonald, 
126  Mich.  142,  85  N.  W.  579;  Wood- 
ward-Holmes Co.  V.  Nudd,  58  Minn. 
236,  59  N.  W.  1010,  27  L.  R.  A.  340, 
49  Am.   St.  503;   Sykes  v.   Sykes,  49 


625 


LAW    OF    TARTNERSHIP 


836 


heirs,  or  of  dower  or  homestead  can  attach. ^^  But  other  courts 
hold  that  the  remainder  of  partnership  lands  which  is  not  needed 
in  partnership  adjustments,  has  never  lost  its  status  as  real  estate 
while  owned  by  the  firm,^*  and  where  such  is  the  rule  the  wife 
of  a  partner  is  at  all  times  a  necessary  party  to  the  conveyance 
of  partnership  lands,  and  the  widow  of  a  deceased  partner  to 


Miss.  190;  Scruggs  v.  Blair,  44  Miss. 
406;  Young  v.  Thrasher,  115  Mo.  222, 
21  S.  W.  1104;  Uhler  v.  Semple,  20 
N.  J.  Eq.  288 ;  Fairchild  v.  Fairchild, 
64  N.  Y.  471 ;  Hauptmann  v.  Haupt- 
mann,  91  App.  Div.  197,  86  N.  Y.  S. 
427;  Dawson  v.  Parsons,  10  Misc. 
428,  6Z  N.  Y.  St.  320,  31  N.  Y.  S.  78; 
Grififey  v.  Northcutt,  5  Heisk.  (Tenn.) 
746;  Aldrich  v.  Robinson,  2  Haw. 
606;  Ga.  Code,  §  2649. 

93  Shanks  v.  Klein,  104  U.  S.  18, 
26  L.  ed.  635 ;  Schlichter  Jute  Cordage 
Co.  V.  Mulqueen,  142  Fed.  583 ;  Hoxie 
V.  Carr,  1  Sum.  (U.  S.)  173;  Cole 
V.  Mette,  65  Ark.  503,  47  S.  W.  407, 
67  Am.  St.  945 ;  Dupuy  v.  Leaven- 
worth, 17  Cal.  262 ;  Gillett  v.  Gaffney, 
3  Colo.  351 ;  Robertson  v.  Baker,  11 
Fla.  192;  Loubat  v.  Nourse,  5  Fla. 
350;  Hartnett  v.  Stillwell,  121  Ga. 
386,  49  S.  E.  276,  104  Am.  St.  151; 
Trowbridge  v.  Cross,  117  111.  109,  7 
N.  E.  347 ;  Dickey  v.  Shirk,  128  Ind. 
278,  27  N.  E.  7ZZ ;  Barkley  v.  Tapp,  87 
Ind.  25;  Henry  v.  Anderson,  77  Ind. 
361 ;  Hoyt  v.  Hoyt,  69  Iowa  174,  28 
N.  W.  500 ;  Drake  v.  Moore,  66  Iowa 
58,  23  N.  W.  263 ;  Hewitt  v.  Rankin, 
41  Iowa  35;  Johnson  v.  Clark,  18 
Kans.  157;  Galbraith  v.  Gedge,  16  B. 
Mon.  (Ky.)  631;  Dyer  v.  Clark,  5 
Met.  (Mass.)  562,  39  Am.  Dec.  697; 
Michigan  Trust  Co.  v.  Chapin,  106 
Mich.  384.  64  N.  W.  334.  58  Am.  St. 
490;  Arnold  v.  Wainwright,  6  Minn. 
358,   80   Am.    Dec.   448;    Whitney   v. 


Gotten,  53  Miss.  689;  Matthews  v. 
Hunter,  67  Mo.  293 ;  Messer  v.  Mes- 
ser,  59  N.  H.  375 ;  Partridge  v.  Wells, 
3  Stew.  (30  N.  J.  Eq.)  176,  afifd.  31 
N.  J.  Eq.  362 ;  Greenwood  v.  Mar- 
vin, 111  N.  Y.  423,  19  N.  E.  228; 
Fairchild  v.  Fairchild,  64  N.  Y.  471 ; 
Rank  v.  Grote,  50  N.  Y.  Super.  Ct. 
275  (affd.  110  N.  Y.  12,  17  N.  E. 
665)  ;  Tarbel  v.  Bradley,  7  Abb.  N. 
Gas.  273  (afifd.  86  N.  Y.  280)  ;  Coles 
V.  Coles,  15  Johns.  (N.  Y.)  159,  8  Am. 
Dec.  231 ;  Maloy  v.  Associated  Lace 
Makers  Co.,  55  Hun  604,  8  N.  Y.  S. 
815,  30  N.  Y.  St.  153;  Johnson  v. 
Donvan,  SO  Hun  215,  2  N.  Y.  S.  858. 
20  N.  Y.  St.  30;  King  v.  Weeks,  70 
N.  Car.  372 ;  Greene  v.  Greene,  1  Ohio 
535;  Moderwell  v.  Mullison,  21  Pa. 
St.  257;  Tillinghast  v.  Champlin,  4  R. 
L  173,  67  Am.  Dec.  510;  Hunt  v. 
Benson,  2  Humph.  (Tenn.)  459; 
Dewey  v.  Dewey,  35  Vt.  555 ;  Hop- 
kins V.  Prichard,  51  W.  Va.  385,  41 
S.  E.  347 ;  Bergeron  v.  Richardott, 
55  Wis.  129,  12  N.  W.  384;  Bird  v. 
Morrison,  12  Wis.  138. 

94  Powers  v.  Robinson,  90  Ala.  225, 
8  So.  10 ;  Blanchard  v.  Floyd,  93  Ala. 
53,  9  So.  418;  Percifull  v.  Piatt,  36 
Ark.  456 ;  McCauley  v.  Fulton,  44  Cal. 
355 ;  Hanway  v.  Robertshaw,  49  Miss. 
758;  Holmes  v.  McGee,  27  Mo.  597; 
Tattersall  v.  Nevels.  77  Nebr.  843,  110 
N.  W.  708 ;  Smith  v.  Jackson,  2  Edw. 
Ch.  (N.  Y.)  28;  Ferguson  v.  Hass, 
Phil.  Eq.  (62  N.  Car.)  113. 


837 


ADMINISTRATION    AFTER    DEATH 


§  626 


an  action  for  their  sale.^''  But  where  the  rule  obtains  of  conver- 
sion upon  the  acquisition  of  lands  by  a  partnership,  or  of  holding 
in  trust  for  firm  purposes,  wives  or  widows  of  partners  are  not 
necessary  parties  to  a  conveyance  or  action  for  sale.°° 

§  626.  Rights  of  surviving  partner  in  firm  real  estate. — In 
the  application  of  the  rules  announced  in  preceding  sections  there 
has  arisen  conflict  in  many  details.  Although  the  surviving 
partner  takes  the  legal  title  to  all  the  personal  assets  of  the  firm, 
the  general  rule  is  that  he  takes  only  an  equitable  title  to  firm 
real  estate,  and  if  necessary  in  order  to  pay  firm  debts  and  settle 
partnership  accounts,  he  has  the  power  to  sell  such  real  estate, 
his  deed  conveying  only  an  equity  to  the  purchaser,  who  has  the 
power  to  compel  the  holder  of  the  legal  title  to  convey  it.'*^    The 


osPugh  V.  Currie,  5  Ala.  446; 
Brewer  v.  Browne,  68  Ala.  210;  Butts 
V.  Cooper,  152  Ala.  375,  14  So.  616; 
Duhring  v.  Duhring,  20  Mo.  174; 
Smith  V,  Jackson,  2  Edw.  Qi.  (N. 
Y.)  28;  Huber  v.  Case,  93  App.  Div. 
479,  87  N.  Y.  S.  663. 

^^  Drewry  v.  Montgomery,  28  Ark. 
256 ;  Welch  v.  McKenzie,  66  Ark. 
251,  50  S.  W.  505 ;  Loubat  v.  Nourse, 
5  Fla.  350;  Ferris  v.  Van  Ingen,  110 
Ga.  102,  35  S.  E.  347;  Bopp  v.  Fox, 
63  111.  540;  Simpson  v.  Leech,  86  111. 
286;  Huston  v.  Neil,  41  Ind.  504; 
Dickey  v.  Shirk,  128  Ind.  278,  27  N. 
E.  733 ;  Hewitt  v.  Rankin,  41  Iowa 
35 ;  Woodward-Holmes  Co.  v.  Nudd, 
58  Minn.  236,  59  N.  W.  1010,  27  L.  R. 
A.  340,  49  Am.  St.  503 ;  Sage  v.  Sher- 
man, 2  N.  Y.  417;  Tarbel  v.  Brad- 
ley, 7  Abb.  N.  Cas.  (N.  Y.)  273  (affd. 
86  N.  Y.  280)  ;  Greenwood  v.  Mar- 
vin, 111  N.  Y.  423,  19  N.  E.  228; 
Dawson  v.  Parsons,  10  Misc.  428,  31 
N.  Y.  S.  78,  63  N.  Y.  St.  320 ;  Haupt- 
mann  v.  Hauptmann,  91  App.  Div. 
197,  86  N.  Y.  S.  427 ;  Meily  v.  Wood, 
71  Pa.  488,  10  Am.  Rep.  719. 


^"^  See  ante,  §  617.  See  also  SharJcs 
V.  Klein,  104  U.  S.  18,  26  L.  ed.  635 ; 
Schlichter  Jute  Cordage  Co.  v.  Mul- 
queen,  142  Fed.  583 ;  Hartnett  v.  Still- 
well,  121  Ga.  386,  49  S.  E.  276,  104 
Am.  St.  151  (applying  §  2649,  code 
1895)  ;  Walling  v.  Burgess,  122  Ind. 
299,  22  N.  E.  419,  23  N.  E.  1076,  7  L. 
R.  A.  481;  Steinberg  v.  Larkin,  58 
Kans.  201,  48  Pac.  861,  37  L.  R.  A. 
195;  Johnson  v.  Clark,  18  Kans.  157; 
Merritt  v.  Dickey,  38  Mich.  41 ;  Han- 
way  V.  Robertshaw,  49  Miss.  758; 
Delmonico  v.  Guillaume,  2  Sandf.  Ch. 
(N.  Y.)  366;  Sparger  v.  Moore,  117 
N.  Car.  449,  23  S.  E.  359 ;  Tillinghast 
V.  Champlin,  4  R.  I.  173,  67  Am.  Dec. 
510;  Williamson  v.  Fontain,  7  Baxt. 
(Tenn.)  212;  Weld  v.  Johnson  Mfg. 
Co.,  86  Wis.  552,  57  N.  W.  374.  See 
generally  case  note  Am.  Cas.  1912  D, 
1207;  Roulston  v.  Washington,  79 
Ala.  529  (1885);  Duryea  v.  Burt,  28 
Cal.  569  (1865)  ;  French  v.  Vanatta, 
83  Ark.  306,  104  S.  W.  141;  Breen 
V.  Richardson,  6  Colo.  605  (1883)  ; 
Shanks  v.  Klein,  104  U.  S.  18,  26  L. 
ed.  635;   Clay  v.  Field,  34  Fed.  375 


§  626 


LAW    OF    rARTNERSIIIP 


838 


surviving  partner  has  the  full  right  of  possession  of  the  partner- 
ship lands  for  the  purposes  of  winding  up  the  business.''®  The 
surviving  partner  can  not  sell  real  estate  unless  necessary  to  pay 
debts  or  settle  partnership  affairs.^^  A  purchaser  of  land  from 
a  surviving  partner,  with  notice  that  it  was  partnership  property, 
is  bound  to  know  the  authority  of  such  partner  as  to  its  sale/ 
As  a  general  rule  where  land  is  purchased  by  partners  for  part- 
nership purposes  and  the  conveyance  is  made  to  all  the  partners, 


(mod.  138  U.  S.  464,  11  Sup.  Ct.  419, 
34  L.  ed.  1044)  ;  Holton  v.  Guinn,  65 
Fed.  450 ;  Holladay  v.  Land  &c.  Imp. 
Co.,  57  Fed.  774,  6  C.  C.  A.  560 ;  Me- 
gibben  v.  Perin,  49  Fed.  183 ;  Loubat 
V.  Nourse,  5  Fla.  350 ;  First  Nat.  Bank 
V.  Cody,  93  Ga.  127,  19  S.  E.  831; 
Kimball  v.  Lincoln,  99  111.  578 
(1881)  ;  Walling  v.  Burgess,  122  Ind. 
299,  22  N.  E.  419,  23  N.  E.  1076,  7 
L.  R.  A.  481  (1889)  ;  Western  Se- 
curities Co.  V.  Atlee  (Iowa),  151  N. 
W.  56;  Van  Staden  v.  Kline,  64  Iowa 
180,  20  N.  W.  3  (1884)  ;  Sternberg 
V.  Larkin,  58  Kans.  201,  48  Pac.  861, 
Zl  L.  R.  A.  195;  Divine  v.  Mitchum, 
4  B.  Mon.  (Ky.)  488,  41  Am.  Dec. 
241;  Buffum  v.  Bu£fum,  49  Maine 
108,  n  Am.  Dec.  249 ;  Riley  v.  Carter, 
76  Md.  581,  25  Atl.  667,  19  L.  R.  A. 
489,  35  Am.  St.  443 ;  Hanson  v.  Met- 
calf,  46  Minn.  25,  48  N.  W.  441; 
Armor  v.  Frey,  253  Mo.  447,  161  S.  W. 
829 ;  Matthews  v.  Hunter,  67  Mo.  293 ; 
Sullivan  v.  Smith,  15  Nebr.  476,  19 
N.  W.  620,  48  Am.  Rep.  354 ;  Deveney 
V.  Mahoney,  23  N.  J.  Eq.  247 ;  Collumb 
v.  Read,  24  N.  Y.  505  ;  Buchan  v.  Sum- 
ner, 2  Barb.  Ch.  (N.  Y.)  165,  47  Am. 
Dec.  305 ;  Sherrod  v.  Mayo,  156  N. 
Car.  144,  72  S.  E.  216,  Ann.  Cas.  1912 
D,  1205 ;  Rammelsberg  v.  Mitchell, 
29  Ohio  St.  22 ;  Tillinghast  v.  Champ- 
lin,  4  R.  L  173,  67  Am.  Dec.  510; 
Griffey      v.      Northcutt,      5      Heisk. 


(Tenn.)  746;  Dyer  v.  Morse,  10 
Wash.  492,  39  Pac.  138,  28  L.  R.  A. 
89 ;  Fereday  v.  Wightwick,  1  Russ.  & 
M.  45,  Taml.  250 ;  Phillips  v.  Phillips, 
1  Myl.  &  K.  649,  663,  1  L.  J.  Ch. 
(N.  S.)  214;  Broom  v.  Broom,  3 
Myl.  &  K.  443. 

98  French  v.  Vanatta,  83  Ark,  306, 
104  S.  W.  141;  Holton  v.  Guinn,  65 
Fed.  450;  Clay  v.  Field,  34  Fed.  375 
(mod.  138  U.  S.  464,  11  Sup.  Ct. 
419,  34  L.  ed.  1044)  ;  Southern  Cot- 
ton Oil  Co.  V.  Henshaw,  89  Ala.  448, 
7  So.  760 ;  Espy  v.  Comer,  76  Ala. 
501;  Caldwell  v.  Parmer,  56  Ala. 
405;  Lang  v.  Waring,  25  Ala.  625, 
60  Am.  Dec.  533 ;  Robinson  v. 
Roberts,  31  Conn.  145 ;  Price  v. 
Hicks,  14  Fla.  565 ;  Sternberg  v. 
Larkin,  58  Kans.  201,  48  Pac.  861, 
Zl  L.  R.  A.  195;  Wilson  v.  Soper, 
13  B.  Mon.  (Ky.)  411,  56  Am.  Dec. 
573 ;  Wyer  v.  Winchester,  2  Mart. 
(N.  S.)  (La.)  69;  Priest  v.  Chou- 
teau, 85  Mo.  398,  55  Am.  Rep.  ZIZ; 
Holmes  v.  McGee,  27  Mo.  597;  Mc- 
Cormick's  Appeal,  57  Pa.  St.  54.  98 
Am.  Dec.  191 ;  Jones  v.  Sharp,  9 
Heisk.  (Tenn.)  660;  Yeatman  v. 
Woods',  6  Yerg.  (Tenn.)  20,  27  Am. 
Dec.  452. 

09  Armor  v.  Frey,  253  Mo.  447,  161 
S.  \\\  829. 

1  Western  Securities  Co.  v.  Atlee 
(Iowa),  151  N.  W.  56. 


839 


ADMINISTRATION    AFTER    DEATH 


§  626 


on  the  death  of  one  the  legal  title  in  his  interest  passes  to  his  legal 
heirs,"  who  hold  in  common  with  the  surviving  partner.'"'  But 
this  legal  title  in  the  heir  is  held  subject  to  a  trust  in  favor  of  the 
partnership  and  the  surviving  partner  who  is  charged  with  the 
payment  of  firm  debts  and  the  settlement  of  firm  accounts.'*  Even 
if  the  record  title  to  real  estate  which  is  in  fact  partnership  real 
estate  is  in  the  deceased  partner,  his  heirs  take  the  legal  title 
subject  to  the  same  trust  for  the  surviving  partner  and  the 
equitable  purposes  of  the  partnership. °     In  such  case,  however, 


-  Sherrod  v.  Mayo,  156  N.  Car.  144, 
72  S.  E.  216;  Clay  v.  Field,  34  Fed. 
375  (mod.  138  U.  S.  464,  11  Sup.  Ct. 
419,  34  L.  ed.  1044)  ;  Logan  v.  Green- 
law, 25  Fed.  299;  Andrews  v.  Brown, 
21  Ala.  437,  56  Am.  Dec.  252 ;  Perci- 
fuU  V.  Piatt,  36  Ark.  456;  Dupuy  v. 
Leavenworth,  17  Cal.  262 ;  Loubat  v. 
Nourse,  5  Fla.  350;  Baker  v.  Mid- 
dlebrooks,  81  Ga.  491,  8  S.  E.  320; 
Galbraith  v.  Gedge,  16  B.  Mon.  (Ky.) 
631 ;  Goodburn  v.  Stevens,  5  Gill 
(Md.)  1;  Han  way  v.  Robertshaw,  49 
Miss.  758 ;  Smith  v.  Jackson,  2  Edw. 
Ch.  (N.  Y.)  28;  Buckley  v.  Buckley, 
11  Barb.  (N.  Y.)  43;  Buchan  v. 
Sumner,  2  Barb.  Ch.  (N.  Y.)  165, 
47  Am.  Dec.  305 ;  Greene  v.  Graham, 
5  Ohio  264 ;  Summey  v.  Patton,  60  N. 
Car.  601,  Winst.  Eq.  52,  86  Am.  Dec. 
451 ;  Yeatman  v.  Woods,  6  Yerg. 
(Tenn.)  20,  27  Am.  Dec.  452;  Piper 
V.  Smith,  1  Head  (Tenn.)  93; 
Williamson  v.  Fontain,  7  Baxt. 
(Tenn.)  212;  Griffey  v.  Northcutt,  5 
Heisk.  (Tenn.)  746;  Murrell  v.  Man- 
delbaum,  85  Tex.  22,  19  S.  W.  880, 
34  Am.  St.  777. 

•'■  Penn  v.  Megibben,  S2>  Fed.  86 ; 
Hanway  v.  Robertshaw,  49  Miss. 
758;  Scruggs  v.  Blair,  44  Miss.  406; 
Buckley  v.  Buckley,  11  Barb.  (N.  Y.) 
43 ;  Buchan  v.  Sumner,  2  Barb.  Ch. 
(N.  Y.)  165,  47  Am.  Dec.  305 ;  Greene 


V.  Graham,  5  Ohio  264 ;  Broom  v. 
Broom,   3   Myl.  &  K.  443. 

*  Woodward-Holmes  Co.  v.  Nudd, 
58  Minn.  236,  59  N.  W.  1010,  27  L. 
R.  A.  340,  49  Am.  St.  503 ;  Megibben 
V.  Perin,  49  Fed.  183 ;  Logan  v.  Green- 
law, 25  Fed.  299 ;  Blanchard  v.  Floyd, 
93  Ala.  53,  9  So.  418;  Abernathy  v. 
Moses,  7Z  Ala.  381 ;  Caldwell  v.  Par- 
mer, 56  Ala.  405 ;  Andrews  v.  Brown, 
21  Ala.  437,  56  Am.  Dec.  252;  Pugh 
V.  Currie,  5  Ala.  446;  Dupuy  v. 
Leavenworth,  17  Cal.  262 ;  Loubat  v. 
Nourse,  5  Fla.  350 ;  Rossum  v.  Sinker 
(Ind.),  12  Cent.  L.  J.  202;  Good- 
burn  V.  Stevens,  5  Gill  (Md.)  1; 
Dyer  v.  Clark,  5  Met.  (Mass.)  562, 
39  Am.  Dec.  697;  Burnside  v.  Mer- 
rick, 4  Met.  (Mass.)  537;  Merritt 
V.  Dickey,  38  Mich.  41 ;  Hanway  v. 
Robertshaw,  49  Miss.  758;  Scruggs 
v.  Blair,  44  Miss.  406 ;  Priest  v.  Chou- 
teau, 85  Mo.  398,  55  Am.  Rep.  Z7Z; 
Cilley  V.  Huse,  40  N.  H.  358;  Del- 
monico  v.  Guillaume,  2  Sandf.  Ch. 
(N.  Y.)  366;  Rammelsberg  v.  Mitch- 
ell, 29  Ohio  St.  22;  Murrell  v.  Man- 
delbaum,  85  Tex.  22,  19  S.  W.  880, 
34  Am.  St.  777;  Pierce  v.  Trigg,  10 
Leigh  (Va.)  406;  Ripley  v.  Water- 
worth,  7  Ves.  Jr.  425;  Dale  v.  Ham- 
ilton, 5  Hare  369,  16  L.  J.  Ch.  (N. 
S.)    126,  11  Jur.  163. 

^Little  V.   Snedecor,   52   Ala.    167; 


3 — Row.  ON  Partn. — Vol.  2 


626 


LAW    OF    PARTNERSHIP 


840 


the  purchaser  without  notice  from  the  holder  of  the  legal  title 
is  protected  from  the  secret  equity  in  favor  of  the  partnership.^ 
If  the  real  estate  has  by  agreement  of  the  partners  or  by  will  of 
the  deceased  partner  been  converted  into  personalty  for  all  pur- 
poses, the  surviving  partner  may  transfer  the  valid  legal  title/  or 
if  under  the  laws  of  the  particular  jurisdiction  he  has  the  power 
to  convey  such  real  estate,^  or  of  course,  if  the  title  is  in  his  name 
and  he  happens  to  be  the  only  survivor.  A  sale  by  a  surviving 
partner  of  partnership  real  estate  to  pay  his  individual  debts 
passes  only  his  individual  interest,"  and  a  quitclaim  deed  to  part- 
nership lands  by  a  surviving  partner  passes  only  his  interest,^"  al- 
though it  is  sometimes  held  that  if  conversion  out  and  out  into 
personalty  has  not  been  made  by  record  agreement,  the  repre- 
sentatives of  a  deceased  partner  must  join  in  a  conveyance  in 
order  to  give  complete  legal  title.  Where  the  personal  property 
of  a  firm  is  insufficient  to  pay  its  debts,  its  realty  may  be  subjected 


Houston  V.  Stanton,  11  Ala.  412; 
Pugh  V.  Currie,  5  Ala.  446;  Dupuy  v. 
Leavenworth,  17  Cal.  262 ;  Johnson 
V.  Clark,  18  Kans.  157 ;  Way  v.  Steb- 
bins,  47  Mich.  296,  11  N.  W.  166; 
Burnand  v.  Nerot,  2  BHgh.  (N.  S.) 
215,  4  Eng.  Reprint  1112,  6  L.  J.  Ch. 
(O.  S.)  81,  4  Russ.  247,  38  Eng.  Re- 
print 798 ;  Eng.  Partnership  Act 
(1890),  §  20. 

6  Hartnett  v.  Stillwell,  121  Ga.  386, 
49  S.  E.  276,  104  Am.  St.  151. 

7  Sherrod  v.  Mayo,  156  N.  Car. 
144,  72  S.  E.  216,  Ann.  Cas.  1912  D, 
1205;  Davis  v.  Smith,  82  Ala.  198,  2 
So.  897;  Darrow  v.  Calkins,  154  N. 
Y.  503,  49  N.  E.  61,  48  L.  R.  A.  299, 
61  Am.  St.  637  (afifg.  6  App.  Div.  28, 
39  N.  Y.  S.  527)  ;  Moore  v.  Wood, 
171  Pa.  St.  365,  ZZ  Atl.  63 ;  Du  Bree 
V.  Albert,  100  Pa.  St.  483;  Meily  v. 
Wood,  71  Pa.  St.  488,  10  Am.  Rep. 
719. 

^  Jones  V.  Sharp,  9  Heisk.  (Tenn.) 
660;  Solomon  v.  Fitzgerald,  7  Heisk. 


(Tenn.)  552;  McAlister  v.  Mont- 
gomery, 3  Hayw.  (Tenn.)  94;  San- 
born V.  Sanborn,  11  Grant  Ch.  (U. 
C.)   359. 

9  Caldvirell  v.  Parmer,  56  Ala.  405 ; 
Lang  V.  Waring,  17  Ala.  145 ;  First 
Nat.  Bank  v.  Cody,  93  Ga.  127,  19 
S.  E.  831. 

10  Jackson  v.  Gunton,  218  Pa.  275, 
67  Atl.  467;  Sprague  Mfg.  Co.  v. 
Hoyt,  29  Fed.  421 ;  French  v.  Vanatta, 
83  Ark.  306,  104  S.  W.  141;  Stern- 
berg V.  Larkin,  58  Kans.  201,  48  Pac, 
861,  Z7  L.  R.  A.  195;  Cornwall  v. 
Cornwall,  6  Bush  (Ky.)  369;  Whit- 
ney V.  Gotten,  53  Miss.  689;  Clark 
v.  Fleischmann,  81  Nebr.  445,  116  N. 
W.  290;  Hill  V.  Beach,  1  Beas.  (12 
N.  J.  Eq.)  31 ;  Rammelsberg  v. 
Mitchell,  29  Ohio  St.  22;  Title  & 
Trust  Co.  v.  Bell,  188  Pa.  St.  637, 
41  Atl.  637;  McPherson  v.  Swift,  22 
S.  Dak.  165,  116  N.  W.  76,  133  Am. 
St.  907 ;  State  v.  Neal,  29  Wash.  391, 
69  Pac.  1103. 


841  ADMINISTRATION    AFTER    DEATH  §    627 

for  that  purpose,  by  either  the  surviving  partner,^^  or  by  firm 
creditors,  if  the  firm  is  insolvent/'  A  deed  executed  by  a  joinder 
of  a  surviving  partner  with  executors  of  the  deceased  with  the 
fraudulent  purpose  of  themselves  acquiring  the  lands  does  not 
pass  title/^  It  is  not  necessary  for  a  purchaser  of  partnership 
real  estate  from  a  surviving  partner  who  has  authority  to  sell, 
to  look  to  the  application  of  the  proceeds,  but  he  acquires  good 
title." 

§  627.     Rights  of  heirs,  devisees,  widow  and  personal  rep- 
resentatives of  deceased  partner  in  partnership  real  estate. — 

As  stated  in  the  preceding  section,  the  heirs  of  the  deceased  part- 
ner take  the  legal  title  to  the  deceased  partner's  interest  in  part- 
nership real  estate,  subject  to  a  trust  in  favor  of  the  equitable 
winding  up  of  all  firm  affairs,  and  can  be  compelled  to  execute 
a  conveyance  to  a  purchaser  for  full  value,  in  order  to  pay  firm 
debts/^  By  the  great  weight  of  authority,  the  remainder  of  the 
firm  real  estate  after  debts  are  paid  and  the  equities  adjusted  be- 
tween the  partners  descends,  according  to  the  laws  of  descent  of 
real  estate,  to  the  deceased  partner's  heirs  or  devisees,"  except 
where  such  real  estate  has  been  converted  into  personalty  for 

11  Clay  V.   Freeman,    118  U.   S.  97,         is  See  cases  cited  in  notes  4,  5,  6, 
6  Sup.  Ct.  964,  30  L.  ed.  104;  Shanks     preceding  section. 

V.  Klein,  104  U.  S.  18,  26  L.  ed.  635  le  See  ante  §  624 ;  Oliver  v.  Piatt, 

(afifg.  Fed.  Cas.  No.  7870)  ;  Perin  v.  3  How.    (U.   S.)   333,   11   L.  ed.  622 

Megibben,   53    Fed.   86,    3    C.    C.   A.  (aflfg.   3    McLean    (U.    S.)    27,   Fed. 

443;  Dyer  v.  Clark,  5  Mete.   (Mass.)  Cas.  No.  11116)  ;  Perin  v.  Megibben, 

562,  39  Am.  Dec.  697 ;  Leary  v.  Boggs,  53   Fed.  86,   3   C.   C.  A.  443 ;   Aber- 

41   Hun  643,   1   N.  Y.   St.   571;   Mc-  nathy  v.   Moses,   73  Ala.   381;   Lang 

Caskill  V.  Lancashire,  83  N.  Car.  393.  v.  Waring,  25  Ala.  625,  60  Am.  Dec. 

See  also  French  v.  Vanatta,  83  Ark.  533;    Houston    v.    Stanton,    11    Ala. 

306,  104  S.  W.  141.  412;  Lenow  v.  Fones,  48  Ark.  557,  4 

12  Murphy  v.  Abrams,  50  Ala.  293;  S.  W.  56;  Gray  v.  Palmer,  9  Cal.  616; 

Holland  V.  Fuller,  13  Ind.  195 ;  Graves  Galbraith  v.  Tracy,  153  111.  54,  38  N. 

V.  Hardin,  55  S.  W.  679,  21   Ky.  L.  E.  937,  28  L.  R.  A.  129,  46  Am.  St. 

1499 ;    Goodburn    v.    Stevens,    5    Gill  867 ;  Strong  v.  Lord,  107  111.  25 ;  Pep- 

(Md.)   1.  per  V.  Pepper,  24  111.  App.  316;  Wall- 
is  Meyer  v.  Meyer    (Miss.)    64  So.  ing  v.  Burgess,  122  Ind.  299,  22  N.  E. 

420.  419,  23  N.  E.  1076,  7  L.  R.  A.  481; 

"Lovewell  v.  Schoolfield,  217  Fed.     Patterson  v.  Blake,  12  Ind.  436;  Hart 

689.  V.  Hawkins,  3  Bibb.  (Ky.)  502,  6  Am. 


§  627 


LAW    OF    PARTNERSHIP 


842 


all  purposes.^'     The  widow's  right  of  dower  extends  to  this  re- 
mainder/^ and  only  to  this  remainder  since  she  has  no  right  to 


Dec.  666;  Galbraith  v.  Gedge,  16  B. 
Mon.  (Ky.)  631;  Buffum  v.  Buffum, 
49  Maine  108,  11  Am.  Dec.  249 ;  Good- 
burn  V.  Stevens,  5  Gill  (Md.)  1; 
Whitman  v.  Boston  &  M.  R.,  3  Allen 
(Mass.)  133;  Shearer  v.  Shearer,  98 
Mass.  107;  Oliver  v.  Olmstead,  112 
Mich.  483,  70  N.  W.  1036;  Wood- 
ward-Holmes Co.  V.  Nudd,  58  Minn. 
236,  59  N.  W.  1010,  27  L.  R.  A.  240, 
49  Am.  St.  503;  Hanway  v.  Robert- 
shavir,  49  Miss.  758;  Scruggs  v.  Blair, 
44  Miss.  406;  In  re  Wallace,  28  Misc. 
603,  59  N.  Y.  S.  1084 ;  Priest  v.  Chou- 
teau, 85  Mo.  398,  55  Am.  Rep.  ZIZ; 
Collins  V.  Warren,  29  Mo.  236 ;  Smith 
v.  Wood,  1  N.  J.  Eq.  74 ;  Buckley  v. 
Buckley,  11  Barb.  (N.  Y.)  43;  Buchan 
v.  Sumner,  2  Barb.  Ch.  (N.  Y.)  165, 
47  Am.  Dec.  305;  Sears  v.  Mack,  2 
Bradf.  Sur.  (N.  Y.)  394;  Fairchild 
v.  Fairchild,  64  N.Y.471  (aflfg.5  Hun 
407)  ;  Collumb  v.  Read,  24  N.  Y.  505 ; 
Sherrod  v.  Mayo,  156  N.  Car.  144, 
72  S.  E.  216;  Summey  v.  Patton,  60 
N.  Car.  601,  86  Am.  Dec.  451 ;  Hanff 
V.  How^ard,  56  N.  Car.  440;  Sumner 
V.  Hampson,  8  Ohio  328,  32  Am.  Dec. 
722;  Foster's  Appeal,  74  Pa.  St.  391, 
15  Am.  Rep.  553 ;  Tillinghast  v. 
Champlin,  4  R.  I.  173,  €1  Am.  Dec. 
510;  Rice  v.  Barnard,  20  Vt.  479,  50 
Am.  Dec.  54 ;  Yeatman  v.  Woods,  6 
Yerg.  (Tenn.)  20,  27  Am.  Dec.  452; 
Griffey  v.  Northcutt,  5  Heisk. 
(Tenn.)  746;  McAlister  v.  Montgom- 
ery, 3  Hayvv.  (Tenn.)  94;  Piper  v. 
Smith,  1  Head  (Tenn.)  93;  Barcroft 
V.  Snodgrass,  1  Coldw.  (Tenn.) 
430;  Hannegan  v.  Roth,  12  Wash. 
65,  40  Pac.  636;  Weld  v.  Johnson 
Mfg.  Co.,  86  Wis.  552,  57  N.  W.  374 ; 
Martin   v.    Morris,   62   Wis.   418,   22 


N.  W.  525;  Marrett  v.  Murphy,  11 
Nat.  Bankr.  Reg.  132;  Doe  v.  Mc- 
Leod,  8  U.  C.  Q.  B.  344. 

"Patrick  V.  Patrick,  71  N.  J.  Eq. 
347,  dZ  Atl.  848;  Ihmsen  v.  Huston 
(Pa.),  93  Atl.  601;  Uniform  Part- 
nership Act,  §§  26,  25(d). 

18  Bennett  v.  Bennett,  137  Ky.  17, 
121  S.  W.  495,  Ann.  Cas.  1912  A, 
407 ;  Strong  v.  Lord,  107  111.  25 ;  Bopp 
V.  Fox,  63  111.  540 ;  Hiscock  v.  Jaycox, 
12  Nat.  Bankr.  Reg.  507,  Fed.  Cas. 
No.  6531 ;  Holton  v.  Guinn,  65  Fed. 
450;  Perin  v.  Megibben,  53  Fed.  86, 
3  C.  C.  A.  443 ;  Brewer  v.  Browne, 
68  Ala.  210;  Lenow  v.  Fones,  48  Ark. 
557,  4  S.  W.  56 ;  Ferris  v.  Van  Ingen, 
110  Ga.  102,  35  S.  E.  347;  Walling 
V.  Burgess,  122  Ind.  299,  22  N.  E. 
419,  2Z  N.  E.  1076,  7  L.  R.  A.  481; 
Hale  V.  Plummer,  6  Ind.  121 ;  Mat- 
lock V.  Matlock,  5  Ind.  403;  Rat- 
cliffe  V.  Mason,  92  Ky.  190,  17  S.  W. 
438,  13  Ky.  L.  551;  Goodburn  v. 
Stevens,  1  Md.  Ch.  420;  Harris  v. 
Harris,  153  Mass.  439,  26  N.  E.  1117; 
Dyer  v.  Clark,  5  Met.  (Mass.)  562, 
39  Am.  Dec.  697;  Free  v.  Beatley, 
95  Mich.  426,  54  N.  W.  910;  Wood- 
ward-Holmes Co.  v.  Nudd,  58  Minn. 
236,  59  N.  W.  1010,  27  L.  R.  A.  240, 
49  Am.  St.  503;  Sykes  v.  Sykes,  49 
Miss.  190;  Young  v.  Thrasher,  115 
Mo.  222,  21  S.  W.  1104;  Willet  v. 
Brown,  65  Mo.  138,  27  Am.  Rep.  265 ; 
Uhler  V.  Semple,  20  N.  J.  Eq.  288; 
Craighead  v.  Pike,  58  N.  J.  Eq.  15, 
43  Atl.  424  (affd.  60  N.  J.  Eq.  443, 
45  Atl.  1091)  ;  Sage  v.  Sherman,  2  N. 
Y.  417 ;  Stroud  v.  Stroud,  61  N.  Car. 
525;  Patton  v.  Patton,  60  N.  Car. 
572,  86  Am.  Dec.  448;  Foster's  Ap- 
peal,   74    Pa.    St.    391,    15    Am.    Rep. 


843 


ADMINISTRATION    AFTER    DEATH 


§  627 


dower  until  firm  debts  are  paid  and  partnership  equities  settled.'^ 
The  widow  has  no  right  to  dower  in  partnership  lands  where  it 
is  held  that  they  are  converted  into  personalty  for  all  purposes, "'' 
or  where  by  agreement  of  the  partners  they  have  been  so  con- 
verted.^^ Under  the  rule  in  England  and  Canada,  partnership 
real  estate  is  treated  as  converted  into  personalty  for  all  pur- 
poses, and  the  remainder  goes  to  the  deceased  partner's  personal 
representative.^"  Generally  in  this  country,  such  remainder  being 
considered  realty,  it  does  not  go  to  the  personal  representative,"^ 


553;  Reed  v.  Kennedy,  2  Strobh.  (S. 
Car.)  67;  Martin  v.  Smith,  25  W. 
Va.  579. 

19  Walling  V.  Burgess,  122  Ind. 
299,  22  N.  E.  419,  23  N.  E.  1076,  7 
L.  R.  A.  481;  Huston  v.  Neil,  41 
Ind.  504;  Dyer  v.  Clark,  5  Mete. 
(Mass.)  562,  39  Am.  Dec.  697;  Wood- 
ward-Holmes Co.  V.  Nudd,  58  Minn. 
236,  59  N.  W.  1010,  27  L.  R.  A.  340, 
49  Am.  St.  503;  Hauptmann  v. 
Hauptmann,  91  App.  Div.  197,  86  N. 
Y.  S.  427.  See  ante  §  296,  on  right 
of  dower  in  partnership  real  estate. 

-'^  Essex  V.  Essex,  20  Beav.  442 ; 
In  re  Music  Hall  Block,  8  Ont.  225 ; 
Deering  v.  Kerfoot,  89  Va.  491,  16  S. 
E.  671 ;  Pierce  v.  Trigg,  10  Leigh 
(Va.)   406. 

2iMallory  v.  Russell,  71  Iowa  63, 
32  N.  W.  102,  60  Am.  Rep.  776; 
Greene  v.  Greene's  Partners,  1 
Ohio  535,  13  Am.  Dec.  642;  Lowe 
V.  Lowe,  13  Bush  (Ky.)  688.  See 
also  Coster  v.  Clarke,  3  Edw.  Ch. 
(N.  Y.)  428;  Sumner  v.  Hampson, 
8  Ohio  328,  32  Am.  Dec.  722. 

"Waterer  v.  Waterer,  L.  R.  15 
Eq.  402,  21  W^kly.  Rep.  508;  Alur- 
tagh  V.  Costello,  L.  R.  7  Ir.  428; 
Darby  v.  Darby,  3  Drew.  495,  2  Jur. 
(N.  S.)  271,  25  L.  J.  Ch.  371 ;  Hough- 
ton V.  Houghton,  5  Jur.  528,  10  L.  J. 
Ch.  310,  11  Sim.  491,  34  Eng.  Ch. 
491,   59   Eng.   Reprint  963;   Wylie  v. 


Wylie,  4  Grant  Ch.  (U.  C.)  278; 
Eng.  Partnership  Act  (1890),  §  22. 
23  Clay  V.  Freeman,  118  U.  S.  97,  30 
L.  ed.  104,  6  Sup.  Ct.  964;  Logan  v. 
Greenlaw,  25  Fed.  299 ;  In  re  Codding, 
9  Fed.  849 ;  Coolidge  v.  Burke,  69  Ark. 
237,  62  S.  W.  583 ;  Lenow  v.  Fones, 
48  Ark.  557,  4  S.  W.  56;  Loubat  v. 
Nourse,  5  Fla.  350 ;  Simpson  v.  Leech, 
86  111.  286;  Bopp  v.  Fox,  63  111.  540; 
Hewitt  V.  Rankin,  41  Iowa  35 ;  Lowe 
V.  Lowe,  13  Bush  (Ky.)  688  (lim- 
iting Louisville  Bank  v.  Hall,  8  Bush 
(Ky.)  672)  ;  Galbraith  v.  Gedge,  16 
B.  Mon.  (Ky.)  631;  Shearer  v. 
Shearer,  98  Mass.  107;  Wilcox  v.  Wil- 
cox, 13  Allen  (Mass.)  252;  Dilworth 
V.  Mayfield,  36  Miss.  40;  Willet  v. 
Brown,  65  Mo.  138,  27  Am.  Rep. 
265 ;  Wooldridge  v.  Wilkins,  3  How. 
(Miss.)  360;  Campbell  v.  Campbell, 
30  N.  J.  Eq.  415 ;  Uhler  v.  Semple,  20 
N.  J.  Eq.  288;  Buckley  v.  Buckley, 
11  Barb.  (N.  Y.)  43;  Buchan  v.  Sum- 
ner, 2  Barb.  Ch.  (N.  Y.)  165,  47  Am. 
Dec.  305 ;  Smith  v.  Jackson,  2  Edw. 
(N.  Y.)  28;  Coles  v.  Coles,  15  Johns. 
(N.  Y.)  319,  1  Am.  Lead  Cas..  Hare 
and  \\'allace  notes,  494 ;  Fairchild  v. 
Fairchild,  64  N.  Y.  478  (affg.  5  Hun 
407)  ;  Fisher  v.  Lang,  10  Ohio  Dec. 
(Reprint)  178,  19  Cine.  L.  Bui.  139; 
In  re  Leaf's  Appeal,  105  Pa.  St.  505 ; 
Foster's  Appeal,  74  Pa.  St.  391,  IS 
Am.  Rep.  553 ;  Tillinghast  v.   Cham- 


§    628  LAW    OF    PARTNERSHIP  844 

but  to  the  heirs  of  the  deceased  partner."*  The  personal  repre- 
sentative of  the  deceased  partner  has  no  right  to  sell  the  partner's 
interest  in  firm  realty,  until  after  firm  debts  have  been  paid."^ 
If  the  interest  of  the  deceased  partner  in  firm  real  estate  is  sold 
by  his  personal  representative,  the  proceeds  go  to  his  estate.-''  A 
conveyance  by  personal  representatives  of  a  deceased  partner 
of  his  interest  in  a  partnership  has  been  held  to  convey  his  in- 
terest in  firm  real  estate.'^ 

§  628.  Rights  of  heirs  and  surviving  partner  in  surplus 
real  estate. — If  partnership  realty  has  been  converted  into 
personalty  out  and  out  as  by  the  English  Partnership  Act  or 
Uniform  Partnership  Act,  the  surviving  partner  has  the  same 
power  to  sell  any  surplus  not  needed  for  the  payment  of  debts, 
which  he  has  over  firm  personal  assets.  And  under  the  American 
decisions  he  has  this  power  where  by  agreement  partnership  real 
estate  has  been  changed  into  personalty  for  all  purposes."^  But 
under  the  general  holdings  in  this  country,  where  such  conversion 
has  not  taken  place,  it  is  said  that  the  surviving  partner  and  the 
heirs  of  the  deceased  partner  take  such  surplus  in  the  character 
of  realty  as  tenants  in  common,-®  and  they  may  have  a  partition 

plin,  4  R.  I.   173,  67  Am.  Dec.  510;  25  McKean   v.    Vlck,    108    111.    Z7Z; 

Williamson     v.     Fontain,     7     Baxt.  Cilley  v.  Huse,  40  N.  H.  358;  Will- 

(Tenn.)  212;  Jones  v.  Sharp,  9  Heisk.  iams  v.  Moore,  62  N.  Car.  211. 

(Tenn.)  660;  Griffey  v.  Northcutt,  5  26  Hartnett  v.  Stillwell,  121  Ga.  386, 

Heisk.   (Tenn.)  746.  49  S.  E.  276,  104  Am.  St.  151. 

24  Lang  V.  Waring,  25  Ala.  625,  60  27  ihmsen  v.  Huston   (Pa.),  93  Atl. 

Am.  Dec.  533 ;  Branner  v.  Nichols,  61  601. 

Kans.   356,   59   Pac.   633  ;    Shearer  v.  2s  Breen  v.  Richardson,  6  Colo.  605  ; 

Shearer,  98  Mass.  107 ;  Way  v.  Steb-  Hyman  v.   Peters,   30   III.   App.    134 ; 

bins,   47    Mich.   296,    11    N.   W.    166;  Clark  v.  Fleischmann,  81   Nebr.  445, 

Yeatman  v.  Woods,  6  Yerg.   (Tenn.)  116  N.  W.  290;  Patrick  v.  Patrick,  71 

20;    Griffey    v.    Northcutt,    5    Heisk.  N.  J.  Eq.  347,  6?,  Atl.  848;  Buckley  v. 

(Tenn.)  746;  Solomon  v.  Fitzgerald,  Doig,   188  N.  Y.  238,  80  N.  E.  913; 

7  Heisk.  (Tenn.)  552;  Williamson  v.  Du  Bree  v.  Albert,  100  Pa.  St.  483; 

Fontain,  7  Baxt.   (Tenn.)   212;  Mar-  Miller  v.  Ferguson,  107  Va.  249,  57  S. 

tin  V.  Morris,  62  Wis.  418,  22  N.  W.  E.  649,  122  Am.  St.  840. 

525;  Weld  v.  Johnson  Mfg.   Co.,  86  29  Espy    v.    Comer,    76    Ala.    501; 

Wis.  552,  57  N.  W.  374;  Un  Wong  Powers  v.   Robinson,  90  Ala.   225,  8 

V.  Kan  Chu,  5  Haw.  225;  Aldrich  v.  So.   10;   Blanchard  v.  Floyd,  93  Ala. 

Robinson,  2  Haw.  606.  53,  9   So.  418;    McCauley   v.    Fulton, 


845 


ADMINISTRATION    AFTER    DEATH 


§  629 


of  it.'°  Other  courts  say  that  the  surviving  partner  and  the  de- 
ceased partner's  heirs  do  not  take  the  surplus  real  estate  as  ten- 
ants in  common, ^^  while  other  decisions,  some  of  them  based  on 
statute,  declare  for  the  same  rule  followed  in  England  and  seem- 
ingly provided  for  by  the  Uniform  Partnership  Act,  that  the 
surviving  partner  should  convert  into  money  all  the  partnership 
property.^" 

§  629.  Rights  in  firm  real  estate  under  Uniform  Partner- 
ship Act. — The  Uniform  Partnership  Act  makes  a  very 
marked  change  in  almost  all  the  doctrines  announced  in  the  last 
preceding  sections.  It  provides  that  a  partner's  interest  in  firm 
property  is  personalty,  thus  following  the  English  rule  of  equita- 
ble conversion  of  partnership  realty  into  personalty,  for  all  pur- 


44  Cal.  355 ;  Loubat  v.  Nourse,  5  Fla. 
350;  Hartnett  v.  Stillwell,  121  Ga. 
386,  49  S.  E.  276,  104  Am.  St.  151; 
Blake  v.  Nutter,  19  Maine  16;  Dyer 
V.  Clark,  5  Met.  (Mass.)  562,  39  Am. 
Dec.  697 ;  Scruggs  v.  Blair,  44  Miss. 
406;  Alexander  v.  Kimbro,  49  Miss. 
529;  Smith  v.  Jackson,  2  Edw.  Ch. 
(N.  Y.)  28;  Treadwell  v.  Williams,  9 
Bosw.  (N.  Y.)  649;  Cundey  v.  Hall, 
208  Pa.  335,  57  Atl.  761,  101  Am.  St. 
938;  Hale  v.  Henrie,  2  Watts  (Pa.) 
143,  27  Am.  Dec.  289. 

30  Brewer  v.  Browne,  68  Ala.  210; 
Thayer  v.  Lane,  Walk.  Ch.  (Mich.) 
200;  Comstock  v.  McDonald,  126 
Mich.  142,  85  N.  W.  579;  Way  v. 
Stebbins,  47  Mich.  296,  11  N.  W.  166; 
Craighead  v.  Pike,  58  N.  J.  Eq.  15, 
43  Atl.  424  (afifd.  60  N.  J.  Eq.  443,  45 
Atl.  1091);  Molineaux  v.  Raynolds, 
54  N.  J.  Eq.  559,  35  Atl..  536;  Smith 
V.  Cowles,  81  App.  Div.  328,  81  N. 
Y.  S.  524;  Greene  v.  Graham,  5  Ohio 
264. 

31  Hoxie  V.  Carr,  1  Sumn.  (U.  S.) 
173,  Fed.  Cas.  No.  6802 ;  Ingraham  v. 


Mariner,  194  111.  269,  62  N.  E.  609; 
Galbraith  v.  Tracy,  153  111.  54,  38  N. 
E.  937,  28  L.  R.  A.  129,  46  Am.  St. 
867 ;  Needham  v.  Wright,  140  Ind.  190, 
39  N.  E.  510;  McKee  v.  Covalt,  71 
Kans.  772,  81  Pac.  475;  Galbraith  v. 
Gedge,  16  B.  Mon.  (Ky.)  631;  Han- 
son V.  Hanson,  4  Nebr.  (Unof.)  880, 
97  N.  W.  23 ;  Cilley  v.  Huse,  40  N.  H. 
358;  Leary  V.  Boggs,  41  Hun  643,  1 
N.  Y.  St.  571 ;  Preston  v.  Fitch,  137 
N.  Y.  41,  33  N.  E.  77  (revg.  19  N.  Y. 
S.  849,  64  Hun  636,  46  N.  Y.  St.  588)  ; 
Baird  v.  Baird's  Heirs,  21  N.  Car. 
524,  31  Am.  Dec.  399. 

32  Moran  v.  Mclnerney,  129  Cal.  29, 
61  Pac.  575,  948;  Ingraham  v.  Mari- 
ner, 194  111.  269,  62  N.  E.  609;  Mac- 
Farlane  v.  MacFarlane,  82  Hun 
238,  63  N.  Y.  St.  589;  Baird  v. 
Baird's  Heirs,  21  N.  Car.  524,  31  Am. 
Dec.  399;  McPherson  v.  Swift,  22  S. 
Dak.  165,  116  N.  W.  76;  McAllister 
V.  Montgomery,  3  Hay  (Tenn.)  94, 
Code  of  Tennessee  (1896).  §  3678; 
Pierce  v.  Trigg,  10  Leigh  (Va.)  406; 
Comp.  Laws  Utah  1907,  §  3918. 


§    630  LAW    OF    PARTXERSIIIP  846 

poses,'"  and  that  on  the  death  of  a  partner  his  right  in  specific 
partnership  property  vests  in  the  surviving  partner  or  partners, 
who  have  no  right  to  possess  such  property  except  for  partner- 
ship purposes.^*  It  would  seem  that  the  intention  and  effect 
of  these  provisions  is  to  permit  the  surviving  partner  to  sell 
firm  real  property  in  the  same  manner  as  firm  chattels.  These 
provisions  also  change  the  general  rules  that  firm  real  estate 
descends  to  a  partner's  heirs,  subject  only  to  a  trust  in  favor 
of  the  partnership,  and  simplify  the  question  as  to  the  rights 
of  heirs  and  personal  representatives  discussed  in  the  last  section. 
It  is  also  provided  that  a  partner's  interest  in  specific  firm  property 
is  not  subject  to  dower,  curtesy,  or  allowances  to  widows,  heirs, 
or  next  of  kin.^^  In  this  respect  the  act  does  not  state  a  different 
rule  from  that  laid  down  in  most  decisions. 

§  630.  Liability  of  surviving  partner  and  deceased  part- 
ner's estate  on  firm  obligations. — As  a  general  rule,  a  firm 
creditor  has  no  right  to  join  the  representatives  of  a  deceased 
partner  and  a  surviving  partner  in  an  action  on  an  obligation 
of  the  firm,  therefore,  the  surviving  partner  is  liable  to  a  several 
action,  upon  such  obligation,  just  as  on  his  individual  obligation. ■""' 
A  firm  creditor  may  also  proceed  against  the  deceased  partner's 
estate  on  a  firm  obligation. ^^     It  was  the  early  rule  that  the  part- 

33  Uniform  Partnership   Act,    §  26.     v.  Alhambra  Palace  Co.   [1901],  1  K. 

34  Uniform  Partnership      Act,      §     B.  59.  70  L.  J.  K.  B.  26,  83  L.  T.  Rep. 
25  (d).  (N.  S.)   431;  Campbell  v.  Farley,  18 

35  Uniform  Partnership      Act,      §     Ont.   Pr.  97;   Connell  v.   Owen,  4  U. 
25  (e).  C.    C.    P.    113;    Lindley    Partnership 

3GRoss  V.  Everett,  12  Ga.  30;  Mc-  (7th    ed.)    326. 

Lean  v.  McAllister,  30  Mo.  App.  107 ;  37  Claflin    v.    Behr,    89   Ala.    503,    8 

Wright   V.    Barton,   34   Nebr.   776,   52  So.    45 ;    McLain    v.    Carson,    4    Ark. 

N.   W.  809 ;   Carrere  v.   Spofiford,  46  164,  Z7  Am.  Dec.  777 ;  Camp  v.  Grant, 

How.   Pr.  294,   15   Abb.   Pr.    (N.   S.)  21  Conn.  41,  54  Am.  Dec.  321  :  Henry 

(N.  Y.)  47;  Bridge  v.  Swain,  3  Redf.  v.   Caruthers,    196  111.   136,   63   N.    E. 

Sur.  (N.  Y.)  487;  Livingston  v.  Cox,  629    (affg.   95    111.    App.    582);    Dog- 

6  Pa.  St.  360 ;  Marvin  v.  McRae,  Rice  gett  v.  Dill,  108  111.  560,  48  Am.  Rep. 
( S.  Car.)  171;  Calder  v.  Rutherford,  565;  Evans  v.  Superior  Steel  Co.,  114 
3   B.   &   B.   302,   7  Moore   C.   P.    158,  111.  App.  505;  Newman  v.  Gates,  165 

7  E.  C.  L.  743;  Martin  v.  Crompe.  1  Ind.  171.  72  N.  E.  638;  Maxey  v. 
Ld.  Raym.  340,  2  Salk.  444;   Phillips  Averill,  2  B.  Mon.   (Ky.)    107;  Boat- 


847  ADMINISTRATION    AFTER    DEATH  §    630 

nership  creditor  could  not  proceed  against  a  deceased  partner's 
estate  until  he  had  first  exhausted  his  remedy  against  the 
surviving  partners,  or  had  shown  to  the  court  that  the 
survivors  were  insolvent,  but  such  rule  was  changed  in 
Great  Britain  by  a  leading  case,^^  which  held  that  a  partnership 
creditor  may  in  any  case  proceed  against  a  deceased  partner's 
estate,  without  regard  to  the  survivor's  insolvency,  it  being  said 
that  in  equity  partnership  liability  for  debts  is  several  as  well 
as  joint,  and  the  estate  of  a  member  of  a  firm  is  liable  as  for  an 
individual  debt.  This  case  has  been  followed  by  most  English 
and  American  decisions  since  that  time.^''  Judge  Story  thus 
stated  the  doctrine:*"  "The  doctrine  formerly  held  upon  this 
subject  seems  to  have  been  that  the  joint  creditors  had  no  claim 
whatsoever  in  equity  against  the  estate  of  the  deceased  partner, 
except  when  the  surviving  partners  were  at  the  time  of  his  death 
or  subsequently  became,  insolvent  or  bankrupt.  But  that  doc- 
trine has  since  been  overturned,  and  it  is  now  held  that  in  equity 

men's    Sav.    Inst.    v.    Mead,    52    Mo.  Am.  Dec.  321 ;   Fillyan  v.  Laverty,  3 

543 ;  Hamersley  v.  Lambert,  2  Johns.  Fla.   72 ;    Union   Trust   Co.   v.    Shoe- 

Ch.  (N.  Y.)  508;  Moore's  Appeal,  34  maker,   258   111.   564,    101    N.   E.    1050 

Pa.    St.   411;    Wilson    v.    McConnell,  (affg.  decree  172  111.  App.  365)  ;  Dog- 

9    Rich.   Eq.    (S.    Car.)    500;    Martin  gett  v.  Dill,  108  111.  560,  48  Am.  Rep. 

V.  Morris,  62  Wis.  418,  22  N.  W.  525 ;  565 ;   Silverman  v.   Chase,  90  111.  Zl ; 

Brown   v.   Gordon,    16   Beav.   302,  22  Mason  v.  Tiffany,  45  111.  392 ;  Hardy 

L.  J.  Ch.  65 ;  Winter  v.  Innes,  2  Jur.  v.    Overman,    36    Ind.    549 ;    Dean    v. 

981,   4   Myl.   &   C.    101,    18   Eng.    Ch.  PhilHps,     17     Ind.     406;     Weyer     v. 

101,  41    Eng.   Reprint  40;   Wilkinson  Thornburgh,    15    Ind.    124;    Irby    v. 

V.  Henderson,  2  L.  J.  Ch.  190,  1  Myl.  Graham,    46    Miss.   425 ;    Freeman   v. 

&  K.   582,   7   Eng.   Ch.  582,   39   Eng.  Stewart,    41    Miss.    138;    Bowker    v. 

Reprint  801;  Bagel  v.  Miller   [1903],  Smith,  48  N.  H.  Ill,  2  Am.  Rep.  189; 

2    K.    B.    212,    72    L.    J.    K.    B.    495;  Wisham  v.  Lippincott,   1   Stockt.  Eq. 

Stocken  v.  Dawson,  9  Beav.  239,  50  (N.  J.)    353;   Saunders  v.  Wilder,  2 

Eng.  Reprint  335    (affd.  17  L.  J.  Ch.  Head  (Tenn.)  577;  Gaut  v.  Reed,  24 

282).  Tex.  46,  76  Am.  Dec.  94;  Washburn 

38  Devaynes  v.   Noble,   1   Men  529.  v.  Bank  of  Bellows  Falls,  19  Vt.  278 ; 

39  Lewis  v.  United  States,  82  U.  S.  Wilkinson  v.  Henderson,  1  Myl.  &  K. 
622,  21  L.  ed.  215;  Nelson  v.  Hill,  5  582;  Braithwaite  v.  Britain,  1  Keen 
How.  (U.  S.)  127,  12  L.  ed.  81;  206;  Brown  v.  Douglas,  10  Law  Jour- 
Travis  V.  Tartt,  8  Ala.  574;  McLain  nal  14. 

v.  Carson,  4  Ark.   164,  Ti]  Am.   Dec.         ^^  Story  Partnership,   §  362. 
Til ;  Camp  v.  Grant,  21  Conn.  41,  54 


§    630  LAW    OF    PARTNERSHIP  848 

all  partnership  debts  are  to  be  deemed  joint  and  several,  and 
consequently  the  joint  creditors  have  in  all  cases  the  right  to 
proceed  at  law  against  the  survivors,  and  an  election  also  to  pro- 
ceed in  equity  against  the  estate  of  a  deceased  partner  whether 
the  survivor  be  insolvent  or  bankrupt  or  not."  So  it  is  held  that 
where  a  partnership  creditor  failed  to  proceed  against  a  deceased 
partner's  estate  until  after  the  insolvency  of  the  survivors  this 
does  not  affect  the  liability  of  the  deceased  partner's  estate,  al- 
though the  claim  could  have  been  collected  from  the  survivors 
before  their  insolvency/^  But  there  have  been  many  American 
decisions  which  followed  the  earlier  rule,  holding  either  the 
legal  remedy  against  survivors  must  have  been  exhausted  or 
their  insolvency  shown,  before  a  firm  creditor  is  entitled  to  pro- 
ceed against  the  estate  of  a  deceased  partner.*"  A  proceeding 
against  the  deceased  partner's  estate  does  not  affect  the  liability 
of  the  surviving  partner  for  the  same  claim. '*^  Firm  creditors  are 
entitled  to  priority  in  firm  assets  over  the  individual  creditors 
of  a  deceased  partner,**  but  as  a  rule  in  most  jurisdictions  have 
not  the  right  to  share  equally  with  individual  creditors  in  his 
separate  estate.*^     Although  in  some  cases  such  right  is  allowed 

^Doggett  V.  Dill,   108  111.   560,  48  Caines   Case,   in   error    (N.  Y.)    122; 

Am.  Rep.  565.  Hubble  v.  Perrin,  3  Ohio  287;  Sher- 

*-  Caldwell    v.    Stileman,    1    Ravvle  man  v.   Kreul,  42  Wis.  33 ;   Gray  v. 

(Pa.)    212;    Pendleton    v.    Phelps,    4  Chiswell,  9  Ves.  124. 

Day  476,  Fed.  Cas.  No.  19923 ;  Reims-  ^^  Finnegan   v.   Allen,   60   111.   App. 

dyke  v.  Kane,   1    Gall.    (U.   S.)    371;  354;  In  re  Hodgson,  31  Ch.  D.  177,  55 

Daniel  v.  Townsend,  21  Ga.  155;  Ben-  L.  J.  Ch.  241,  54  L.  T.  Rep.   (N.  S.) 

nett  V.  Woolfolk,  15  Ga.  213 ;  Lewis  222. 

V.   Conrad,   11   Iowa  153;   Pearson  v.  ^*  Pilcher's  Succession,  39  La.  Ann. 

Keedy,  6  B.  Mon.  (Ky.)   128,  43  Am.  362,    1    So.  929;   Banks   v.   Steele,  27 

Dec.  160 ;   In  re  Roberts,  214  N.   Y.  Nebr.  138,  42  N.  W.  883. 

369,  108  N.  E.  562 ;  Pope  v.  Cole,  55  ^^  See   generally   ch.    17,    on    appli- 

N.  Y.  124,  14  Am.  Rep.  198;  Hoyt  v.  cation    of    assets.      See    also    Bridge 

Bonnett,    50    N.    Y.    538;    Richter   v.  v.    AlcCulIough,    27   Ala.    661;    Camp 

Poppenhausen,  42  N.  Y.  373 ;  Voorhis  v.  Grant,  21   Conn.  41,  54  Am.  Dec. 

V.  Childs,  17  N.  Y.  354;  Trustees  of  321;    Spratt  v.    First    Nat.    Bank,    84 

Leake    &    Watts    Orphan    House    v.  Ky.   85,    7   Ky.   L.   791 ;    Dahlgren   v. 

Lawrence,     11     Paige     (N.    Y.)     80;  Duncan.    7    Sm.    &    M.    (Aliss.)    280; 

Hamersley  v.  Lambert,  2  Johns.  Ch.  Barton  Nat.   Bank  v.  Atkins,  72  Vt. 

(N.  Y.)  508;  Jenkins  v.  De  Groot,  1  33,  47  Atl.  176;  Ex  parte  Dear,  L.  R. 


849 


ADMINISTRATION    AFTER    DEATH 


631 


where  there  is  no  firm  estate,  and  no  hving  solvent  partner.^"  It 
is  generally  held  that  the  time  for  presenting  a  claim  by  a  firm 
creditor  against  a  deceased  partner's  estate  is  not  limited  by  the 
statutes  as  to  the  presentation  of  claims  by  individual  creditors. ^^ 

§  631.  Surviving  partner's  rights  and  liabilities  as  to  de- 
ceased partner's  estate. — The  surviving  partner's  rights  in 
possession  of  firm  assets  are  only  to  convert  them  into  cash,  pay 
debts  and  wind  up  firm  affairs  ;*^  he  has  no  right  to  pay  individual 
debts  with  firm  assets/''  Some  courts  hold  him  to  a  certain 
extent  a  trustee  for  the  deceased  partner's  estate,'^*'  others  follow 
the  English  holding  that  he' is  not  such  a  trustee. '^^  The  survivor 
may  recover  from  the  estate  of  the  deceased  partner  firm  money 
which  was  misappropriated  by  the  deceased  or  his  representa- 
tives,^" and  so  far  as  the  rights  of  innocent  purchasers  are  not 
affected,  may  pursue  the  property  into  which  such  money  w^as 


1  Ch.  Div.  514,  45  L.  J.  Bankr.  22, 
34  L.  T.  Rep.  (N.  S.)  631;  Ridgway 
V.  Clare,  19  Beav.  Ill,  52  Eng.  Re- 
print 291 ;  Lodge  v.  Pritchard,  1 
DeG.,  J.  &  S.  610,  32  L.  J.  Ch.  775; 
Whittingstall  v.  Grover,  55  L.  T.  Rep. 
(N.  S.)  213;  Lee  v.  Flood,  2  Wkly. 
Rep.  26;  In  re  Daniel,  75  L.  T.  Rep. 
(N.  S.)   143,  3  Manson  312. 

4*5  Sparhawk  v.  Russell,  10  Mete. 
(Mass.)  305.  See  ch.  17,  on  applica- 
tion of  assets. 

*''■  Corson  v.  Berson,  86  Cal.  433, 
25  Pac.  7;  Pendleton  v.  Phelps,  Fed. 
Gas.  No.  10923,  4  Day  476;  Fillyau 
V.  Laverty,  3  Fla.  72;  Nagle  v.  Ball, 
71  Miss.  330,  13  So.  929;  Denny  v. 
Turner,  2  Mo.  App.  52 ;  Sale  v.  Dish- 
man,  3  Leigh  (Va.)  548. 

■*^  Huggins  V.  Huggins,  117  Ga.  151, 
43  S.  E.  759;  Dyas  v.  O'Neil,  3  Ohio 
S.  &  C.  PI.  Dec.  309,  2  Ohio  N.  P. 
81;  Levy  v.  Archenhold  (Tex.  Civ. 
App.),  44  S.  W.  46  (1898);  In  re 
Clough,  31  Ch.  D.  324,  55'  L.  J.  Ch.  77, 


S3  L.  T.  Rep.  (N.  S.)  716;  Kerrison 
V.  Reddington,   11   Ir.  Eq.  451. 

« Jones  V.  Dulaney,  86  S.  W.  547, 
977,  27  Ky.  L.  702. 

50  Andrews  v.  Stinson,  254  111.  Ill, 
98  N.  E.  222  (revg.  judgment  164 
111.  App.  25)  ;  Galbraith  v.  Tracy,  153 
111.  54,  38  N.  E.  937,  28  L.  R.  A.  129, 
46  Am.  St.  867;  Heffron  v.  Knicker- 
bocker, 57  111.  App.  336;  Jones  v.  Du- 
laney, 86  S.  W.  547,  977,  27  Ky.  L. 
702,  810;  Fried  v.  Burk,  125  Aid.  500, 
94  Atl.  86;  Milam  v.  Hill,  29  Tex. 
Civ.  App.  573,  69  S.  W.  447;  Ten- 
nant  v.  Dunlop,  97  Va.  234,  33  S.  E. 
620. 

siMulherin  v.  Rice,  106  Ga.  810, 
32  S.  E.  865;  Knox  v.  Gye,  L.  R.  5 
H.  L.  656,  42  L.  J.  Ch.  234;  Cham- 
bers V.  Howell,  11  Beav.  6,  12  Jur. 
905,  50  Eng.  Reprint  718 ;  Eng.  Part- 
nership Act  (1890),  §  43. 

52  Price  V.  Hicks,  14  Fla.  565  ;  Brad- 
ley V.  Brigham,  144  Mass.  181,  10  N. 
E.  793 ;  In  re  Miller,  157  Pa.  St.  224, 


§    631  LAW    OF    PARTNERSHIP  850 

changed.'^'  He  has  a  right  to  collect  from  the  estate  of  a  deceased 
partner  debts  owing  by  such  partner  to  the  firm,'^*  and  may  retain 
a  sufficient  portion  of  such  partner's  share  in  firm  assets  to  satisfy 
his  debt  to  the  firm.^^  And  if  the  surviving  partner  is  compelled 
to  pay  firm  debts  the  deceased  partner's  estate  must  reimburse 
him  for  that  partner's  share  in  the  loss.^^  It  has  been  held  that 
where  a  partner  pays  firm  debts  or  pays  out  money  for  the  firm, 
his  claim  for  contribution  from  the  deceased  partner's  estate 
is  contingent,  and  does  not  become  absolute  until  settlement  of 
partnership  affairs."  By  the  Uniform  Partnership  Act  a  de- 
ceased partner's  individual  property  is  bound  to  contribute  to  the 
liabilities  of  the  partnership  if  needed.^^  If  the  survivor  makes 
improvements  necessary  in  winding  up  the  business,  he  is  en- 
titled to  reimbursement  from  the  firm  assets,  and  to  contribution 
from  the  deceased  partner's  estate  if  firm  assets  are  insufficient.^^ 
The  surviving  partner  must  use  reasonable  diligence  and  skill 
in  winding  up  the  firm's  affairs,  and  must  respond  for  any  de- 
preciation or  loss  caused  by  a  failure  to  do  so.^°    Any  use  of  firm 

27  Atl.  698;  Alexander  v.  Coulter,  2  75  L.  T.  Rep.  (N.  S.)  143,  3  Man- 
Serg.  &  R.    (Pa.)    494.  son  312;   In   re  Ruby,  24  Ont.   App. 

53  Holmes    v.    Gilman,    138    N.    Y.     509. 

369,  34  N.  E.  205,  20  L.  R.  A.  566,        "  Blakely  v.   Smock,   96   Wis.  611, 

34  Am.  St.  463  (revg.  64  Hun  227,  19  71  N.  W.  1052;  Logan  v.  Dixon,  12> 

N.  Y.  S.  151  and  affg.  18  N.  Y.  S.56).  Wis.  533,  41   N.  W.  713;  Gleason  v. 

54  Painter   v.    Painter,   68    Cal.   395,  White.  34  Cal.  258. 

9   Pac.  450;    Bird   v.   Bird,   11   Maine         ^s  ^',-,iform      Partnership      Act,      § 

499,  1  Atl.  455;  McCormick's  Appeal,  40   (g). 

55   Pa.   St.  252.  -'O  TJHotson   v.    Tillotson,   34    Conn. 

55  Painter  v.  Painter,  133  Cal.  xix,  335 ;  Beck  v.  Thompson,  22  Nev.  109, 
36  Pac.  865;   In  re  Morris,  L.  R.  10  36  Pac.  562. 

Ch.  App.  Cas.  68,  44  L.  J.  Ch.  178,  31  eo  Maynard    v.    Richards,     166    111. 

L.   T.    Rep.    (N.    S.)    491,   23   Wkly.  466,  46  N.   E.   1138,   57  Am.   St.   145 

Rep.  120.  (affg.  61    111.   App.   336)  ;   Harrah   v. 

56  In  re  Burdick,  140  N.  Y.  S.  582,  Dyer  (Ind.),  102  N.  E.  14;  Swaf- 
79  Misc.  167,  4  N.  Y.  Civ.  Proc.  R.  ford  v.  White,  89  S.  W.  129,  28  Ky. 
21;  Olleman  v.  Reagan,  28  Ind.  109;  L.  119;  Cockerham  v.  Bosley,  52  La. 
Goldthwait  v.  Day.  149  Mass.  185,  21  Ann.  65,  26  So.  814;  Baker  v.  Balti- 
N.  E.  359;  Wheeler  v.  Arnold,  30  more  Safe  Deposit  &c.  Co.,  90  Md. 
Mich.  304 ;  Hanna  v.  Wray,  11  Pa.  St.  744,  45  Atl.  1028,  78  Am.  St.  463 ; 
27;  Ridgway  v.  Clare,  19  Beav.  Ill,  Bundy  v.  Youmans,  44  Mich.  376,  6 
52   Eng.   Reprint  291 ;    In   re   Daniel,  N.    W.    851 ;    Stanhope    v.    Suplee,    2 


851  ADMINISTRATION    AFTER    DEATH  §    632 

assets  for  personal  benefit  or  in  a  manner  not  authorized  by  law 
is  at  his  own  risk  of  loss,''^  and  for  all  profits  made  by  an  unau- 
thorized use  of  firm  assets,  he  must  account  to  the  deceased 
partner's  estate  for  an  interest  therein  proportional  to  the  de- 
ceased's share  in  the  business."'  If  the  deceased  partner's  estate 
is  compelled  to  pay  firm  debts,  the  deceased's  representation  is 
entitled  to  contribution  from  the  survivor,"^  and  may  proceed 
to  set  aside  a  voluntary  conveyance  of  the  surviving  partner's 
estate  as  fraudulent.*'* 

§  632.     Surviving  partner  and  good-will  of  business. — In 

case  of  dissolution  by  death  of  a  partner,  the  same  rules  as  to 
good-will  apply  as  in  other  cases  of  dissolution,  namely,  that  each 
partner  or  the  deceased  partner's  estate,  in  the  absence  of  agree- 
ment, is  entitled  to  a  sale  of  the  good-will  and  a  share  in  its 
proceeds.®^  It  was  formerly  held  that  the  right  to  use  the  firm 
name  passed  to  the  surviving  partner.*'"     But  it  is  now  held  that 

Brewst.   (Pa.)  455;  Condon  v.  Calla-  444;    Eng.    Partnership    Act    (1890), 

han,  115  Tenn.  285,  89  S.  W.  400,  1  §  29   (2). 

L.   R.  A.    (N.   S.)    643,   112  Am.   St.  es  Hill  v.   Huston,    IS    Grat.    (Va.) 

833 ;    Gresham   v.   Harcourt,   93   Tex.  350. 

149,  53  S.  W.   1019   (revg.  Tex.   Civ.  ^4 Alston  v.  Rowles,   13  Fla.  117. 

App.,    SO    S.    W.    1058)  ;    Hunter    v.  «5  Matter  of  Silkman,  121  App.  Div. 

Dowling   [1893],  3  Ch.  212,  62  L.  J.  202,   105  N.  Y.   S.  872    (affd.   190  N. 

Ch.  617,  68  L.  T.   (N.  S.)  780;  Mar-  Y.   560,    83    N.    E.    1131);    Howe   v. 

joram  v.  Saundeford,  Rom.  Cas.  110;  Searing,     6     Bosw.      (N.     Y.)      354; 

In  re  Wentworth  &c.   Surrogate  Ct,  Williams  v.  Wilson,  4  Sandf.  Ch.  (N. 

44  U.  C.  Q.  B.  207.  Y.)     379;    Dougherty    v.    Van    Nos- 

Gi  Morgan  v.   Morgan,  68  Ala.  80;  trand,    1    Hoflfm.    Ch.     (N.    Y.)    68; 

Fitz   V.    Reichard,   20   La.   Ann.   549;  Holden  v.  McMakin,  1  Pars.  Sel.  Eq. 

Bauchle  v.  Smylie,  104  App.  Div.  513,  Cas.  (Pa.)  270;  Wedderburn  v.  Wed- 

93   N.   Y.    S.   709;    Hiljberd   v.    Hub-  derburn,  22  Beav.  84;    Smith  v.   Ev- 

bard,   211    Pa.  331,   338,  60  Atl.  911,  erett,  27  Beav.  446. 

913.  '"^  Lewis   v.   Langdon,    4   L.   J.    Ch. 

62  Dovey  v.  Dovey,  95  Nebr.  624,'l46  258,  7  Sim.  421 ;  Blake  v.  Barnes,  12 

N.  W.  923 ;  Painter  V.  Painter  (Cal.),  N.    Y.    S.   69,    26   Abb.    N.    Cas.   208 

65  Pac.  135;  Oliver  v.  Forrester,  96  111.  (affd.  58  Hun  525,   12  N.  Y.  S.  354, 

315    (revg.   1    111.   App.  259)  ;   Young  34  N.  Y.  St.  919)  ;  Mason  v.  Dawson, 

v.   Scoville,  99  Iowa   177,  68   N.  W.  IS  Misc.  595,  37  N.  Y.  S.  90,  72  N. 

670:  Roberts  v.  Hendrickson,  75  Mo.  Y.   St.   123. 
App.    484;    Booth    v.    Parkes,    Beatty 


§  632 


LAW    OF    PARTNERSHIP 


852 


the  right  to  use  the  firm  name  is  a  part  of  the  good-will,  for 
which,  if  valuable,  the  surviving  partner  must  account  to  the 
deceased  partner's  estate.*^^  The  survivor  may  purchase  the 
right  to  use  it  from  the  deceased  partner's  estate.^^  Under  the 
general  rule  the  surviving  partner  may  set  up  business  for  him- 
self at  the  old  stand,  without  liability  for  damage  to  the  good- 
will as  a  part  of  firm  assets."''  Continuance  of  the  business  by  the 
surviving  partner  in  the  old  firm  name,  even  if  the  name  includes 
that  of  the  deceased  partner,  does  not,  in  itself,  make  the  de- 
ceased partner's  estate  liable/*'  In  some  jurisdictions  statutes 
allow  the  use  of  such  name  by  the  survivor  upon  compliance 
with  their  provisions,'^^  while  in  others  the  personal  representa- 
tives of  the  deceased  have  a  statutory  right  to  enjoin  such  use.'^ 


67  Slater  v.  Slater,  175  N.  Y.  143, 
67  N.  E.  224,  61  L.  R.  A.  796,  96 
Am.  St.  605  (mod.  78  App.  Div.  449, 
80  N.  Y.  S.  363)  ;  Kirkman  v.  Kirk- 
man,  20  Misc.  211,  45  N.  Y.  S.  Z7Z 
(affd.  26  App.  Div.  395,  49  N.  Y.  S. 
683)  ;  Fenn  v.  Bolles,  7  Abb.  Pr.  (N. 
Y.)  202 ;  Rammelsberg  v.  Mitchell,  29 
Ohio  St.  22;  Holden  v.  McMakin,  1 
Pars.  Eq.  Cas.  (Pa.)  270;  Tennant 
V.  Dunlop,  97  Va.  234,  Z2  S.  E.  620; 
Rowell  V.  Rowell,  122  Wis.  1,  99  N. 
W.  473;  In  re  David  [1899],  1  Ch. 
378,  68  L.  J.  Ch.  185,  80  L.  T.  Rep. 
(N.  S.)  75;  Smith  v.  Hawthorne,  76 
L.  T.  (N.  S.)  716;  Page  v.  Ratliffe, 
76  L.  T.  (N.  S.)  eZ;  Wedderburn  v. 
Wedderburn,  22  Beav.  84,  2  Jur.  (N. 
S.)  674,  25  L.  J.  Ch.  710,  52  Eng. 
Reprint  1039. 

^^  Rankin  v.  Newman,  114  Cal.  635, 
46  Pac.  742,  34  L.  R.  A.  265. 

69  Hutchinson  v.  Nay,  187  Mass. 
262,  72  N.  E.  974,  68  L.  R.  A.  186, 
105  Am.  St.  390;  Wilbeck  v.  Chit- 
tenden, 50  Mich.  426,  15  N.  W.  537; 
Chittenden  v.  Witbeck,  50  Mich.  401, 
15  N.  W.  526;  Scudder  v.  Ames,  142 
Mo.   187,  43   S.  W.  659;   Lobeck  v. 


Lee-Clark-Andreesen  Hardware  Co., 
Z7  Nebr.  158,  55  N.  W.  650,  23  L.  R. 
A.  795 ;  Fisk  v.  Fisk,  77  N.  Y.  App. 
Div.  83,  79  N.  Y.  S.  Z7,  12  N.  Y.  Ann. 
Cas.  228;  DeGrauw  v.  Schmid,  38 
App.  Div.  189,  56  N.  Y.  S.  593,  ap- 
plying laws  (1897),  ch.  420;  Davies 
V.  Hodgson,  25  Beav.  177,  4  Jur.  (N. 
S.)  252,  27  L.  J.  Ch.  449,  6  Wkly. 
Rep.  355,  53  Eng.  Reprint  604. 

■^0  Price  v.  Mathews,  14  La.  Ann. 
11;  National  Bank  of  Maryland  v. 
Hollingsworth,  135  N.  Car.  556,  47 
S.  E.  618;  Altgelt  v.  Sullivan  (Tex. 
Civ.  App.),  79  S.  W.  Z?>2>;  Webster 
V.  Webster,  3  Swanst.  490;  English 
Partnership  Act   (1890),   §   14   (2). 

71  Mass.  Stat.  1887,  ch.  248,  applied 
in  Groves  v.  Wilson,  168  Mass.  370, 
47  N.  E.  100;  N.  Y.  Laws  (1897), 
ch.  420,  §  20,  applied  in  Slater  v. 
Slater,  175  N.  Y.  143,  67  N.  E.  224, 
61  L.  R.  A.  796,  96  Am.  St.  605  (mod. 
78  App.  Div.  449,  80  N.  Y.  S.  363). 

72  Lodge  v.  Weld,  139  Mass.  499, 
2  N.  E.  95 ;  Morse  v.  Hall,  109  Mass. 
409;  Bowman  v.  Floyd,  3  Allen 
(Mass.)  76,  80  Am.  Dec.  55.  Com- 
pare  Lane  v.   Arnold,    11    Daly  293, 


853  ADMINISTRATION  AFTER  DEATH  §  633 

§  633.  Surviving  partner  as  deceased  partner's  executor 
or  administrator. — Wliere  a  surviving  partner  is  also  the  ex- 
ecutor or  administrator  of  the  deceased  partner,  he  acts  in  a  dual 
capacity,  representing  both  the  partnership  and  the  deceased 
partner's  estate.  His  duties  as  surviving  partner  are  practically 
the  same  as  in  any  other  case,  to  convert  the  assets  of  the  firm 
into  money  and  receive,  hold  and  distribute  the  proceeds.'^  And 
as  such,  it  is  his  duty  to  ascertain  and  get  together  the  deceased 
partner's  share  in  the  firm  property  and  assets  and  turn  this  over 
to  the  deceased's  separate  estate."  But  he  has  no  right  to  pos- 
session of  chattels  not  assets  of  the  partnership."  And  he  may 
also  call  upon  the  estate  to  contribute  for  debts  which  he  has 
paid,  if  the  firm  assets  are  insufficient,'"'  although  laches  may  bar 
his  right  to  contribution,'^'^  But  as  surviving  partner  he  can  not 
apply  the  separate  assets  of  the  deceased  partner  to  the  payment 
of  firm  debts,  nor  sell  his  separate  property  for  that  purpose.^* 
He  can  not  in  one  capacity  contract  with  himself  in  his  other 
capacity,'^'*  and  a  sale  by  himself  as  surviving  partner  to  himself 
as  personal  representative,  or  vice  versa,  is  voidable,^"  although 

revd.  99  N.  Y.  648;  Sparrow  v.  Kohn,  62;  Rowell  v.  Rowell,  122  Wis.  1,  99 

109  Pa.   St.  359,  2  Atl.  498,  58  Am.  N.  W.  473. 

Rep.   726.  "  In  re  Whitlow's  Estate,  184  Mo. 

"Gossios  V.  Wulff  (Mo.  App.),  165  App.  229,  167  S.  W.  463. 

S.  W.  817;   Pearson  v.   Keedy,  6  B.  76  Mead   v.    Byington,    10   Vt.    116; 

Mon.    (Ky.)    128,   43   Am.   Dec.    160;  Boyle    v.    Boyle,    4    B.    Mon.    (Ky.) 

Matter    of    Thieriot,    117    App.    Div.  570. 

686,  102  N.  Y.  S.  952;  Beste  v.  Bur-  "  Hardisty    v.    Hardisty,    11    Md. 

ger,   110  N.  Y.  644,   17  N.  E.  734,  2  179,  26  Atl.  322;  In  re  De  Coursey, 

Silvernail  Ct.  App.  91   (affg.  13  Daly  211  Pa.  92,  60  Atl.  490. 

317,   17  Abb.  N.   Cas.   162)  ;   Clausen  ^s  Boyle  v.  Boyle,  4  B.  Mon.  (Ky.) 

V.    Puvogel,    114   App.    Div.   455,    100  570;  Shelly  v.  Hiatt,  52  N.  Car.  509; 

N.  Y.  S.  49;  Kreis  v.  Gorton,  23  Ohio  Gee  v.  Humphries,  49  S.  Car.  253,  27 

St.  468;  Palicio  v.  Eigne,  15  Ore.  142,  S.   E.   101. 

13  Pac.  765;  In  re  Morris,  L.  R.  10  ^^  In  re  Leavitt's  Estate,  20  N.  Y. 

Ch.  App.  Cas.  68,  44  L.  J.   Ch.   178,  S.  58.  28  Abb.  N.  Cas.  457,  1  Powers 

31   L.  T.  Rep.   (N.  S.)   491;  Way  v.  74;   Egan  v.  Wirth,  26  R.  I.  363,  58 

Bassett,  5  Hare  55,  10  Jur.  89,  15  L.  Atl.  987. 

J.   Ch.   1,  26  Eng.   Ch.  55.  so  Nelson    v.    Hayner,    66    111.    487; 

■^^  In    re   Woodruff's    Estate,    Tuck.  Denholm   v.    McKay,    148   Mass.   434, 

(N.   Y.)    1;   In  re  Dair,   Ohio   Prob.  19  N.  E.  551,  12  Am.  St.  574;  Bauchle 

R.  233 ;  Grant  v.  McKinney,  36  Tex.  v.  Smylie,   104  App.  Div.  513,  93  N. 


§    634  LAW    01'     PARTNERSHIP  854 

in  Louisiana  such  sale  and  purchase  is  allowed  by  statute."  If 
he  fails  to  account  to  the  deceased  partner's  estate  for  his  share, 
resort  may  be  had  to  court  to  force  an  accounting,''-  for  the 
fair  valuation  of  such  share  at  the  time  of  the  deceased  partner's 
death. ^^  He  is  under  a  duty  as  administrator  of  the  deceased 
partner's  estate  to  account  in  court,  and  may,  it  seems,  account 
as  surviving  partner  in  connection  therewith,^*  and  the  judg- 
ment of  such  court  is  conclusive  if  not  appealed  from.**°  Pro- 
vision may  be  made  in  partnership  articles  for  payment  by  a  sur- 
viving partner  to  a  deceased  partner's  widow  before  final  settle- 
ment and  distribution,-"  but  if  a  surviving  partner,  who  is  also 
his  deceased  partner's  administrator,  makes  such  an  allowance 
without  authority  in  the  partnership  agreement,  he  has  misap- 
propriated the  firm  assets. '^^ 

§  634.  Partnership  administrator  under  statute. — As  was 
seen  in  a  preceding  section, ^^  many  states  regulate  by  statute  the 
administration  of  partnership  aft'airs  after  the  death  of  a  partner, 
providing  for  the  giving  of  a  bond  and  other  formalities,  and 
usually  forbidding  the  settlement  of  a  partnership  estate  in  any 

Y.  S.  709 ;   Gee  v.  Humphries,  49  S.  ^^  Broughton    v.    Broughton,    44   L. 

Car.  253,  27  S.  E.  101 ;  Hart  v.  Hart,  J.  Ch.  526. 

31  W.  Va.  688,  8  S.  E.  562.  ^4  in  re  Hearns,  214  N.  Y.  426,  108 

81  Savage  v.  Williams,  15  La.  Ann.  N.  E.  816 ;  State  ex  rel.  Whitlow  v. 
250;  Carter  v.  McManus,  15  La.  Ann.  American  Surety  Co.  of  New  York 
641.  (Mo.  App.),  177  S.  W.  1074. 

82  Vincent  v.  Martin,  79  Ala.  540 ;  ^^  State  v.  American  Surety  Co.  of 
Raison  v.  Williams,  42  S.  W.  1108,  New  York  (Mo.  App.),  177  S.  W. 
19  Ky.   L.    1142;   Leland   v.   Newton,  1074. 

102  Mass.  350 ;  Stewart  v.  Burkhalter,  sg  McClean  v.  Kennard,  L.  R.  9  Ch. 

28  Miss.  396;  Matter  of  Mertens,  39  336,43  L.  J.  Ch.  323,  30  L.  T.  Rep.    (N. 

Misc.   512,  80  N.  Y.   S.  376;    Matter  S.)   186,  22  Wkly.  Rep.  382;  Johnston 

of  Dummett,  38  Alisc.  477,  77  N.  Y.  v.  Moore,  4  Jur.   (N.  S.)   356,  27  L. 

S.  1118.    See  also  Clausen  v.  Puvogel,  J.    Ch.  453,  6  Wkly.   Rep.  490.     See 

114  App.  Div.  455,  100  N.  Y.  S.  49;  also  Harrah  v.  Dyer  (Ind.  App.),  96 

Egan  V.  Wirth,  26  R.  I.  363,  58  Atl.  N.  E.  41. 

987 ;  Mack  v.  Mack,  26  Nova  Scotia  "  Sellers  v.   Shore,  89  Ga.  416,   15 

24  (affd.  23  Can.  Sup.  Ct.  146).  Com-  S.  E.  494;  Julian  v.  Wrightsman,  73 

pare   Hutton   v.   Laws,   55   Iowa   710,  Mo.  569;  Miller  v.  Berry,  19  S.  Dak. 

8  N.  W.  642.  625,  104  N.  W.  311. 

ss  See  ante  §  615. 


855  ADMINISTRATION    AFTER    DEATH  §    635 

Other  manner/''  These  statutes  usually  regulate  powers  of  the 
administrator  in  managing  firm  affairs,"''  and  in  the  settlement 
and  payment  of  claims/''^  and  provide  for  an  accounting  in  a 
certain  court. °-  Statutory  provisions  usually  regulate  the  giving 
of  a  bond  by  such  administrator,"^  and  determine  what  is  a  breach 
of  its  conditions  and  the  remedy  for  such  breach."* 

§  635.     Winding  up  the  business. — It  has  been  seen  that  a 
surviving  partner  may  mortgage  firm  assets  to  secure  firm  debts,"'' 

89  Dow  V.  Simpson,  17  N.  Mex.  357,  67  S.  W.  744;  In  re  Curlee,  118  La. 

132  Pac.  568 ;  Teney  v.  Laing,  47  Kans.  563,  43  So.  165. 

297,  27  Pac.  976 ;   Towler  v.   Bull,  3        93  State  ex  rel.  Whitlow  v.  Ameri- 

Kans.   App.   626,   44    Pac.   30;    In    re  can   Surety  Co.  of   New  York    (Mo. 

Curlee,     118    La.    563,    43     So.     165;  App.),    177    S.    \V.    1074;    Gurley    v. 

Notrebe  v.   McKinney,  6  Rob.    (La.)  Gurley,    11    Miss.    413,    26    So.    962; 

13 ;    Bass   v.    Emery,    74    Maine   338 ;  Goodson  v.  Goodson,  140  Mo.  206,  41 

Barnes  v.  Stone,   198  Mo.  471,  95  S.  S.   W.  IZI ;   Hays  v.  Odom,  79   Mo. 

W.   915;    Headlee  v.    Cloud,    51    Mo.  App.   425;    Hill   v.    Treat,   67    Maine 

301;    Green   v.   Virden,   22    Mo.   506;  501;  Cook  v.  Lewis,  36  Alaine  340. 
State  V.  Neal,  29  Wash.  391,  69  Pac.         s*  Miller  v.  Kingsbury,   128  III.  45, 

1103.  21  N.  E.  209  (affg.  28  III.  App.  532)  ; 

''°  Shattuck   V.    Chandler,   40   Kans.  State    v.    L'nited    States    Fidelity   &c. 

516,    20    Pac.    225,    10    Am.    St..  227;  Co.,   4    Pennew.    (Del.)    428,   56   Ati. 

Bell  V.    McCoy,    136   Mo.   552,   38    S.  607;    Adams    v.    Marstellcr,    70    Ind. 

W.    329;    Easton   v.    Courtwright,   84  381;    Harrah   v.   State,   38   Ind.   App. 

Mo.    27 ;    Springfield    Grocer    Co.    v.  495,  76  N.  E.  443,  11  N.  E.  747 ;  Carr 

Shackelford,    56   Mo.   App.   642.  v.  Catlin,  13  Kans.  393 ;  Macready  v. 

91  In  re  Curlee,  118  La.  563,  43  So.  Sdienck,  41  La.  Ann.  456,  6  So.  517; 

165;    Barnes   v.    Stone,    198   Mo.  471,  Walmsley  v.  Mendelsohn,  31  La.  Ann. 

95     S.    W.    915 ;    Easton    v.     Court-  152 ;  Twibill's  Succession,  14  La.  Ann. 

wright,  84   Mo.  27;    State  v.   Shack-  645;    State  v.   Baldwin,  31    Mo.  561; 

lett,   11   Mo.  App.  265;   In   re  Whit-  State  v.  Shacklett,  115  Mo.  App.  715, 

low's  Estate  (Mo.  App.),  167  S.  W.  91  S.  W.  956;  State  v.  Smith,  57  Mo. 

463;    Collier  v.   Cairns,   6   Mo.   App.  App.    120;    State    v.    Myers,    9    Mo. 

188.  App.  44. 

92Wolfort  V.   Reilly,   133   Mo.  463,        ^s  See  ante  §  620,  on  power  of  aliena- 

34  S.  W.  847 ;  In  re  Glover,  127  Mo.  tion ;  Central  Trust  &c.  Co.  v.  Respass, 

153,  29  S.  W.  982;  Christy  v.  Done-  112  Ky.  606,  66  S.  W.  421,  23  Ky.  L. 

gan,  83   Mo.  374;   Crow  v.  Weidner,  1905,   56   L.    R.    A.   479,    99   Am.    St. 

36  Mo.  412;   State  v.   Shacklett,    115  317;  Rosenthal  v.  Hasberg,  84  N.  Y. 

Mo.  App.  715,  91   S.  W.  956;   Cogs-  S.  290:  Calvert  v.  Miller,  94  N.  Car. 

well  V.  Frendenau,  93  Mo.  App.  482,  600;  Herron  v.  Wampler,  194  Pa.  St. 

277,  45  Atl.  81. 

4 — Row.  ON  Partx. — Vol.  2  i 


635 


LAW    OF    PARTNERSHIP 


856 


and  may  incur  debts  incidental  to  the  winding  up  of  the  busi- 
ness for  which  the  firm  assets  are  bound.""  He  may  compel 
contribution  from  a  deceased  partner's  estate  if  firm  assets  are 
Insufficient  to  pay  such  debts. °"  But  there  is,  in  most  jurisdictions, 
no  right  in  the  surviving  partner  to  bind  the  estate  of  the  de- 
ceased partner,"^  and  it  has  been  held  that  this  right  does  not 
exist,  unless  by  will  or  contract.""  Under  ordinary  circumstances, 
one  surviving  partner  can  not  bind  his  co-survivors  by  signing  the 
firm  name,  unless  there  is  express  agreement  or  ratification 
thereto  by  those  sought  to  be  bound. ^  Ordinarily  a  surviving 
partner  is  liable  individually  for  the  breach  of  any  contract  which 
he  enters  into."  If  he  acts  with  a  high  degree  of  good  faith, 
which  is  required  both  by  the  former  partnership  relationship 
and  by  the  fiduciary  relationship  to  the  estate  of  the  deceased 
partner,  which  he  occupies,  the  surviving  partner  may  purchase 
the  interest  of  the  deceased  partner.^        Such  purchase  may  be 


06  See  §§  617,  618,  on  rights  and 
powers  of  surviving  partner. 

97  Hart  V.  Bowen,  86  Fed.  877,  31 
C.  C.  A.  31 ;  Dolan  v.  Lee,  40  N.  J. 
Eq.  338  (afifg.  39  N.  J.  Eq.  193); 
Preston  v.  Fitch,  137  N.  Y.  41,  33  N. 
E.  77  (revg.  19  N.  Y.  S.  849,  64  Hun 
636,  46  N.  Y.  St.  588)  ;  Allen  v. 
Blanchard,  9  Cow.  (N.  Y.)  631; 
O'Neill  V.  Dufif,  33  Leg.  Int.  408,  11 
Phila.    (Pa.)    244. 

98  Bagel  V.  Miller  [1903],  2  K.  B. 
212,  72  L.  J.  K.  B.  495 ;  Bauer  Grocer 
Co.  V.  McKee  Shoe  Co.,  87  111.  App. 
434;  Kalb fell's  Estate,  30  Pitts.  L.  J. 
(N.  S.)  (Pa.)  273,  27  Pitts.  L.  J. 
(N.  S.)   210. 

^^  Exchange  Bank  v.  Tracey,  77 
Mo.  594;  Cock  v.  Carson,  45  Tex. 
429. 

1  Castle  V.  Reynolds,  10  Watts 
(Pa.)  51;  Jenness  v.  Carleton,  40 
Mich.  343;  Bank  of  Port  Gibson  v. 
Baugh,   17  Miss.  290. 

~  Bass    Dry   Goods    Co.   v.    Granite 


City  Mfg.  Co.,  116  Ga.  176,  42  S.  E. 
415. 

3  Rammelsberg  v.  Mitchell,  29  Ohio 
St.  22;  Mitchell  v.  Schultz,  8  Ohio 
Dec.  78,  5  Wkly.  L.  Bui.  503;  Lud- 
low V.  Cooper,  4  Ohio  St.  1 ;  Ham- 
ilton V.  Wells,  182  111.  144,  55  N. 
E.  143  (affg.  81  111.  App.  274)  ;  Gal- 
braith  V.  Tracy,  153  111.  54,  38  N.  E. 
937,  28  L.  R.  A.  129,  46  Am.  St.  867 ; 
Valentine  v.  Wysor,  123  Ind.  47,  23 
N.  E.  1076,  7  L.  R.  A.  788;  Wilson 
V.  Soper,  13  B.  Mon.  (Ky.)  411,  56 
Am.  Dec.  573 ;  Macready  v.  Schenck, 
43  La.  Ann.  479,  9  So.  470;  Skip- 
with  V.  Lea,  16  La.  Ann.  247;  Wel- 
bourn  v.  Kleinle,  92  Md.  114,  48  Atl. 
81 ;  Robinson  v.  Simmons,  146  Mass. 
167,  15  N.  E.  558,  4  Am.  St.  299; 
Lobeck  v.  Lee-Clarke-Andreesen 
Hardware  Co.,  37  Nebr.  158,  55  N. 
W.  650,  23  L.  R.  A.  795;  Howell  v. 
Wallace,  37  App.  Div.  323,  56  N.  Y. 
S.  280;  Ogden  v.  Astor,  4  Sandf. 
(N.  Y.)  311;  Tennant  v.  Dunlop,  97 


857 


ADMINISTRATION    AFTER    DEATH 


636 


provided  for  by  the  partnership  agreement/  or  by  will.° 

§  636.  Interest  and  profits. — Good  faith  employment  of, 
and  accounting  for,  partnership  property  in  his  possession  during 
the  period  of  settlement  will  undoubtedly  relieve  a  surviving  part- 
ner from  liability  for  interest  and  profits.''  After  a  reasonable 
time  has  elapsed  for  the  settlement  of  firm  affairs  and  the  payment 
of  debts,  the  surviving  partner  is  sometimes  held  chargeable  with 
interest  on  the  deceased  partner's  share,^  but  not  if  there  has 
been  no  unnecessary  and  unreasonable  delay.^  While  surviving 
partners  have  the  right  to  conduct  the  affairs  of  the  firm,  in 
closing  up  the  business,  and  to  keep  the  deceased  partner's  share 
until  settled,  if  done  in  a  reasonable  time  and  manner,  this  is 
not,  in  the  absence  of  an  agreement  therefor,  an  authority  to  so 


Va.  234,  33  S.  E.  620;  Ex  parte  Ses- 
sions, 2  Ch.  Chamb.  (U.  C.)  360. 

4  Rankin  v.  Newman,  114  Cal.  635, 
46  Pac.  742,  34  L.  R.  A.  265 ;  Brown 
V.  Slee,  103  U.  S.  828,  26  L.  ed  618; 
Littell  V.  Hackley,  126  Fed.  309,  61 
C.  C.  A.  295 ;  Robertson  v.  Miller,  1 
Brock.  466,  Fed.  Cas.  No.  11926; 
Scharringhausen  v.  Luebsen,  52  Mo. 
337;  Sands  v.  Miner,  160  N.  Y.  693, 
55  N.  E.  1100  (affg.  16  App.  Div. 
347,  44  N.  Y.  S.  894)  ;  Lowenstein 
V.  Schififer,  38  App.  Div.  178,  56  N. 
Y.  S.  674 ;  Hull  v.  Cartledge,  18  App. 
Div.  54,  45  N.  Y.  S.  450;  Jones  v. 
Proctor,  5  Obio  N.  P.  315;  Kauf- 
mann  v.  Kaufmann,  239  Pa.  42,  86 
Atl.  634;  In  re  Fleming,  184  Pa.  St. 
88,  39  Atl.  29 ;  Cant  v.  Reed,  24  Tex. 
46,  76  Am.  Dec.  94;  Ex  parte  Mor- 
ley,  L.  R.  8  Ch.  1026;  In  re  David 
[1899],  1  Ch.  378,  68  L.  J.  Ch.  185; 
Page  v.  Ratliffe,  76  L.  T.  Rep.  (N. 
S.)  63;  Hibben  v.  Collister,  30  Can. 
Sup.  Ct.  459 ;  Robertson  v.  Junkin, 
26  Can.  Sup.  Ct.  192. 

^  Murphy  v.  Murphy,  217  Mass. 
233,  104  N.  E.  466. 


6  Maynard  v.  Richards,  166  111.  466, 
46  N.  E.  1138,  57  Am.  St.  145;  Greg- 
ory v.  Menefee,  83  Mo.  413.  See 
further  Turner  v.  Turner  (Ky.),  16 
S.  W.  137;  Kite's  Heirs  v.  Kite's 
Exrs.,  1  B.  Mon.   (Ky.)   177. 

7  Porter  v.  Long,  136  Mich.  150, 
98  N.  W.  990,  4  Ann.  Cas.  177; 
Washburn  v.  Goodman,  17  Pick. 
(Mass.)  519.  See  also  Kite  v.  Kite, 
1  B.  Mon.  (Ky.)  177;  Bernie  v.  Van- 
dever,  16  Ark.  616;  Klotz  v.  Mac- 
ready,  39  La.  Ann.  638,  2  So.  203; 
Featherstonhaugh  v.  Turner,  25  Beav. 
382 ;  Oliver  v.  Forrester,  96  111.  315  ; 
Goodburn  v.  Stevens,  1  Md.  Ch.  420; 
Killefer  v.  McLain,  78  Mich.  249, 
44  N.  W.  405 ;  Perrin  v.  Lepper, 
72  Mich.  454,  40  N.  W.  859;  Ramsdell 
V.  Millerd,  Harr.  (Mich.)  373;  Han- 
nahs v.  Hannahs,  68  N.  Y.  610;  In  re 
Brown's  Appeal,  89  Pa.   St.   139. 

sKarrah  v.  Dyer  (Ind.  App.),  96 
N.  E.  41;  Turner  v.  Turner  (Ky.), 
16  S.  W.  137;  Gregory  v.  Menefee, 
83  Mo.  413. 


§    637  LAW    OF    rARTXERSIIIP  858 

retain  the  deceased  partner's  share  for  the  purpose  of  continuing 
the  business,  and  if  they  do  so,  in  the  event  of  making  a  profit, 
they  must  give  the  representatives  of  the  deceased  partner  his 
share.®  The  business  is  conducted,  by  the  surviving  partners,  at 
their  own  peril,  and  if  there  is  a  loss,  or  less  than  the  legal  rate 
of  interest  is  made  on  the  capital,  the  executor  of  the  deceased 
partner  has  his  option  of  requiring  an  account  at  the  legal  rate 
of  interest  instead  of  profits,^''  but,  in  exercising  this  option,  the 
representative  of  the  deceased  partner  must  either  base  his  claim 
for  the  whole  period  upon  one  or  the  other  option.  He  can  not 
take  profits  when  profits  are  large,  and  interest  when  there  are 
small  profits  or  a  loss.  In  case  one  of  the  surviving  partners 
should  acquire  the  interest  of  the  deceased  partner  in  the  firm, 
and  assents  to  a  continuation  of  the  partnership,  the  above  rule 
does  not  apply,  and  he  must  stand  upon  the  regular  division  of 
profits  and  losses,  without  the  above  option/^  A  surviving  part- 
ner who  continued  the  business  is  not  entitled  to  interest  on  an 
excess  in  his  share  of  capital  owing  to  overdrafts  made  by  the 
deceased  partner.^- 

§  637.  Compensation. — Ordinarily  the  surviving  partner 
is  not  entitled  to  compensation  for  his  services  in  winding  up 
and  settling  the  partnership  afi^airs,  unless  there  is  an  agreement 
therefor,  or  special  circumstances  entitling  him  to  such  compen- 
sation.^^   Where  he  renders  special  or  extraordinary  services  or 

9McGibbon    v.    Tarbox,    144    App.  (Mich.)  373 ;  Harrah  v.  Dyer  (Tnd.), 

Div.  837,  129  N.  Y.  S.  594,  98  N.  E.  102  N.  E.  14. 

390,   205    N.    Y.    St.   271;    Painter   v.  12  McGibbon  v.  Tarbox,  205  N.  Y. 

Painter,    133    Cal.    xix,   65    Pac.    135  271,   98   N.   E.   390    (revg.    144   App. 

(1901)  ;    Oliver   v.    Forrester,   96    111.  Div.  837,  129  N.  Y.  S.  594). 

315;  Young  v.  Scoville,  99  Iowa,  177,  i' See  ante  §  352;  Griggs  v.  Clark, 

68  N.  W.  670 ;  Roberts  v.  Hendrick-  23  Cal.  427 ;  Tillotson  v.  Tillotson,  34 

son,    75    Mo.    App.    484 ;    Rowell    v.  Conn.  335 ;  Kimball  v.  Lincoln,  5  III. 

Rowell,    122  Wis.   1,  99  N.  W.   473;  App.  316;  Young  v.  Scoville,  99  Iowa 

Booth   V.    Parkes,    Beatty   444;    Eng.  177,   68   N.   W.   670;    Commonwealth 

Partnership  Act  (1890),  §  29  (2).  v.   Bracken    (Ky.),  2>2  S.  W.  609,  17 

1"  Goodburn  v.  Stevens,  1  Md.  Ch.  Ky.  L.  785 ;  Coakley  v.  Hazelwood,  21 

420.  Ky.  L.  40,  49  S.  W.   1067;   Smith  v. 

iiMillerd      v.       Ramsdell,       Harr.  Smith,   51    La.   Ann.  72.  24   So.  618; 


859 


ADMINISTRATION    AFTER    DEATH 


§  637 


continues  the  business  for  some  time  with  the  acquiescence  of 
the  deceased  partner's  relatives,  or  under  order  of  court,  there 
may  be  a  right  to  compensation."  The  old  English  rule,  as  given 
by  Mr.  Lindley^^'  gave  the  right  to  the  surviving  partner  to 
collect  from  the  firm  for  his  services  in  carrying  on  the  business 
for  the  benefit  of  the  deceased  partner's  estate,  unless  such  sur- 
viving partner  was  also  an  executor,  in  which  case  he  could  not 
so  collect.  In  most  American  states  now  a  surviving  partner 
who  is  also  the  deceased  partner's  executor  can  not  recover  com- 


Sangston  v.  Hack,  52  Md.  173 ;  Por- 
ter V.  Long,  124  Mich.  584,  83  N.  W. 
601 ;  Loomis  v.  Armstrong,  49  Mich. 
521,  14  N.  W.  505 ;  Scudder  v.  Ames, 
89  Mo.  496,  14  S.  W.  525;  Gregory 
V.  Menefee,  83  Mo.  413 ;  Burgess  v. 
Badger,  83  Hun  488,  31  N.  Y.  S. 
614,  64  N.  Y.  St.  327;  Slater  v. 
Slater,  78  App.  Div.  449,  80  N.  Y.  S. 
363;  Beatty  v.  Wray,  19  Pa.  St.  516, 
57  Am.  Dec.  677;  Piper  v.  Smith, 
1  Head  (Tenn.)  93;  Patton  v.  Cal- 
houn, 4  Grat  (Va.)  138;  note  to 
Shields  V.  Fuller,  4  Wis.  102,  65  Am. 
Dec.  293.  See  also  Smith  v.  Knight, 
88  Iowa  257,  55  N.  W.  189;  Colgin 
V.  Cummins,  1  Port.  (Ala.)  148; 
Maynard  v.  Richards,  166  111.  466,  46 
N.  E.  1138,  57  Am.  St.  145  (afifg.  61 
111.  App.  336)  ;  Justice  v.  Lairy,  19 
Ind.  App.  272,  49  N.  E.  459,  65  Am. 
St.  405 ;  Coakley  v.  Hazelwood,  21 
Ky.  L.  40,  49  S.  W.  1067;  Hite  v. 
Hite,  1  B.  Mon.  (Ky.)  177;  Roberts 
V.  Hendrickson,  75  Mo.  App.  484; 
Clausen  v.  Puvogel,  114  App.  Div. 
455,  100  N.  Y.  S.  49;  Slater  v.  Slater, 
78  App.  Div.  449,  80  N.  Y.  S.  363 
(judgment  mod.  on  another  point  in 
175  N.  Y.  143,  a  N.  E.  224,  61  L.  R. 
A.  796,  96  Am.  St.  605)  ;  Ames  v. 
Downing,  1  Bradf.  Sur.  (N.  Y.) 
321 ;  McCullough  v.  Barr,  145  Pa.  St. 
459,  22   Atl.   962;    Brown   v.   McFar- 


land,  41  Pa.  St.  129,  80  Am.  Dec. 
598;  Robertson  v.  Schwenk,  18  Pa. 
Co.  Ct.  577;  Galbraith's  Estate,  12 
Phila.  (Pa.)  20;  Condon  v.  Calla- 
han,   115   Tenn.   285,   89   S.   W.   400, 

I  L.  R.  A.  (N.  S.)  643,  112  Am. 
St.  833 ;  Godfrey  v.  Templeton,  86 
Tenn.  161,  6  S.  W.  47;  Berry  v.  Jones, 

II  Heisk.  (Tenn.)  206,  27  Am.  Rep. 
742 ;  Frazier  v.  Frazier,  11  Va.  775 ; 
Lennig  v.  Lennig,  11  W.  N.  C.  18. 

14  McGibbon  v.  Tarbox,  144  App, 
Div.  837,  129  N.  Y.  S.  594,  205  N.  Y. 
271,  98  N.  E.  390;  Peck  v.  Knapp, 
137  N.  Y.  S.  70;  Painter  v.  Painter 
(Cal.),  Z^  Pac.  865;  Griggs  v.  Clark, 
23  Cal.  427;  Jones  v.  Marshall,  24 
Idaho  678,  135  Pac.  841 ;  Maynard  v. 
Richards,  166  111.  466,  46  N.  E.  1138, 
57  Am.  St.  145 ;  Harrah  v.  Dyer  (Ind. 
App.),  96  N.  E.  41;  Hite  v.  Hite,  1 
B.  Mon.  (Ky.)  177;  Hancock  v.  Han- 
cock, 24  Ky.  L.  664,  69  S.  W.  757; 
Schenkl  v.  Dana,  118  Mass.  236; 
Royster  v.  Johnson,  12>  N.  Car.  474; 
Cameron  v.  Francisco,  26  Ohio  St. 
190;  In  re  Zell's  Appeal,  126  Pa.  St. 
329,  17  Atl.  647;  Evans  v.  Weather- 
head,  24  R.  I.  394,  53  Atl.  286;  God- 
frey V.  Templeton,  86  Tenn.  161,  6 
S.  W.  47;  Newell  v.  Humphrey,  Z7 
Vt.  265;  Hanks  v.  Wilcox,  2  Haw. 
509. 

1^  Lindley  Partnership,  593. 


§  6^7 


LAW    OF    PARTNERSHIP 


860 


pensation  for  winding  up  the  business/*'  A  California  case" 
holds  that  a  surviving  partner,  who  has  conducted  the  business 
for  a  considerable  time  after  the  death  of  his  copartner,  and 
such  continuance  has  been  advantageous,  is  entitled  to  compensa- 
tion for  his  services,  which  shall  be  deducted  from  the  profits 
before  division  of  the  same.  The  financial  result  of  the  surviving 
partner's  activities  does  not,  however,  necessarily  determine  the 
question  as  to  his  right  to  receive  compensation  for  his  services/® 
It  is  also  said  that  in  the  case  of  a  nontrading  partnership,  such 
as  one  between  attorneys,  the  rule  as  to  noncompensation  for 
services  of  a  surviving  partner  should  not  apply,  as  in  case  of  a 
commercial  partnership,^^  but  such  distinction  is  not  upheld  by 
most  cases.'"  And  it  is  often  held  that  a  surviving  partner  who 
continues  the  business  is  not  entitled  to  compensation  where 
there  is  no  express  agreement,"^  though  a  good  many  other  de- 
cisions have  allowed  compensation  to  him  where  the  continuation 
of  the  business  was  profitable.""     Nor  is  compensation  usually 


"Terrell  v.  Rowland,  86  Ky.  67, 
4  S.  W.  825,  9  Ky.  L.  258;  Scudder 
V.  Ames,  89  Mo.  496,  14  S.  W.  525; 
Roberts  v.  Hendrickson,  75  Mo.  App. 
484;  In  re  Tutt,  41  Mo.  App.  662; 
Matter  of  Dummett,  38  Misc.  477, 
77  N.  Y.  S.  1118;  In  re  Harris,  4 
Dem.  Sur.  (N.  Y.)  463,  1  N.  Y.  St. 
331. 

1'  Griggs  V.  Clark,  23  Cal.  427.  See 
also  Wood  V.  Wood,  26  Barb.  (N.  Y.) 
356. 

18  Lee  V.  Dolan,  12  Stew.  (N.  J.) 
193. 

19  Sterne  v.  Goep,  20  Hun  396  (affd. 
84  N.  Y.  641). 

20  Denver  v.  Roane,  99  U.  S.  355, 
25  L.  ed.  476;  Little  v.  Caldwell,  101 
Cal.  553,  36  Pac.  107,  40  Am.  St.  89 ; 
Osment  v.  McElrath,  68  Cal.  466,  9 
Pac.  731,  58  Am.  Rep.  17;  Justice 
V.  Lairy,  19  Ind.  App.  272,  49  N.  E. 
459,  65  Am.  St.  405;  Starr  v.  Case, 
59   Iowa  491,   13   N.  W.  645;   Lamb 


V.  Wilson,  3  Nebr.  (Unof.)  496,  92 
N.  W.  167.  See  also  Clifton  v.  Clark, 
83  Miss.  446,  36  So.  251,  66  L.  R.  A. 
821,   102  Am.  St.  458. 

21  Kimball  v.  Lincoln,  5  111.  App. 
316  (affd.  99  111.  578)  ;  Young  v.  Sco- 
ville,  99  Iowa  177,  68  N.  W.  670; 
Smith  V.  Smith,  51  La.  Ann.  72,  24 
So.  618;  In  re  Taft,  55  Hun  603,  8  N. 
Y.  S.  282,  28  N.  Y.  St.  315,  5  Silv. 
370;  Buford  v.  Neely,  17  N.  Car. 
481 ;  Cameron  v.  Francisco,  26  Ohio 
St.  190;  Beatty  v.  Wray,  19  Pa.  St. 
516,  57  Am.  Dec.  677;  Godfrey  v. 
Templeton,  86  Tenn.  161,  6  S.  W.  47 ; 
Newell  V.  Humphrey,  Z7  Vt.  265; 
Patton  V.  Calhoun,  4  Grat.  (Va.) 
138;  In  re  Aldridge  (1894),  2  Ch.  97. 

22  Yates  V.  Finn,  L.  R.  13  Ch.  Div. 
839;  Willett  v.  Blanford,  1  Hare 
253 ;  Featherstonhaugh  v.  Turner,  25 
Beav.  382 ;  Griggs  v.  Clark,  23  Cal. 
427;  McElroy  v.  Whitney,  12  Idaho 
512,  88   Pac.  349;  Robinson  v.   Sim- 


861 


ADMINISTRATION    AFTER    DEATH 


§  637 


granted  for  services  rendered  in  completing  firm  contracts,^^  al- 
though under  other  circumstances  where  large  services  were 
entailed,  compensation  has  been  allowed."*  Ordinarily,  compen- 
sation is  not  allowed  where  the  business  is  carried  on  under 
testamentary  direction,"^  except  by  consent  of  the  executors  or 
heirs. -*^  Nor  may  a  surviving  partner  who  is  also  the  executor 
of  the  deceased  partner's  estate  recover  from  the  estate  for 
settling  up  the  business  of  the  firm,-'  though  he  may  recover 
the  statutory  commission  or  allowance  for  administering  the  de- 
ceased's estate.'*  And  it  has  also  been  held  that  a  surviving 
partner  appointed  as  receiver  of  the  business  has  no  right  to 
compensation.'^  Summing  up  the  subject,  "there  is  a  disinclina- 
tion to  allow  pay  to  a  surviving  partner  for  winding  up ;  but  the 
tendency  is  to  deal  with  such  questions  on  their  particular  cir- 


nions,   146  Mass   167,   15   N.   E.   558, 

4  Am.  St.  299;  Godfrey  v.  Temple- 
ton,  86  Tenn.  161,  6  S.  W.  47;  Cam- 
eron V.  Francisco,  26  Ohio  St.  190 ; 
Frazier  v.  Frazier,  11  Va.  775  ;  Rowell 
V.  Rowell,  122  Wis.  1,  99  N.  W.  473. 

23  Little  V.  Caldwell,  101  Cal.  553, 
36  Pac.  107,  40  Am.  St.  89;  Porter 
V.  Long,  124  Mich.  584,  83  N.  W. 
601. 

2*  Justice  V.  Lairy,  19  Ind.  App. 
272,  49  N.  E.  459,  65  Am.  St.  405; 
Schenkl  v.  Dana,  118  Mass.  236; 
Cameron  v.  Francisco,  26  Ohio  St. 
190;  Brown  v.  McFarland,  41  Pa. 
St.  129,  80  Am.  Dec.  598;  Condon  v. 
Callahan,  115  Tenn.  285,  89  S.  W. 
400,  1  L.  R.  A.  (N.  S.)  643,  112  Am. 
St.  833. 

-5  Tillotson  V.  Tillotson,  34  Conn. 
335;  Berry  v.  Folkes,  60  Miss.  576; 
Evans  v.  Weatherhead,  24  R.  I.  394, 
53  Atl.  286. 

26  In  re  Bach,  2  Connoly  Sur.  490, 
12  N.  Y.  S.  712;  Kimball  v.  Lincoln, 

5  111.  App.  316  (afifd.  99  111.  578)  ; 
Barber  v.  Murphy,  23  Ky.  L.  286,  62 
S.  W.  894. 


27  Pickens'  Estate,  14  W.  N.  C. 
407;  Terrell  v.  Rowland,  86  Ky.  57, 
4  S.  W.  825,  9  Ky.  L.  258;  Ames 
V.  Downing,  1  Bradf.  Sur,  (N.  Y.) 
321;  In  re  Harris,  4  Dem.  Sur.  (N. 
Y.)  463;  Dodson  v.  Dodson,  6  Heisk. 
(Tenn.)  110;  Burden  v.  Burden,  1 
Ves.  &  B.  170. 

2s  Gregory  v.  Menefee,  83  Mo. 
413;  Roberts  v.  Hendrickson,  75  Mo. 
App.  484;  In  re  Tutt,  41  Mo.  App. 
662;  Clausen  v.  Puvogel,  114  App. 
Div.  455,  100  N.  Y.  S.  49;  In  re 
Dummett,  38  Misc.  477,  11  N.  Y.  S. 
1118;  In  re  Allen's  Appeal,  125  Pa. 
St.  544,  17  Atl.  453 ;  Beatty  v.  Wray, 
19  Pa.  St.  516,  57  Am.  Dec.  677; 
Frazier  v.  Frazier,  11  Va.  775 ;  Brown 
V.  Tastet,  Jacob  284 ;  Stocken  v.  Daw- 
son, 6  Beav.  371 ;  Cockerell  v.  Barber, 
2   Russ.   Ch.   585. 

29  Berry  v.  Jones,  11  Heisk. 
(Tenn.)  206,  27  Am.  Rep.  742.  See 
also  Lennig  v.  Lennig,  11  W.  N.  C. 
18.  But  compare  Davy  v.  Scarth 
[1906],  1  Ch.  55,  which  allowed  the 
partner  who  acted  as  receiver  an 
agreed  remuneration. 


§  638 


LAW    OF    PARTNERSHIP 


862 


ciimstances  rather  than  by  absolute  rules."""  The  Uniform  Part- 
nership Act  allows  the  surviving  partner  reasonable  compensa- 
tion for  winding  up  firm  affairs.^^ 

§  638.  Continuation  of  business  by  surviving  partner. — 
As  was  stated  in  a  former  section,  a  surviving  partner  has  no 
authority  to  continue  the  business,  but  must  wind  it  up,^^  and 
if  he  does  continue  it  he  is  answerable  for  all  debts  which  he 
incurs,^^  and  for  loss  and  depreciation  thus  occasioned.^*  It  is 
often  provided,  however,  by  the  partnership  articles  that  the 
business  shall  continue  on  the  death  of  a  partner,^^  and  the  pro- 
vision is  often  found  that  the  personal  representatives  or  heirs 
of  the  deceased  may  become  partners,  which,  however,  does  not 
bind  them  to  enter  the  firm,  but  only  gives  them  the  option  of 
so  doing,^*^  and  they  have  a  right  to  refuse  to  enter  the  firm,  even 


30  Thayer  v.  Badger,  171  Mass.  279, 
50  N.  E.  541. 

31  Uniform  Partnership  Act,  § 
18  (f). 

32  Perin  v.  Megibben,  53  Fed.  86, 
13  C.  C.  A.  443 ;  Adams  v.  Ward,  26 
Ark.  135;  McElroy  v.  Whitney,  12 
Idaho  512,  88  Pac.  349;  Remick  v. 
Emig,  42  111.  342;  Powell  v.  North, 
3  Ind.  392,  56  Am.  Dec.  513;  Williams 
V.  Brookline,  194  Mass.  44,  79  N.  E. 
779;  Frey  v.  Eisenhardt,  116  Mich. 
160,  74  N.  W.  501 ;  Stewart  v.  Rob- 
inson, 115  N.  Y.  328,  22  N.  E.  160, 
163,  5  L.  R.  A.  410;  Collender  v. 
Phelan,  79  N.  Y.  366;  Dawson  v. 
Parsons,  21  N.  Y.  S.  212  (afifg.  20  N. 
Y.  S.  65)  ;  Evans  v.  Evans,  9  Paige 
(N.  Y.)  178;  Egberts  v.  Wood,  3 
Paige  (N.  Y.)  517,  24  Am.  Dec.  236; 
Holden  v.  McMakin,  1  Pars.  Eq.  Cas. 
(Pa.)  270;  Weld  v.  Johnson  Mfg. 
Co.,  86  Wis.  552,  57  N.  W.  374; 
Evans  v.  Hughes,  18  Jur.  691 ;  Myers 
v.  Myers,  60  L.  J.  Ch.  311;  Hills  v. 
Reeves,  31  Wkly.  Rep.  209  (aflfg.  30 
Wkly.  Rep.  439).   See  ante  §§  615-618. 


33  Juliand  v.  Watson,  43  N.  Y.  571 ; 
Staats  V.  Howlett,  4  Den.  (N.  Y.) 
559. 

3*  Roberts  v.  Hendrickson,  75  Mo. 
App.  484;  Hooley  v.  Gieve,  9  Abb. 
N.  Cas.  8,  9  Daly  (N.  Y.)  104  (affd. 
82  N.  Y.  625). 

35  Butler  V.  American  Toy  Co.,  46 
Conn.  136;  Rand  v.  Wright,  141  Ind. 
226,  39  N.  E.  447;  Hart  v.  Anger, 
38  La,  Ann.  341;  In  re  Shaw,  81 
Maine  207,  16  Atl.  662;  Edwards  v. 
Thomas,  66  Mo.  468 ;  Stewart  v.  Rob- 
inson, 115  N.  Y.  328,  22  N.  E.  160, 
163,  5  L.  R.  A.  410;  Lane  v.  Arnold, 
99  N.  Y.  648  (revg.  11  Daly  293,  13 
Abb.  N.  Cas.  1Z,  affg.  63  How.  Pr. 
40)  ;  Matter  of  Marx,  106  App.  Div. 
212,  94  N.  Y.  S.  151;  Matter  of 
Laney,  50  Hun  15,  2  N.  Y.  S.  443,  18 
N.  Y.  St.  463  (affd.  119  N.  Y.  607, 
23  N.  E.  1143)  ;  Evans  v.  Watts,  192 
Pa.  St.  112,  43  Atl.  464;  Alexander 
V.  Lewis,  47  Tex.  481 ;  McNeish  v. 
United  States  Hulless  Oat  Co.,  57 
Vt.  316. 

3<'  Louisiana  Bank  v.  Kenner,  1  La. 


863 


ADMINISTRATION    AFTER    DEATH 


638 


if  the  decedent's  estate  becomes  subject  to  damages  for  breach 
of  the  partnership  contract.^^  It  is  also  competent  to  provide  by 
will  for  the  carrying  on  of  a  partnership  business  after  one  part- 
ner's death,^^  or  even  by  parol  agreement  between  the  partners 
while  all  were  living."''  If  the  business  is  continued  by  the  sur- 
viving partner  and  the  representatives  of  the  deceased,  a  new 
firm  is  formed,  it  is  held,  and  it  is  not  merely  a  continuation  of 
the  old.  even  though  authorized  by  the  partnership  agreement  or 
the  deceased  partner's  will.***  It  f ollow^s,  from  the  general  rules 
of  partnership  law  as  to  assumption  of  debts  upon  change  in 
the  membership  of  a  firm,  that  the  new  members  of  the  firm 
are  not  liable  for  the  debts  of  the  old  firm.*^  It  is  said  :*"  "Where 
an  executor  thus  engages  in  carrying  on  the  business,  it  is  usually 
spoken  of  as  a  continuance  of  the  partnership,  but  it  is  incorrect 
to  so  term  it.    It  is  necessarily  the  creation  of  a  new  partnership, 


384;  Wild  v.  Davenport,  48  N.  J.  L. 
129,  7  Atl.  295,  57  Am.  Rep.  552; 
Evans  v.  Watts,  192  Pa.  St.  112,  43 
Atl.  464;  Holland  v.  King,  6  C.  B. 
727,  60  E.  C.  L.  727;  Downs  v.  Col- 
lins, 6  Hare  418,  31  Eng.  Ch.  418,  67 
Eng.  Reprint  1228;  Piggott  v.  Bag- 
ley,  McClell.  &  Y.  569,  29  Rev.  Rep. 
850. 

^'^  Stearns  v.  Inhabitants  of  Brook- 
line  (Mass.),  107  N.  E.  57;  Burwell 
V.  Cawood,  2  How.  (U.  S.)  560,  11 
L.  ed.  378;  Reeve  v.  Lisle  [1902],  A. 
C.  461,  71  L.  J.  Ch.  768;  Downs  v. 
Collins,  6  Hare  418,  31  Eng.  Ch.  418, 
67  Eng.  Reprint  1228 ;  Lancaster  v. 
Allsup,  57  L.  T.  N.  S.  53. 

38  Jones  V.  Walker,  103  U.  S.  444, 
26  L.  ed.  404 ;  Smith  v.  Ayer,  101  U. 
S.  320,  25  L.  ed.  955 ;  Burwell  v.  Ca- 
wood, 2  How.  (U.  S.)  560,  11  L.  ed. 
378;  Andrews  v.  Stinson,  254  111.  Ill, 
98  N.  E.  222 ;  Murphy  v.  Murphy,  217 
Mass.  233,  104  N.  E.  466;  In  re  Al- 
len's Appeal,  125  Pa.  St.  544,  17  Atl. 
453;  see  ante  §  615. 


3^  Stearns  v.  Inhabitants  of  Brook- 
line  (Mass.),  107  N.  E.  57. 

40  Lee  V.  Wimberly,  102  Ala.  539, 
15  So.  444;  Vincent  v.  Martin,  79 
Ala.  540;  Pitkin  v.  Pitkin,  7  Conn. 
307,  18  Am.  Dec.  Ill;  Andrews  v. 
Stinson,  254  111.  HI,  98  N.  E.  222, 
Ann.  Cas.  1913  B,  927;  compare  Rand 
V.  Wright,  141  Ind.  226,  39  N.  E. 
447;  Hornaday  v.  Cowgill,  54  Ind. 
App.  631,  101  N.  E.  1030;  Insley  v. 
Shire,  54  Kans.  793,  39  Pac.  713,  45 
Am.  St.  308;  Ellis  v.  Johnson,  4  Ky. 
L.  (abstract)  991 ;  Mattison  v.  Farn- 
ham,  44  Minn.  95,  46  N.  W.  347; 
Kennedy  v.  Porter,  109  N.  Y.  526,  17 
N.  E.  426,  16  N.  Y.  St.  613;  Matter 
of  Laney,  50  Hun  15.  2  N.  Y.  S.  443 ; 
McGrath  v.  Cowen,  57  Ohio  St.  385, 
49  N.  E.  338;  Wilcox  v.  Derickson, 
168  Pa.  St.  331,  31  Atl.  1080;  Pem- 
berton  v.  Oakes,  4  Russ.  154,  6  L.  J. 
Ch.  35,  4  Eng.  Ch.  154,  38  Eng.  Rep. 
(Reprint)    763. 

*i  See  cases  cited  in  preceding  note. 

42  Mattison  v.  Farnham,  44  Minn. 
95,  46  N.  W.  347, 


§    638  LAW    OF    PARTNERSHIP  864 

in  which  the  executor  takes  the  place  of  the  deceased  partner, 
and  it  is  elementary  law  that  a  person  becoming  a  member  of 
an  existing  firm,  or  forming  a  partnership  with  another  in  the 
latter's  existing  business,  does  not  thereby  become  liable  for  the 
debts  already  incurred,  nor  does  the  new  firm  become  liable  for 
them.  An  agreement,  express  or  implied,  is  necessary  to  create 
such  liability,  not  only  between  the  creditors  and  the  new  firm, 
but  also  between  the  partners."  There  are  some  cases  in  which 
statements  seemingly  opposed  to  the  rule  just  mentioned  are 
found,  but  in  none  of  them  was  the  point  directly  in  dispute,  and 
it  seems  that  the  real  effect  of  the  holding  is  merely  that  there 
is  a  continuing  business,  and  not  that  the  same  partnership  con- 
tinued, and  there  is  no  real  conflict.*^  In  Missouri  a  partner- 
ship business  continued  because  of  a  direction  in  a  will  is  the 
creation  of  a  new  partnership,**  but  if  there  is  a  term  fixed  by 
the  articles  of  partnership  for  the  continuation  of  a  partnership 
after  death  of  a  partner  such  partnership  continues  until  the 
expiration  of  such  fixed  period,  if  it  is  agreed  that  the  partner- 
ship shall  continue.*^  In  New  York,  where  a  deceased  partner's 
interest  was  bequeathed  in  trust  to  be  continued  in  the  partnership 
business,  it  was  held  no  new  firm  was  created,  but  that  the  sur- 
vivors were  to  continue  the  business,  using  the  capital  of  the 
deceased  partner.**'  It  has  been  held  that  a  partner  who  retired 
from  the  firm  prior  to  the  death  of  a  partner,  though  he  did 
not  follow  the  prescribed  method  of  retirement,  yet  is  not  liable 

43  Burwell  v.  Cawood,  2  How.    (U.  Co.,  57  Vt.  316 ;   Davis  v.   Christian, 

S.)    560,    11    L.   ed.   378;    Lincoln   v.  15  Grat.   (Va.)   11. 

Orthwein,   120  Fed.  880,  57  C.  C.  A.  44  Bank  v.  Tracy,  11  Mo.  594 ;  Haw- 

540;    Duffield   v.   Brainerd,   45    Conn,  kins  v.  Quinette,   156  Mo.  App.   153, 

424;    Ferris   v.    Van    Ingen,    110    Ga.  136  S.  W.  246. 

102,  35  S.  E.  347 ;  Schmidt  v.  Archer,  ^s  Edwards     v.     Thomas,    66     Mo. 

113  Ind.  365,  14  N.  E.  543;  Parnell  V.  468;    Hax   v.    Burnes,    98    Mo.    App. 

Thompson,    81    Kans.    119,    105    Pac.  707,  11  S.  W.  928;  Farmers  &c.  Sav. 

502,  ZZ  L.  R.  A.  (N.  S.)  658;  Evans  Inst.  v.   Garesche,  12  Mo.  App.  584. 

V.   Watts,    192    Pa.    St.    112,   43   Atl.  46  Costello   v.   Costello.   209   N.   Y. 

464;  Mason  v.  Slevin,  1  White  &  W.  252,    103   N.   E.   148    (affg.   judgment 

Civ.  Cas.  Ct.  App.  (Tex.)   §  11;  Mc-  152  App.  Div.  280,  137  N.  Y.  S.  132). 
Neish  V.  United  States  Hulless  Oat 


865  ADMINISTRATION    AFTER    DEATH  §    638 

for  debts  contracted  subsequent  to  the  death  of  the  partner, 
since  this  worked  a  dissolution  of  the  old  firm  and  the  creation 
of  a  new  one,  although  the  remaining  partners  continued  the 
business  under  provision  in  the  articles,  that,  "the  law  in  relation 
to  surviving  partners  is  hereby  waived,  and  that  the  business 
shall  be  carried  on  the  same  as  if  such  death  had  not  occurred, 
until  the  expiration  of  the  term  of  partnership."'*^  However, 
the  holdings  as  to  the  formation  of  a  new  firm,  on  continuance 
of  the  business  after  death  of  a  partner,  are  not  fully  supported 
by  cases  which  hold  that  a  provision  in  a  wnll  or  in  partnership 
articles  for  the  partnership  to  continue  for  a  specified  time,  even 
if  one  partner's  death  occurs  before  the  expiration  of  such  time, 
binds  a  deceased  partner's  estate  only  for  the  amount  of  the 
capital  then  in  the  business/^  In  one  of  the  cases  where  there 
was  a  provision  in  the  partnership  articles  that  "the  surviving 
partner  shall  continue  the  business  for  the  unexpired  term,"  it 
was  said  :*^  "It  is  clear  that  partners  can  make  a  valid  and  bind- 
ing agreement  that  in  the  event  of  the  death  of  one  or  more  of 
the  members  of  the  firm,  the  business  shall  be  continued  by  the 
survivor,  employing  for  the  purpose  the  united  capital  which 
had  constituted  the  partnership  effects.  That  is  precisely  what 
we  think  the  contract  of  partnership  in  this  case  contemplated. 
The  result  of  such  agreement  and  direction  is,  that  the  survivor 
can  fasten  no  new  debt  or  liability  on  the  estate  of  the  partner 
not  carried  previously  into  the  adventure  as  part  of  the  stock. 
He  can  use  only  the  partnership  effects  as  they  were  in  the  firm 
when  his  copartner  died.  Over  these,  however,  his  control  is 
unlimited."     And  under  other  provisions  of  partnership  articles 

47Hornaday    v.    Cowgill,    54    Ind.  v.  Robinson,  115  N.  Y.  328,  22  N.  E. 

App.  631,  101  N.  E.   1030.  160,    163,   5   L.   R.   A.  410;    National 

48  Steiner  v.  Steiner  Land  &c,  Co.,  Bank  v.  Bigler,  83  N.  Y.  51 ;  In  re  Tal- 

120  Ala.  128,  26  So.  494 ;  Burwell  v.  mage,  39  App.  Div.  466,  57  N.  Y.  S.  427 

Cawood,  2  How.   (U.  S.)   560,  11  L.  (afifd.  161  N.  Y.  643,  57  N.  E.  1126)  ; 

ed.  378;  Ferris  v.  Van  Ingen,  110  Ga.  Roessler's  Estate,  5  Pa.  Dist.  776,  19 

102,   35    S.   E.   347;    Barber   v.    Mur-  Pa.  Co.  Ct.  161;   Smith  v.  Smith,   13 

phy,   62   S.  W.  894,  23   Ky.   L.  286;  Grant  Ch.  (U.  C.)   81. 
Wild  V.  Davenport,  48  N.  J.  L.  129,        ^o  Vincent  v.   Martin,  79  Ala.  540. 
7  Atl.  295,  27  Am.  Rep.  552 ;  Stewart 


§    639  LAW    OF    PARTNERSHIP  866 

it  has  been  held  that  the  entire  estate  is  chargeable  with  the  debts 
of  the  partnership  incurred  after  his  death. '^'^  If  a  new  firm  is 
organized  and  the  survivor  passes  title  to  the  firm  property  to  it, 
this  extinguishes  his  right  to  such  property  as  surviving  part- 
ner.°^  But  if  the  survivor  merely  mingles  firm  assets  with  his 
own  and  continues  the  business,  the  firm  creditors  have  a  right 
to  share  in  the  entire  assets.^"  A  continuance  of  the  business  by 
one  of  the  surviving  partners  without  authority,  does  not  sub- 
ject the  others  to  liability. ^^  As  was  seen,  a  survivor  who  con- 
tinues the  business  as  such  is  liable  for  all  loss  sustained,^*  and 
must  share  profits  with  the  deceased  partner's  estate. ^^  A  sur- 
viving partner,  who  has  already  accounted  as  such,  can  not  be 
compelled  to  make  a  further  accounting  as  to  affairs  of  a  new 
firm  formed  by  him  and  the  personal  representatives  of  the  de- 
ceased.^*' 

§  639.  Rights  and  liabilities  of  deceased  partner's  estate, 
his  heirs,  and  personal  representatives,  on  continuation  of 
business. — The  decedent's  estate  is  liable  for  the  surviving 
partner's  acts  in  winding  up  the  firm  business,  if  within  the  scope 
of  his  authority  as  such,"  but  not  for  acts  in  the  incurring  of 

50  Ferris  v.  Van  Ingen,  110  Ga.  102,  Matteson  v.  Nathanson,  38  Mich.  Zll . 
35  S.  E.  347;  Willis  v.  Sharp,  113  N.  «*  Harrah  v.  Dyer.  180  Ind.  229.  102 
Y.  586,  21  N.  E.  705,  4  L.  R.  A.  493 ;  N.  E.  14 ;  Dexter  v.  Dexter.  43  App. 
Laughlin  v.  Lorenz,  48  Pa.  St.  275,  Div.  268,  60  N.  Y.  S.  371;  Booth  v. 
86  Am.  Dec.  592;  Ussery  v.  Crus-  Parks,  1  Molloy  465.  See  ante  §§  615- 
man    (Tenn.    Ch.    App.),    47    S.    W.  618. 

567  (1898).  ssHarrah  v.  Dyer.  180  Ind.  229.  102 

51  Lee  V.  Wimberly,  102  Ala.  539,  N.  E.  14 ;  Bell  v.  McCoy,  136  Mo.  552. 
15  So.  444;  Stanford  v.  Lockwood,  38  S.  W.  329;  In  re  Welch,  11  Misc. 
95  N.  Y.  582.  427,  137  N.  Y.  S.  941 ;  Yates  v.  Finn, 

52Moyers    v.    Cummings,    17    App.  13  Ch.  D.  839,  49  L.  J.  Ch.   188,  28 

Cas.    (D.    C.)    269;    Bollenbacher    v.  Wkly.  Rep.  387;  Clements  v.  Hall,  2 

First  Nat.  Bank,  8  Ind.  App.   12,  35  DeG.  &  J.  173,  4  Jur.    (N.  S.)   494; 

N.    E.    403;    Tufts    v.    Latshaw,    172  Townend  v.  Townend,  1  Gififord  201, 

A'lo.   359,   72    S.   W.   679;    Hooley   v.  5  Jur.   (N.  S.)   506. 

Gieve,  82  N.  Y.  625   (afifg.  9  Abb.  N.  so  Andrews  v.  Stinson,  254  111.  Ill, 

Cas.    8,    9   Daly    104);    Spaulding   v.  98   N.   E.  222;    Stinson   v.   Andrews, 

Stubbings,    86   Wis.    255,    56    N.   W.  166  111.  App.  92.    See  ante  §  631,  post 

469,  39  Am.  St.  888;  Ex  parte  Har-  §  641. 

per,  1   DeG.  &  J.  180.  s^  Mason    v.    Tiffany,    45    111.    392; 

53  Cooper  V.  Burns,  6  La.  Ann.  739;  McGill  v.  McGill,  2  Mete.  (Ky.)  258; 


867 


ADMIXISTKATIOX    AFTER    DEATH 


§  639 


new  obligations.^^  Only  the  share  of  the  deceased  partner's 
estate  which  was  in  the  firm  at  his  death  will  be  liable  for  acts 
of  the  executor  in  continuing  the  business  under  the  partnership 
articles  or  will,^-^  unless  it  is  clearly  provided  that  the  entire 
estate  shall  be  liable. ^'^  The  personal  representative  of  the  de- 
ceased is  not  personally  liable  for  debts,  on  the  continuance  of 
the  business  by  the  surviving  partner,  unless  he  becomes  a  part- 
ner,"°  and  in  such  event,  if  authorized  by  the  deceased  to  become 
a  partner,  he  can  require  indemnity  from  the  estate  to  the  ex- 
tent of  the  decedent's  interest  in  the  partnership.*'^     A  personal 


Hawk  V.  Johnson,  3  Sad.  (Pa.)  511, 
6  Atl.  725;  Winter  v.  Innes,  2  Jur. 
981,  4  Myl.  &  C.  101 ;  Sleech's  Case, 
1  Meriv.  539,  15  Rev.  Rep.  155;  De- 
vaynes  v.  Noble,  2  Russ.  &  M.  495 ; 
Daniel  v.  Cross,  3  Ves.  Jr.  277,  3  Rev. 
Rep.  94. 

^sPyke  V.  Searcy,  4  Port,  (Ala.) 
52 ;  Oliver  v.  Forrester,  96  111.  315 
(revg.  1  111.  App.  259)  ;  Stanwood  v. 
Owen,  14  Gray  (Mass.)  195;  Citi- 
zens' Mut.  Ins.  Co.  v.  Ligon,  59  Miss. 
305;  Stewart  v.  Robinson,  115  N.  Y. 
328,  22  N.  E.  160,  163,  5  L.  R.  A. 
410 ;  Tompkins  v.  Tompkins,  18  S. 
Car.  1 ;  Tootle  v.  Jenkins,  82  Tex. 
29,  17  S.  W.  519;  Clark  v.  Bickers, 
9  Jur.  678,  14  Sim.  639;  Houlton's 
Case,  1  jMeriv.  615,  15  Rev.  Rep.  169; 
Eng.  Partnership  Act  (1890),  §  36. 

nsa  Vincent  v.  Martin,  79  Ala.  540; 
Jones  V.  Walker,  103  U.  S.  444,  26  L. 
ed.  404;  Smith  v.  Ayer,  101  U.  S. 
320,  25  L.  ed.  955;  Burwell  v.  Ca- 
wood,  2  How.  (U.  S.)  560,  11  L.  ed. 
378;  Pitkin  v.  Pitkin,  7  Conn.  307,  18 
Am.  Dec.  Ill;  Rand  v.  Wright,  141 
Ind.  226,  39  N.  E.  447;  Brasfield  v. 
French,  59  Miss.  632 ;  Stewart  v.  Rob- 
inson, 115  N.  Y.  328,  22  N.  E.  160, 
163.  5  L.  R.  A.  410  (affg.  48  Hun 
327,  2  N.  Y.  S.  309,  21  Abb.  N.  Cas. 
63,    15    N.    Y.    St.    830)  ;    Peters    v. 


Campbell,  2  Ohio  Dec.  526;  Wilcox 
V.  Derickson,  168  Pa.  St.  331,  31  Atl. 
1080. 

^3  Blodgett  V.  American  Nat.  Bank, 
49  Conn.  9 ;  Burwell  v.  Cawood,  2 
How.  (U.  S.)  560,  11  L.  ed.  378; 
Cook  V.  Rogers,  3  Fed.  69 ;  Phillips 
v.  Blatchford,  137  Mass.  510;  Stewart 
V.  Robinson,  115  N.  Y.  328,  22  N.  E. 
160.  163,  5  L.  R.  A.  410;  Davis  v. 
Christian,   15   Grat.    (Va.)    11. 

coAlsop  V.  Mather,  8  Conn.  584,  21 
Am.  Dec.  703 ;  Edgar  v.  Cook,  4  Ala. 
588;  Galbraith  v.  Tracy,  153  111.  54, 
38  N.  E.  937,  28  L.  R.  A.  129,  46 
Am.  St.  867;  Walker  ▼.  Walker,  88 
Ky.  615,  11  S.  W.  718,  11  Ky.  L.  80; 
Owens  V.  Mackall,  33  Md.  382;  City 
Nat.  Bank  v.  Stone,  131  Mich.  588. 
92  N.  W.  99;  Mattison  v.  Farnham, 
44  Minn.  95,  46  N.  W.  347 ;  Avery  v. 
Alyers,  60  Miss.  367;  Citizens'  Mut. 
Ins.  Co.  V.  Ligon,  59  Miss.  305 ;  Wild 
V.  Davenport,  48  N.  J.  L.  129,  7  Atl. 
295,  57  Am.  Rep.  552;  Johnson  v. 
Kellog,  44  Hun  623,  8  N.  Y.  St.  413 ; 
In  re  Talmage,  161  N.  Y.  643,  57  N. 
E.  1126;  Tisch  v.  Rockafellow,  209 
Pa.  St.  419,  58  Atl.  805;  Lovell  v. 
Gibson,  19  Grant  Ch.   (U.  C.)  280. 

•■'1  Burwell  v.  Cawood,  2  How.  (U. 
S.)  560,  11  L.  ed.  378;  In  re  John- 
son, 15  Ch.  D.  548,  49  L.  J.  Ch.  745, 


§    639  LAW    OF    PARTNERSHIP  868 

representative  has  no  right  to  interfere  with  the  winding  up  of 
the  business  by  the  surviving  partner,  unless  there  is  danger 
of  loss  to  the  deceased  partner's  estate  from  mismanagement.^" 
The  heirs  of  an  intestate  partner  and  his  next  of  kin  are  entitled 
to  his  share."^  The  devisees  and  legatees  of  a  testate  partner 
are  entitled  to  receive  his  interest  from  the  surviving  partner.®* 
Even  if  such  interest  remains  as  a  part  of  the  firm  assets  the 
heirs,  devisees  or  legatees  are  not  liable  for  debts  created  by  the 
surviving  partner,®^  and  are  not  liable  for  firm  debts  unless  they 
become  partners. °®  The  provisions  of  the  Uniform  Partnership 
Act  as  to  the  rights  of  the  deceased  partner's  estate  on  continua- 
tion of  the  business  are  the  following:®^  "When  any  partner 
retires  or  dies,  and  the  business  is  continued  under  any  of  the 
conditions  set  forth  in  section  41  (1,  2,  3,  5,  6),  or  section  3S 
(2b),  without  any  settlement  of  accounts  as  between  him  or  his 
estate  and  the  person  or  partnership  continuing  the  business, 
unless  otherwise  agreed,  he  or  his  legal  representative  as  against 
such  persons  or  partnership,  may  have  the  value  of  his  interest 
at  the  date  of  dissolution  ascertained,  and  shall  receive  as  an 
ordinary  creditor  an  amount  equal  to  the  value  of  his  interest 
in  the  dissolved  partnership  with  interest,  or,  at  his  option  or  at 
the  option  of  his  legal  representative,  in  lieu  of  interest,  the  profits 
attributable  to  the  use  of  his  right  in  the  property  of  the  dissolved 
partnership;  provided,  that  the  creditors  of  the  dissolved  part- 
nership as  against  the  separate  creditors,  or  the  representative 
of  the  retired  or  deceased  partner,  shall  have  priority  on  any 
claim  arising  under  this  section  as  provided  by  section  41  (8)  of 
this- act." 

43  L.  T.  Rep.   (N.  S.)   372,  29  Wkly.  Ohio    S.  &  C.   PI.   Dec.  651,   1   Ohio 

Rep.  168.  N.   P.  44;   Dulaney  v.  Elford,  29  S. 

62Huggins  V.  Huggins,  117  Ga.  151,  Car.  19,  6  S.  E.  855. 

43  S.  E.  759.  65  Pitkin  v.  Pitkin,  7  Conn.  307,  18 

63  Robinson  v.  Simmons,  146  Mass.  Am.  Dec.   111. 

167,  15  N.  E.  558,  4  Am.  St.  299.  "^  Frazer    v.    Howe,    106    111.    563 ; 

64  Jones  V.  Walker,  103  U.  S.  444,     Nave  v.  Sturges,  5  Mo.  App.  557. 

26  L.  ed.  404;   Procter  v.  Procter,  1         c?  Uniform   Partnership   Act,    §  42. 


869  ADMINISTRATION  AFTER  DEATH  §  640 

§  640.  Executors  of  deceased  partners. — As  a  general 
rule,  executors  of  a  deceased  partner  do  not  become  partners  in 
the  firm.  It  has  been  held,  however,  that  where  the  articles  of 
partnership  provide  that  on  the  death  of  a  partner  his  executor 
or  personal  representative  or  some  other  person  shall  be  entitled 
to  the  place  of  the  deceased  partner  in  the  firm,  with  the  capital 
of  the  deceased  partner  in  the  firm  business,  this  is  binding  upon 
the  surviving  partner,  but  optional  with  the  executor."^  This, 
however,  depends  almost  wholly  upon  the  contract  of  partner- 
ship, and  if  the  partnership  articles  provide  absolutely  that  the 
deceased  partner's  capital  shall  remain  in  the  business  for  the 
full  term  of  the  partnership,  then  this  is  binding  both  upon  the 
surviving  partner  and  upon  the  executor.  The  general  rule  may 
be  stated,  that  the  executor  does  not,  by  reason  of  his  office 
alone,  become  a  partner  in  the  late  partnership,  nor  is  he,  in 
most  jurisdictions,  entitled  to  administer  the  assets,  but  it  is 
equally  well  established  that  he  so  far  succeeds  to  the  rights  of 
his  decedent  as  to  have  the  right  to  an  accounting  in  the  interest 
of  the  estate  of  the  deceased  partner,  from  the  surviving  part- 
j^gj._68a  -jYiQ  representative  of  the  deceased  partner  may  invoke 
the  aid  of  a  court  of  equity  in  enforcing  their  rights  to  a  proper 
account  from  the  surviving  partner,  and  in  compelling  him  to 
distribute  the  deceased  partner's  interest  in  the  firm  to  the  parties 
entitled  thereto,  including  creditors  of  the  firm.*'''  Whenever 
all  debts  of  the  firm  are  paid,  the  executors  of  a  deceased  partner 
have  the  right  to  have  the  assets  turned  into  money,  if  possible, 
and  to  have  the  share  of  the  deceased  partner  turned  over  to 
them/°  Of  course,  if  it  is  impossible  or  impracticable  to  have 
the  goods  turned  into  money,  the  executor  would  still  be  entitled 
to  his  decedent's  share,  in  kind.    As  heretofore  stated,  under  a 

csWild  V.   Davenport,  48  N.  J.  L.  Y.)  517,  24  Am.  Dec.  236;  Freeman  v. 
129,    7    Atl.    295,    57    Am.    Rep.    552  Freeman,  136  Mass.  260. 
(1886).     See  §  158  on  partnership  by  «»  People  v.  White,  11  111.  341 ;  Em- 
representation,  arson  v.  Senter,  118  U.  S.  3,  30  L.  ed. 

csaLindley     Partnership,     pp.     591,  49,  6  Sup.  Ct.  981;  Jones  v.  Dexter, 

592;  Egberts  v.  Wood,  3  Paige   (N.  130  Mass.  380,  39  Am.  Rep.  459. 

TOLindley   Partnership,  p.  592. 


§    641  LAW    OF    TARTNERSIIIP  870 

former  topic,  the  good-will  of  a  partnership  is  an  asset  or  at 
least  may  be  so,  if  salable,  and  in  such  case  must  be  accounted 
for  to  the  estate  of  the  deceased  partner.  While  in  some  juris- 
dictions, under  certain  conditions,  the  surviving  partners  may 
take  the  assets,  or  certain  of  them,  at  an  appraised  valuation,  in 
no  jurisdiction  can  the  executors  or  a  court,  in  the  absence  of  a 
contract  of  partnership,  compel  the  surviving  partners  to  pur- 
chase such  deceased  partners  share,  or  a  part  thereof.'^  An 
executor  assumes,  personally,  in  the  absence  of  instructions  by 
the  deceased,  or  of  the  beneficial  representatives  of  the  deceased, 
the  risk  of  leaving  the  property  of  his  deceased  in  the  firm,  to 
be  used  in  the  firm  as  a  going  concern,  though  an  executor,  as 
such,  does  not,  under  ordinary  circumstances,  become  a  partner 
in  the  firm  of  his  decedent,  yet  he  may  personally  assume  such 
liabilities  by  allowing  the  continuation  of  the  business.  As  Mr. 
Lindley  aptly  says :  "The  position  of  the  executors  of  a  de- 
ceased partner  is,  in  fact,  often  one  of  considerable  hardship  and 
difficulty;  if  they  insist  on  an  immediate  winding  up  of  the  firm, 
they  may  ruin  those  whom  the  deceased  may  have  been  most 
anxious  to  benefit;  whilst  if  for  their  advantage  the  partnership 
is  allowed  to  go  on,  the  executors  may  run  the  risk  of  being 
ruined  themselves."'"  This  was  particularly  so,  as  they  could  not, 
in  case  of  successful  operation,  be  entitled  to  any  part  of  the 
profits,  as  such.  This  difficulty  is  obviated,  to  a  certain  extent, 
where,  as  in  Ohio,  a  receiver  may  be  appointed,  who  works  as  an 
officer  of,  and  subject  to,-  the  court.  A  surviving  partner  may 
also  be  executor  of  his  deceased  partner's  estate,  but  is  handi- 
capped in  the  exercise  of  his  duties,  as  the  two  positions  involve 
different  and  often  conflicting  duties  and  rights."^ 

§  641.  Accounting  by  surviving  partner. — To  wdiatever 
extent  a  surviving  partner  carries  on  the  business,  whether  it  be 
merely  to  finish  existing  contracts,  or  by  virtue  of  the  partner- 
ship articles,  he  must  account  to  the  deceased  partner's  represent- 

"1  Dougherty   v.    Van    Nostrand,    1         ^^  Lindley  Partnership,  p.  593. 
Hoffm.  Ch.  (N.  Y.)  68.  "See  ante  §  633. 


871 


ADMINISTRATION    AFTER    DEATH 


§  642 


atives  for  the  profits/*  For  any  unauthorized  carrying  on  of 
the  business,  these  representatives  have  an  election  to  take  the 
l)rofits,  or  compel  the  survivor  to  pay  interest  on  the  capital  of  the 
deceased  partner/^  Since  the  relationship  between  the  deceased 
partner's  representatives  and  the  surviving  partner  is  a  fiduciary 
one,  he  is  held  to  a  strict  accounting."  But  where  the  surviving 
partner  makes  a  fair  settlement,  all  parties  are  bound,  unless 
there  is  a  mistake/^ 

§  642.  Rights  of  creditors. — Where  the  business  is  carried 
on  after  death  of  a  partner  by  the  surviving  partner  or  a  new  firm 
under  the  Uniform  Partnership  Act,  section  41,  the  creditors  of 
a  dissolved  firm  have  the  same  rights  in  firm  assets  as  the  cred- 
itors of  the  person  or  firm  carrying  on  the  business.  Creditors 
who  have  become  such  after  death  of  the  partner,  as  well  as  cred- 
itors of  the  firm  before  that  time,  have  a  prior  right  in  firm  as- 
sets over  personal  creditors  of  the  surviving  partner.^^  An  hon- 
est and  good-faith  purchase  of  the  assets  of  the  old  firm  by  a 


74Harbster's  Appeal,  125  Pa.  St. 
1,  17  Atl.  204;  De  Haven  v.  Anjer 
(Pa.),  6  Atl.  768,  4  Sad.  183;  Carroll 
V.  Alston,  1  S.  Car.  7;  McClean  v. 
Kennard,  L.  R.  9  Ch.  336,  43  L.  J.  Ch. 
323. 

■^^  McGibbon  v.  Tarbox,  144  App. 
Div.  837,  129  N.  Y.  S.  594;  Clay  v. 
Field,  138  U.  S.  464,  11  S.  Ct.  419, 
34  L.  ed.  1044;  Bernie  v.  Vandever, 
16  Ark.  616;  Huggins  v.  Huggins,  117 
Ga.  151,  43  S.  E.  759;  Douthart  v. 
Logan,  190  111.  243,  60  N.  E.  507 
(afifg.  86  III.  App.  294)  ;  Goodburn 
V.  Stevens,  1  Md.  Ch.  420;  Millerd 
V.  Ramsdell  (Mich.),  Harr.  Z72,;  Beck 
V.  Thompson,  22  Nev.  109,  36  Pac. 
562 ;  Haynes  v.  Brooks,  8  Civ.  Proc. 
(N.  Y.)  106;  In  re  Brown's  Appeal, 
89  Pa.  St.  139;  Franklin  v.  Tonjours, 
1  Tex.  App.  Civ.  Cas.,  §  506;  Brown 
V.  De  Tastet,  1  Jac.  284,  23  Rev.  Rep. 
59. 


76  Hottel  V.  Mason,  16  Colo.  43,  26 
Pac.  335;  Beale  v.  Beale,  116  111.  292, 
5  N.  E.  540,  2  N.  E.  65  (1885)  ;  Mc- 
Laughlin V.  Barnum,  31  Md.  425 ; 
Killefer  v.  McLain,  78  Mich.  249,  44 
N.  W.  405;  Mayson  v.  Beazley,  27 
Miss.  106;  Ogden  v.  Astor,  4  Sandi. 
(N.  Y.)  311;  Ames  v.  Downing,  1 
Bradf.  Sur.  (N.  Y.)  321;  Marshall's 
Estate  (Pa.),  34  Pitts.  Leg.  J.  (O.  S.) 
382. 

''■'■  Blaker  v.  Morse,  60  Kans.  24, 
55  Pac.  274 ;  Joplin  v.  Cordrey,  9  Ky. 
L.  445,  5  S.  W.  397 ;  Reynaud  v.  Pey- 
tavin,  13  La.  121. 

78Filley  V.  Phelps,  18  Conn.  294; 
Ex  parte  Clap,  Fed.  Cas.  No.  2783, 
2  Lowell  168 ;  Washburn  v.  Goodman, 
17  Pick.  (Mass.)  519;  Benson  v.  Ela. 
35  N.  H.  402;  Ex  parte  Butcher,  13 
Ch.  Div.  465,  42  L.  T.  Rep.  (N.  S.) 
299;  Brett  v.  Beckwith,  3  Jur.  (N.  S.) 
3L 


5 — Row.  ON  Partn. — ^VoL.  2 


§    643  LAW    OF    PARTNERSHIP  S72 

new  one,  of  which  the  surviving  partner  is  a  member,  destroys  any 
preference  of  the  creditors  of  the  old  firm  in  such  assets.^**  But 
if  the  new  firm  has  assumed  the  debts  of  the  old,  the  creditors 
of  the  old  and  the  new  are  entitled  in  most  states  to  share  equally 
in  the  assets  of  the  new  firm.^'*  And  it  has  been  held  that  when  the 
survivor  has  formed  a  new  partnership,  which  is  using  the  old 
firm's  assets,  the  creditors  of  the  old  firm  may  have  assets  of  the 
old  which  remain  in  kind  appropriated  to  their  debts  in  prefer- 
ence to  debts  of  the  new  firm.^^  The  rights  of  the  surviving 
partner  in  the  good-will  of  the  firm  and  to  the  firm  name  have 
been  treated  in  a  former  chapter.^' 

§  643.  Accrual  of  actions. — The  Uniform  Partnership  Act 
provides,  the  right  to  an  account  of  his  interest  shall  accrue  to 
any  partner  or  his  legal  representative,  as  against  the  winding 
up  partners  or  the  surviving  partners  or  the  person  or  partnership 
continuing  the  business,  at  the  date  of  dissolution  in  the  absence 
of  agreement  to  the  contrary.^^ 

§  644.  Limitation  of  actions  against  surviving  partner. — 
The  question  of  the  application  of  the  statute  of  limitations  to  a 
surviving  partner's  liability  to  the  representatives  of  a  deceased 
partner,  may  become  an  important  question.  The  general  rule 
of  law  is,  that  the  statute  does  not  run  against  trust  estates  in 
favor  of  the  trustee;  according  to  the  English  law,  the  surviving 
partner  is  not  considered  a  trustee.  In  a  leading  case**  it  was  held 
by  Lord  Westbury  that  an  action  against  the  surviving  partner 
by  the  executor  of  a  deceased  partner  was  barred  by  the  statute, 
upon  the  grounds  that  there  was  no  trusteeship,  "A  source  of 
error,"  said  he,  "in  this  matter  is  the  looseness  with  which  the 

'9  McGinty  v.  Flannagan,  106  U.  S.  Columbus    Watch    Co.    v.    Hodenpyl, 

661,  27  L.  ed.  215,   1    Sup.   Ct.   380 ;  135  N.  Y.  430,  32  N.  E.  239.    See  ante 

Fitzpatrick  v.   Flannagan,   106  U.   S.  §§  534,  557. 

648,  27  L.  ed.  211,  1  Sup.  Ct.  369;  In  ^lEx   parte   Morley,    L.    R.   8   Ch. 

re   Simpson,  L.  R.  9  Ch.  App.  Cas.  1026. 

572.  82  See  ch.  12. 

80  Morgan    v.    Randolph,    73    Conn.  83  Uniform    Partnership   Act,    §   43. 

396,  47  Atl.  658,   51    L.   R.   A.  653;  si  Knox  v.  Gye,  L.  R.  5  H.  L.  656. 


873  ADMINISTRATION    AFTER    DEATH  §    644 

word  'trustee'  is  frequently  used.  The  surviving  partner  is  often 
called  a  'trustee' ;  but  the  term  is  used  inaccurately.  He  is  not  a 
trustee,  either  expressly  or  by  implication.  *  *  *  As  between 
the  express  trustee  and  the  cestui  que  trust,  time  will  not  run; 
but  the  surviving  partner  is  not  a  trustee  in  that  full  and  proper 
sense  of  the  word."  This  view  of  the  case  is  followed  by  some 
American  courts,®^  but  other  American  cases  have  disaffirmed  and 
disapproved  the  English  rule.  In  a  leading  case  in  favor  of  the 
theory  of  trusteeship*"  the  court  said :  "In  equity,  a  surviving 
partner  is  treated  as  a  trustee,  with  the  fiduciary  relation  of  trus- 
tee and  cestui  que  trustent  existing  between  him  and  the  repre- 
sentatives of  the  deceased  partner.  There  is  a  conflict  of  the 
authorities  upon  this  point,  but  in  this  state  (Illinois)  the  law 
is  as  stated."  In  the  same  case  it  is  even  held  that :  "In  the  event 
of  the  death  of  both  the  partners  before  the  settlement  of  the 
partnership  affairs,  the  administrator  of  the  last  survivor  stands 
in  the  shoes  of  his  intestate,  and  he  is  charged  with  the  duty  of 
completing  the  settlement  as  a  trustee,  the  relation  between  him 
and  the  legal  representatives  of  the  partner  first  deceased  being 
that  of  trustee  and  cestui  que  trustent."^^  It  is  difficult  to  see 
why  the  latter  theory  is  not  the  logical  and  correct  one,  and  the 
cases  holding  to  the  English  rule  of  no  trusteeship,  show  that, 
as  a  rule,  they  admit  there  is  a  quasi  trusteeship,  but  refuse  to 
apply  the  strict  rule  of  trusteeship  so  as  to  bar  the  statute  of 
limitations  to  these  cases.  In  Georgia,  where  the  bar  of  the  stat- 
ute is  recognized,  it  has  been  held  that  neither  the  statute  nor 
the  equitable  bar  commences  to  run  in  favor  of  the  surviving 
partner  until  administration  has  been  taken  out  on  the  estate  of 

ssKrueger  v.   Speith,  8  Mont.  482,  son  v.  Swift.  22  S.  Dak.  165,  116  N. 

20  Pac.  664,  3  L.  R.  A.  291 ;  Bush  v.  W.  76 ;  Lindner  v.  Adams  Co.  Bank, 

Clark,  127  Mass.  Ill;  Hogg  v.  Ashe,  49  Nebr.  735,  68  N.  W.  1028  (1896). 
2  N.  Car.  471;  Mutual  Life  Lis.  Co.        §7  citing     Dayton     v.     Bartlett,     38 

V.  Sturges,  33  N.  J.  Eq.  328.  Ohio  St.  357 ;  Thomson  v.  Thomson, 

8«Galbraith    v.    Tracy,    153    111.    54,  1  Bradf.  Sur.  (N.  Y.)  24;  Brooks  v. 

38  N.  E.  937,  28  L.  R.  A.  129,  46  Am.  Brooks,    12    Heisk.    (Tenn.)     12;    17 

St.   867    (1894).     See   also    McPher-  Am.  &  Eng.  Enc.  Law,  1158. 


§    644  LAW    OF    rARTNERSIIIP  874 

the  deceased  partner,®^  and  it  has  also  been  held  by  an  Indiana 
case-''  that  no  liability  attaches  to  the  surviving  partner  until  a 
demand  for  settlement  has  been  made  upon  him  by  the  repre- 
sentative of  the  deceased  partner,  and  refused. 

83  Spann  v.  Fox,  1  Ga.  Dec.  1.  ^^  Anderson   v.   Ackerman,   88   Ind. 

481. 


CHAPTER  XXI 


ACCOUNTING,     SETTLEMENT    AND    DISTRIBUTION 


SECTION 

650.  Dissolution  usually  necessary  to 

accounting  between  partners. 

651.  Accounting  or  action  without  dis- 

solution. 

652.  Accounting  for  secret  profits. 

653.  Particular  cases  on  secret  profits. 

654.  Profits   from  independent  trans- 

actions. 

655.  Accounting  where  partnership  is 

illegal. 

656.  Some  leading  cases  on  account- 

ing where  partnership   is   ille- 
gal. 

657.  Who  may  require  an  accounting. 

658.  Who  must  account. 

659.  What  property  must  be  accounted 

for. 

660.  Good-will  of  firm. 

661.  Other  matters  to  be  included  in 

accounting. 

662.  Distribution,  generally. 

663.  Rules   for  distribution — Uniform 

Partnership  Act. 


SECTION 

664.  Determining  partner's   share — In 

general. 

665.  Discharge  of  partnership  liabili- 

ties. 

666.  Contribution — Repayment  of  ad- 

vances. 

667.  Compensation    for    services    and 

expenses  of  winding  up  busi- 
ness. 

668.  Interest. 

669.  Lien  for  advances  or  balances. 

670.  Apportionment  of  losses. 

671.  Repayment  of  capital. 

672.  Partition  of  assets. 

673.  Division  of  profits. 

674.  Proportionate     share     of      each 

partner  in  profits. 

675.  Private  settlement. 

676.  Assumption    of    firm    debts,    in- 

demnity and  suretyship. 

677.  Settlement  by  arbitration. 


§  650.  Dissolution  usually  necessary  to  accounting  be- 
tween partners. — Owing  to  the  fact  that  each  partner  owes 
liis  copartners  the  duty,  among  others,  of  rendering  an  account 
of  all  matters  touching  the  firm,  which  he  possesses,  at  their  re- 
quest, it  follows  that  a  court  of  equity  will  enforce  this  right, 
should  he  fail  and  refuse  to  render  such  request.  This  right  is 
essential  to  the  relation,  and  is  so  recognized  by  the  courts.  The 
general  rule  is,  that  such  suit  should  only  be  brought  upon  dis- 
solution of  the  firm,  and  not  during  its  continuance,  since  espe- 

875 


§  650 


LAW    OF    PARTNERSHIP 


876 


cially  at  the  time  of  dissolution  is  this  right  of  importance,  and 
at  that  time  each  partner  is  entitled  to  an  accounting/  and  upon 
dissolution,  a  settlement  and  accounting  is  generally  necessary 
before  a  distribution  of  firm  assets  can  be  had,  and  the  rights 
of  the  several  partners  ascertained."  As  said  in  a  leading  case  :^ 
"The  general  rule  is  that  a  court  of  equity,  in  a  suit  by  one  part- 
ner against  another,  will  not  interfere  in  matters  of  internal  regu- 
lation, or  except  with  a  view  to  dissolve  the  partnership  and  by 
a  final  decree  to  adjust  all  its  affairs."*  It  is  not  its  office  'to  enter 
into  a  consideration  of  mere  partnership  squabbles,'^  or  'on  every 
occasion  to  take  the  management  of  every  play-house  and  brew- 
house.'®  If  the  members  of  a  firm  can  not  agree  as  to  the  method 
of  conducting  their  business,  the  courts  will  not  attempt  to  con- 
duct it  for  them.  Aside  from  the  inconvenience  of  constant  in- 
terference, as  litigation  is  apt  to  breed  hard  feelings,  easy  ap- 


1  Rassaert  v.  Mensch,  17  Cal.  App. 
637,  120  Pac.  1072 ;  Zimmerman  v. 
Harding,  227  U.  S.  489,  57  L.  ed.  608, 
33  Sup.  Ct.  387;  Mellor  v.  Smither, 
114  Fed.  116,  52  C.  C.  A.  64;  Hargis 
V.  Campbell,  14  Fla.  27 ;  King  v.  Cour- 
son,  57  Ga.  11 ;  Onstatt  v.  Ogle,  234 
111.  454,  84  N.  E.  1059;  Taylor  v.  Cof- 
fing,  18  111.  422 ;  Simonton  v.  McLain, 
37  La.  Ann.  663 ;  Bruns  v.  Spalding, 
90  Md.  349,  45  Atl.  194,  47  L.  R.  A. 
614;  Maiden  Bridge  v.  Salem  Turn- 
pike &  C.  Bridge  Corp.,  112  Mass. 
152;  Feige  v.  Babcock,  111  Mich.  538, 
70  N.  W.  7;  Reis  v.  Reis,  99  Minn. 
446,  109  N.  W.  997;  Lord  v.  Hull, 
178  N.  Y.  9,  70  N.  E.  69,  102  Am. 
St.  484;  Kelly  v.  Kelly,  3  Barb.  (N. 
Y.)  419;  Bradly  v.  Jennings,  201  Pa. 
473,  51  Atl.  343. 

2  Chandler  v.  Wynne,  85  Ala.  301, 
4  So.  653;  Gleason  v.  White,  34  Cal. 
258 ;  Rassaert  v.  Mensch,  17  Cal.  App. 
637,  120  Pac.  1072;  Carter  v.  Brad- 
ley, 58  111.  101 ;  Derby  v.  Gage,  38  111. 
27;  Thompson  v.  Lowe,  111  Ind.  272, 
12  N.  E.  476;   Leonard  v.   Boyd,  24 


Ky.  L.  1320,  71  S.  W.  508;  Reis  v. 
Reis,  99  Minn.  446,  109  N.  W.  997; 
Scott  V.  Caruth,  50  Mo.  120;  Gale  v. 
Sulloway,  62  N.  H.  57 ;  Hill  v.  Beach, 
12  N.  J.  Eq.  31 ;  Sellis  Cas,  4  Abb.  Pr. 
(N.  Y.)  272;  McRae  v.  McKenzie, 
22  N.  Car.  232 ;  Lorenz  v.  Reynolds, 
7  Ohio  N.  P.  17;  Singizer's  Appeal, 
28  Pa.  St.  524;  Hines  v.  Dean,  1 
White  &  W.  Cir.  Cas.  Ct.  App. 
(Tex.),  §  690;  Kilbreth  v.  Root,  33 
W.  Va.  600,  11  S.  E.  21;  Sprout  v. 
Crowley,  30  Wis.  187;  Armstrong  v. 
Hollen,  58  Ore.  534,  115  Pac.  423; 
Ex  parte  Harper,  1  DeG.  &  J.  180, 
2  Jur.   (N.  S.)   724. 

3  Lord  V.  Hull,  178  N.  Y.  9,  70  N. 
E.  69,  102  Am.  St.  484. 

*  Citing  Story  Partnership,  §  229 ; 
Lindley  Partnership,  p.  567 ;  Gow 
Partnership,  p.  114;  Parsons  Partner- 
ship, §  206;  Bates  Partnership,  §  910; 
Collj^er  Partnership  §  236. 

^  Citing  Wray  v.  Hutchinson,  2  Myl. 
&  K.  235,  238. 

^  Citing  Carlen  v.  Drury,  1  Ves.  & 
B.  154,  158. 


877  ACCOUNTING,    SETTLEMENT,    DISTRIBUTION  §    651 

peals  to  the  courts  to  settle  the  differences  of  a  going  concern 
would  tend  to  do  away  with  mutual  forbearance,  foment  discord 
and  lead  to  dissolution.  It  is  to  the  interest  of  the  law  of  part- 
nership that  frequent  resort  to  the  courts  by  copartners  should 
not  be  encouraged  and  they  should  realize  that,  as  a  rule,  they 
must  settle  their  own  differences  or  go  out  of  business.  As  a 
learned  writer  has  said:  *A  partner  who  is  driven  to  a  court  of 
equity  as  the  only  means  by  which  he  can  get  an  accounting  from 
his  copartners,  may  be  supposed  to  be  in  a  position  which  will  be 
benefited  by  a  dissolution ;  in  other  words,  such  a  partnership  as 
that  ought  to  be  dissolved.'^  'If  the  continuance  of  the  partnership 
is  contemplated,'  as  another  commentator  has  said,  'or  if  an  ac- 
counting of  only  part  of  the  partnership  concerns  is  allowed,  no 
complete  justice  can  be  done  between  the  partners,  and  the  fluc- 
tuations of  a  continuing  business  w411  render  the  accounting 
which  is  correct  to-day,  incorrect  to-morrow,  and  to  entertain 
such  bills  on  behalf  of  a  partner  would  involve  the  court  in  in- 
cessant litigation,  foment  disputes,  and  needlessly  drag  partners 
not  in  fault  before  the  public  tribunals.'^  Judge  Story  declared 
that  *a  mere  fugitive,  temporary  breach,  involving  no  serious 
evils  or  mischief,  and  not  endangering  the  future  success  and 
operations  of  the  partnership,  will  therefore,  not  constitute  any 
case  for  equitable  relief.  *  *  *  It  is  very  certain  that,  pend- 
ing the  partnership,  courts  of  equity  w^ill  not  interfere  to  settle 
accounts  and  set  right  the  balance  between  the  partners,  but  await 
the  regular  winding  up  of  the  concern.'  "* 

§  651.  Accounting  or  action  without  dissolution. — "While 
a  forced  accounting  without  a  dissolution  is  not  impossible  it  is 
by  no  means  a  matter  of  course,  for  facts  must  be  alleged  and 
proved  showing  that  it  is  essential  to  the  continuance  of  the  busi- 
ness, or  that  some  special  and  unusual  reason  exists  to  make  it 
necessary.  Thus,  Mr.  Lindley  *  *  *  mentions  three  classes 
of  cases  as  exceptions  to  the  general  rule:  (1)  Where  one  part- 

^  Citing    Parsons     Partnership     (4        » Citing  2  Bates  Partnership,  §  910. 
ed.),  §  206.  9  Story  Partnership,  §§  225,  229. 


§651  LAW    OF    rARTNERSIIIP  878 

ner  has  sought  to  withhold  from  his  copartner  the  profits  arising 
from  some  secret  transaction;  (2)  where  the  partnership  is  for  a 
term  of  years  still  unexpired,  and  one  partner  has  sought  to 
exclude  or  expel  his  copartner  or  drive  him  to  a  dissolution; 
(3)  where  the  partnership  has  proved  a  failure,  and  the  partners 
are  too  numerous  to  be  made  parties  to  the  action  and  a  limited 
account  will  result  in  justice  to  them  all."^^  This  second  ex- 
ception probably  would  not  be  recognized  in  those  American  jur- 
isdictions which  hold  that  a  partnership  for  a  fixed  term  may  be 
dissolved  at  any  time."  Under  the  Uniform  Partnership  Act, 
any  partner  has  the  right  to  a  formal  account  as  to  partnership 
affairs,  (a)  if  he  is  wrongfully  excluded  from  the  partnership 
business  or  possession  of  its  property  by  his  copartners,  (b)  if  the 
right  exists  under  the  terms  of  any  agreement,  (c)  as  provided  by 
section  21,  that  is  for  profits  derived  by  a  partner  from  firm  trans- 
actions without  the  consent  of  the  other  partners,  or  from  any  use 
of  firm  property  by  a  partner,  (d)  whenever  other  circumstances 
make  it  just  and  reasonable/^  It  seems  that  these  provisions  do 
not  necessarily  imply  that  dissolution  shall  accompany  account- 
ing. It  has  been  held^^  that,  in  case  there  is  a  clause  in  the  part- 
nership agreement,  providing  that  settlements  shall  be  made  dur- 
ins:  the  continuance  of  the  firm,  one  member  of  the  firm  mav 
commence  an  action  for  such  accounting  against  his  copartner, 
even  though  no  dissolution  of  the  firm  is  asked  for,  and  the  firm 
continue  operation.  This  is  perhaps  not  so  much  of  an 
exception  to  the  general  rule,  as  an  acknowledgment  of  it,  and 
an  express  provision  in  the  partnership  agreement,  giving  powers 
by  contract  which  the  law  does  not,  of  itself,  allow.  Real  excep- 
tions have  been  recognized,  however,  in  some  jurisdictions,  as, 
for  instance,  if  one  partner  wrongfully  attempts  to  exclude  his 
copartner  from  the  firm,^*  or  where  one  member  of  the  firm  is 
wrongfully  withholding  from  the  firm  secret  profits  which  he  is 

10  Lord  V.  Hull,  178  N.  Y.  9,  70  N.  i-"- Patterson   v.   Ware,    10   Ala.   444 
E.  69,  102  Am.  St.  484.  0846). 

11  See  ch.  19,  §  576.  ^*  Richards  v.  Davies,  2  R.  &  M.  347 

12  Uniform  Partnership  Act,  §  22.  (1831). 


879 


ACCOUNTING,    SETTLEMENT,    DISTRIBUTION  §651 


receiving,  and  to  which  the  firm  is  entitled. ^^  Nor  can  an  action 
for  contribution  be  maintained  by  a  partner  against  another  until 
after  settlement,^"  with  certain  exceptions,  such  as  where  one 
partner  has  agreed  to  pay  the  other  a  sum  which  was  paid  out  for 
the  firm;^^  or  where  there  is  a  single  item  in  the  accounting  un- 
adjusted;^^ or  where  the  adjustment  of  a  matter  does  not  involve 
an  accounting;"  or  upon  an  agreement  for  contribution  to  firm 
capital  ;■"  or  where  a  settlement  has  been  agreed  on  privately."^ 
These  are  all  matters  which  can  be  separated  from  partnership 
affairs  in  general.  The  subject  of  actions  between  partners  will 
be  treated  in  a  subsequent  chapter,  each  of  these  rights  to  sue 
without  an  accounting  being  treated  specifically. 


15  Sanger  v.  French,  157  N.  Y.  213, 
51  N.  E.  979  (1898). 

16  De  Jarnette  v.  McQueen,  31  Ala. 
230,  68  Am.  Dec.  164 ;  Riggs  v.  Stew- 
art, 2  Cranch  C.  C.  171,  Fed.  Cas.  No. 
11830;  Halderman  v.  Halderman,  Fed. 
Cas.  No.  5909,  Hempst.  (U.  S.)  559; 
Bishop  V.  Bishop,  54  Conn.  232,  6  Atl. 
426;  Bracken  v.  Kennedy,  4  111.  558; 
Crossley  v.  Taylor,  83  Ind.  Z2i7 ;  War- 
ring V.  Arthur,  98  Ky.  34,  32  S.  W. 
221,  17  Ky.  L.  605;  Theus  v.  Armi- 
stead,  116  La.  795,  41  So.  95;  Phillips 
V.  Blatchford,  137  Mass.  510;  Mc- 
Gunn  V.  Hanlin,  29  Mich.  476;  Morin 
V.  Martin,  25  Mo.  360 ;  Foss  v.  Dawes, 
72  Nebr.  608,  101  N.  W.  237,  102  N. 
W.  609;  Clayton  v.  Davett  (N.  J.), 
38  Atl.  308  (1897)  ;  Gridley  v.  Dole, 
4  N.  Y.  486;  McDonald  v.  Holmes, 
22  Ore.  212,  29  Pac.  735 ;  Murray  v. 
Herrick,  171  Pa.  St.  21,  32  Atl.  1125; 
Eddins  v.  Menefee  (Ch.  App.  Tenn.), 
54  S.  W.  992  (1899)  ;  Lockhart  v. 
Lytle,  47  Tex.  452 ;  Compton  v.  Thorn, 
90  Va.  653,  19  S.  E.  451;  Smith  v. 
Zumbro,  41  W.  Va.  623,  24  S.  E.  653 ; 
Sadler  v.  Hinxman,  5  B.  &  Ad.  936. 

17  Lyon  V.  Malone,  4  Port.  (Ala.) 
497;  Hunt  v.  Rogers,  7  Allen  (Mass.) 
469,    83   Am.    Dec.   704;    Gilmore   v. 


Ham,  133  N.  Y.  664,  31  N.  E.  624 
(affg.  61  Hun  1,  15  N.  Y.  S.  391,  21 
N.  Y.  Civ.  Proc.  102,  39  N.  Y.  St. 
664)  ;  Halsted  v.  Schmelzel,  17  Johns. 
(N.  Y.)  80;  Coleman  v.  Coleman,  12 
Rich.  (S.  Car.)  183;  Long  v.  Gar- 
nett,  59  Tex.  229.    See  post  §  746. 

isjepsen  v.  Beck,  78  Cal.  540,  21 
Pac.  184;  Clarke  v.  Mills,  36  Kans. 
393,  13  Pac.  569 ;  Clouch  v.  Moyer,  23 
Kans.  404;  Wheeler  v.  Arnold,  30 
Mich.  304 ;  Brown  v.  Agnew,  6  Watts 
&  S.  (Pa.)  235.     See  post  §  754. 

19  Downs  V.  Jackson,  2,2>  111.  464,  85 
Am.  Dec.  289;  Lambert  v.  Ingram, 
15  B.  Mon.  (Ky.)  265;  Power  v.  Rees, 
189  Pa.  St.  496,  42  Atl.  26;  Eakin  v. 
Knox,  6  S.  Car.  14 ;  Edwards  v.  Rem- 
ington, 51  Wis.  336,  8  N.  W.  193; 
Batard  v.  Hawes,  3  C.  &  K.  277,  2 
El.  &  Bl.  287 ;  Edger  v.  Knapp,  1  D. 
&  L.  7Z,  5  M.  &  G.  76Z;  Osborne  v. 
Harper,  5  East  225.     See  post  §  745. 

20  Bumpass  v.  Webb,  1  Stew.  (Ala.) 
19,  18  Am.  Rep.  34 ;  Tyrrell  v.  Wash- 
burn, 6  Allen  (Mass.)  466;  Sprout  v. 
Crowley,  30  Wis.  187;  Brown  v.  Tap- 
scott,  9  L.  J.  Exch.  139,  6  M.  &  W. 
119.    See  post  §  749. 

2iReis  V.  Reis,  99  Minn.  446,  109 
N.  W.  997. 


§  652 


LAW    OF    PARTNERSHIP 


880 


§  652.  Accounting  for  secret  profits. — As  was  previously 
seen,  a  partner  has  no  right  to  make  a  secret  profit  by  the  use  of 
firm  property  or  by  deahngs  contrary  to  the  duty  which  he  owes 
the  partnership.  The  observance  of  the  utmost  good  faith  be- 
tween partners  is  of  the  most  vital  importance,  hence  one  partner 
may  not  receive  any  secret  profits  in  firm  transactions,  and  he 
may  be  held  to  account  therefor.""  So  a  partner  who  uses  part- 
nership money  or  property  in  transactions  for  himself  must  ac- 
count to  the  firm  for  the  profits  thus  made.'^  The  same  rule  ap- 
plies when  he  engages,  for  his  own  benefit,  in  transactions  within 
the  scope  of  the  firm  business,  and  he  must  account  for  profits 
thus  made.-^  This  rule  of  accounting  for  secret  profits  applies  to 
commissions  obtained  by  a  partner  on  goods  sold  by  the  firm;^^ 


22  See  ante  §§  389,  391. 

23  Kelley  v.  Greenleaf,  3  Story  (U. 
S.)  93,  Fed.  Cas.  No.  76S7;  Warren 
V.  Burnham,  32  Fed.  579 ;  Roberts 
V.  Totten,  13  Ark.  609;  Llewelyn  v. 
Levi,  157  Cat.  31,  106  Pac.  219; 
Painter  v.  Wilcox,  52  Colo.  639,  125 
Pac.  503 ;  Deaner  v.  O'Hara,  36  Colo. 
476,  85  Pac.  1123;  Solomon  v.  Solo- 
mon, 2  Ga.  18 ;  Love  v.  Carpenter,  30 
Ind.  284;  Levi  v.  Karrick,  13  Iowa 
344;  Edelen  v.  Hagan,  7  S.  W.  251, 
9  Ky.  L.  862 ;  Pomeroy  v.  Benton,  57 
Mo.  531 ;  Brown  v.  Schackelford,  53 
Mo.  122 ;  Dale  v.  Hogan,  39  Mo.  App. 
646;  Herrick  v.  Ames,  8  Bosw.  (N. 
Y.)  115;  Stoughton  v.  Lynch,  1 
Johns.  Ch.  (N.  Y.)  467;  Lay  v. 
Emery,  8  N.  Dak.  515,  79  N.  W. 
1053 ;  Hurst  v.  Brennen,  239  Pa.  231, 
86  Atl.  783,  Ann.  Cas.  1914  D,  428. 

24  Russell  v.  Austwick,  1  Sim.  52, 
27  Rev.  Rep.  157 ;  Burton  v.  Wookey, 
6  Madd.  (Eng.)  367;  Livingston  v. 
Livingston,  26  Ont.  L.  246;  Wheeler 
V.  Sage,  1  Wall.  (U.  S.)  518,  17  L. 
ed.  646;  Caddie  v.  Mann,  147  Fed. 
960  (revd.  on  other  grounds  158  Fed. 
42,   88   C.    C.   A.    1);    Williamson   v. 


Monroe,  101  Fed.  322;  Miller  v. 
O'Boyle,  89  Fed.  140;  Zimmerman  v. 
Huber,  29  Ala.  379;  Boqua  v.  Mar- 
shall, 88  Ark.  Z72,,  114  S.  W.  714; 
Grafton  v.  Paine,  7  App.  Cas.  (D.  C.) 
255;  Kilbourn  v.  Latta,  5  Mackey  (D. 
C.)  304,  60  Am.  Rep.  2,7 2>;  Wiggins  v. 
Markham,  131  Iowa  102,  108  N.  W. 
113;  Anderson  v.  Whitlock,  2  Bush 
(Ky.)  398,  92  Am.  Dec.  489;  White 
v.  Jouett,  147  Ky.  197,  144  S.  W.  55 
Todd  V.  Rafiferty,  30  N.  J.  Eq.  254 
Weston  V.  Ketcham,  39  Super.  Ct.  (N 
Y.)  54;  Bast's  Appeal,  70  Pa.  St 
301 ;  Edwards  v.  Johnson,  90  S.  Car 
90,  72  S.  E.  638;  Henson  v.  Byrne 
(Tex.),  41  S.  W.  494;  Burns  v.  Rus- 
sell (Tex.),  146  S.  W.  707;  Yost  v. 
Critcher,  112  Va.  870,  72  S.  E.  594; 
Miller  v.  Ferguson,  110  Va.  217,  65  S. 
E.  562,  28  L.  R.  A.  (N.  S.)  618n,  135 
Am.  St.  934;  McMahon  v.  McCler- 
nan,  10  W.  Va.  419. 

25  Fawcett  v.  Whitehouse,  1  Russ.  & 
M.  132 ;  Pratt  v.  Frazer,  95  Ark.  405, 
129  S.  W.  1088;  Manufacturers'  Nat. 
Bank  v.  Cox,  2  Hun  (N.  Y.)  572, 
5  Thomp.  &  C.  126  (affd.  59  N.  Y. 
659). 


881  ACCOUNTING,    SETTLEMENT,    DISTRIBUTION  §    653 

or  purchases  made  by  him  for  the  firm;-"  or  purchasing  firm 
property  in  an  individual  name;""  or  renewing  in  his  own  name 
an  agency  held  by  the  firm  f^  or  becoming  interested  in  a  business 
which  controls  the  sale  of  the  product  of  a  mine  owned  by  the 
firm.-'*  By  the  Uniform  Partnership  Act,  "every  partner  must 
account  to  the  partnership  for  any  benefit,  and  hold  as  trustee 
for  it  any  profits  derived  by  him  without  the  consent  of  the  other 
partners  from  any  transaction  connected  with  the  formation, 
conduct,  or  liquidation  of  the  partnership  or  from  any  use  b} 
him  of  its  property."^" 

§  653.  Particular  cases  on  secret  profits. — In  one  case,^^ 
which  w'as  an  action  between  partners  for  dissolution  and  account- 
ing, the  facts  w^ere  as  follows :  One  partner,  previous  to  the 
formation  of  the  firm,  had  purchased  a  stallion  for  the  sum  of 
twelve  hundred  dollars,  which  fact  was  unknown  to  several  of 
his  copartners.  After  the  formation  of  the  partnership  he  was 
designated  by  his  copartners  to  purchase  a  stallion.  He  reported 
to  them  that  he  had  purchased  the  said  stallion  for  the  firm  for 
eighteen  hundred  dollars,  and  showed  them  a  receipt  from  the 
party  from  whom  he  had  purchased  the  stallion,  for  eighteen  hun- 
dred dollars.  Thereupon  the  partnership  paid  him  the  full 
eighteen  hundred  dollars,  but  later  it  was  discovered  that  he  had 
paid  but  the  twelve  hundred  dollars  for  the  stallion.  A  dissolu- 
tion and  accounting  were  asked  for,  and  the  indebtedness  of  the 
purchasing  partner  of  six  hundred  dollars  was  set  up.  The  court 
allowed  the  petition,  and  said:  "If  Lofgren  (the  purchasing 
partner)  had  previously  purchased  the  horse  at  twelve  hundred 
dollars, — and  it  was  admitted  that  he  had, — he  fraudulently  im- 

26Bentley     v.     Craven,     18     Beav.  Dexter,   130  Mass.  380,  39  Am.  Rep. 

(Eng.)    75;   Farrar   v.   Kingsley,    126  459. 

N.  Y.  S.  584 ;  Dunlop  v.  Richards,  2  2s  Holmes  v.  Darling,  213  Mass.  303, 

E.  D.  Smith  (N.  Y.)   181.  100  N.  E.  611. 

27Gimn  V.   Black,  60   Fed.   151,    19  29  Hurst  v.    Brennen,   239   Pa.   216, 

U.  S.  App.  477,  8  C.  C.  A.  534 ;  Vet-  86  Atl.  778,  Ann.  Cas.  1914  D.  428. 

ter  V.  Lentzinger,  31  Iowa  182;  Dea-  '^  Uniform  Partnership  Act,  §  21. 

venport  v.  Green  River  Deposit  Bank,  ^i  Bloom   v.    Lofgren,   64   Minn.    1, 

138  Ky.  352,  128  S.  W.  88;  Jones  v.  65  N.  W.  960  (1896). 


§    653  LAW    OF    PARTNERSHIP  882 

posed  upon  those  with  whom  he  was  deahng,  his  actual  or  pro- 
posed copartners  in  the  transaction,  *  *  *  jj^  their  deahngs 
with  each  other,  partners  occupy  positions  of  trust,  and  are  re- 
quired to  exercise  the  most  scrupulous  good  faith  toward  each 
other.  Nor  is  this  requirement  confined  to  persons  who  are 
actually  copartners,  but  it  extends  to  those  negotiating  for  a 
partnership  not  yet  formed."  It  is  well  settled,  that  in  order  for 
the  right  of  accounting  to  exist  against  a  partner,  aside  from  a 
universal  partnership,  or  of  express  agreement,  for  secret  profits, 
the  profits  must  be  upon  such  transactions  as  come  within  the 
scope  of  the  partnership  business,  and  in  competition  with  the 
partnership.  In  a  leading  case^"  the  court  said  upon  this  ques- 
tion: "It  is  well  settled  that  a  partner  may  traffic  outside  of  the 
scope  of  the  firm's  business  for  his  own  benefit  and  advantage, 
and  without  going  into  the  authorities  it  is  sufficient  to  cite  the 
thoroughly  considered  case  of  Aas  v.  Benham,^^  in  which  it  was 
sought  to  make  one  partner  accountable  for  profits  realized  from 
another  business,  on  the  ground  that  he  availed  himself  of  infor- 
mation obtained  by  him  in  the  course  of  his  partnership  business, 
or  by  reason  of  his  connection  with  the  firm,  to  secure  individual 
advantage  in  the  new  enterprise.  It  was  there  laid  down  by  Lord 
Justice  Lindley  that  if  a  member  of  a  partnership  firm  avails  him- 
self of  information  obtained  by  him  in  the  course  of  the  transac- 
tion of  the  partnership  business,  or  by  reason  of  his  connection 
with  the  firm,  for  any  purpose  within  the  scope  of  the  partnership 
business,  or  for  any  purpose  which  would  compete  with  the  part- 
nership business,  he  is  liable  to  account  to  the  firm  for  any  benefit 
he  may  have  obtained  from  the  use  of  such  information;  but  if 
he  uses  the  information  for  purposes  which  are  wholly  without 
the  scope  of  the  partnership  business,  and  not  competing  with  it, 
the  firm  is  not  entitled  to  an  account  of  such  benefits.  It  was 
further  laid  down  in  that  case  in  explanation  of  what  was  said 
by  Lord  Justice  Cotton  in  Dean  v.  IMacdowell,^'*  that  "it  is  not  the 

32  Latta  v.  Kllbourn,  150  U.  S.  524,         s*  Dean  v.  MacDowell,  L.  R.  8  Ch. 
n  L.  ed.  1169,  14  Sup.  Ct.  201  (1893).     Div.  345. 

33  (1891),  2  Ch.  244,  255. 


883  ACCOUNTING,    SETTLEMENT,    DISTRIBUTION  §    C54 

source  of  the  information,  but  the  use  to  which  it  is  appHed,  which 
is  important  in  such  matters.  To  hold  that  a  partner  can  never 
derive  any  personal  benefits  from  information  which  he  obtains 
as  a  partner,  would  be  manifestly  absurd."  And  it  was  said  by 
Lord  Justice  Bowen  that,  "the  character  of  information  acquired 
from  the  partnership  transaction,  or  from  connection  with  the 
firm,  which  the  partner  might  not  use  for  his  private  advantage, 
is  such  information  as  belongs  to  the  partnership  in  the  sense  of 
property  which  is  valuable  to  the  partnership,  and  in  which  it 
has  a  vested  right."  It  was  said  in  another  case  :^"  "In  the 
absence  of  an  express  stipulation  to  the  contrary,  the  parties  to 
a  contract  of  copartnership  always  understand,  from  the  very 
nature  of  the  relation,  that  all  gains  made  by  either  in  the  prose- 
cution of  the  common  business,  shall  be  joint  property.  Generally, 
a  copartnership  is  a  combination  of  the  capital,  skill,  industry  and 
influence  of  two  or  more  persons  for  the  prosecution  of  a  par- 
ticular business  for  their  mutual  benefit,  and  a  claim  by  one  that 
he  has  a  right  to  carry  on  a  part  of  the  joint  business  for  his 
own  advantage  and  to  the  manifest  injury  of  his  associates,  is 
so  utterly  destructive  of  the  rights  and  duties  legally  incident  to 
the  relation,  that  it  will  never  be  sanctioned  by  a  court  until  it  is 
clearly  shown  that  he  holds  such  right  by  the  assent  of  his  asso- 
ciates. It  is  certain  that  the  existence  of  such  right  should  not 
be  inferred  from  slight  circumstances,  and  that  is  all  there  is  to 
support  it  in  this  case.  I  consider  the  fact  clearly  established, 
that  Mr.  Rafferty  carried  on,  clandestinely,  a  part  of  the  business 
which  he  and  the  complainant  had  associated  themselves  together 
to  prosecute  for  their  joint  benefit,  and,  consequently,  I  deem  it 
to  be  entirely  beyond  dispute  that  the  complainant  is  entitled  to  an 
account  of  such  business,  and  to  be  awarded  a  share  of  its  profits, 
unless  some  other  sufficient  defense  has  been  shown." 

§  654.     Profits  from  independent  transactions. — A  partner 
may  be  compelled  to  account  for  transactions  carried  on  in  com- 

-->Todd  V.  Rafferty,  30  N.  J.   Eq. 
254. 


§    655  LAW    OF    PARTNERSHIP  884 

petition  with  the  firm  business^^  but  not,  as  a  general  rule,  for 
transactions  carried  on  independently  which  are  not  within  the 
scope  of  the  partnership  business,  even  though  information 
gained  in  the  partnership  affairs  is  utilized  in  such  business.^^  If 
the  partnership  agreement  provides  that  the  members  shall  give 
their  entire  attention  to  the  business,  a  partner  may  be  liable  to 
account  for  profits  made  in  outside  ventures,  on  the  theory  of 
using  time  which  is  the  firm's,^^  or  may  be  held  liable  in  dam- 
ages.^^  But  this  rule  does  not  apply  where  there  is  no  specific 
agreement  by  a  partner  to  devote  his  entire  time  to  the  firm,  and 
where  he  has  not  neglected  firm  business  in  carrying  on  his  out- 
side ventures. *°  There  is  no  duty  to  account  for  profits  made  in 
outside  business  after  dissolution  of  the  firm.*^ 

§  655.  Accounting  v^^here  partnership  is  illegal. — As  a  gen- 
eral rule,  courts  will  not  compel  one  partner  to  account  to  another 
where  the  partnership  is  illegal  or  for  illegal  transactions  carried 
on  by  a  partnership.^"  This  rule  has  been  applied  where  the  pur- 
pose of  the  business  was  to  prevent  competition  in  bidding  on 

36  Manufacturers'  Nat.  Bank  v.  Cox,  ss  Moritz  v.  Peebles,  4  E.  D.  Smith 
2   Hun    (N.   Y.)    572    (affd.   without     (N.  Y.),  135. 

opinion   in  59   N.   Y.  659)  ;    Grafton  ^o  Winchester  v.  Glazier,  152  Mass. 

V.  Paine,  7  App.  D.  C.  255    (appeal  316,  25  N.  E.  728,  9  L.   R.  A.  424; 

dismissed  in  168  U.  S.  704,  42  L.  ed.  Lessig  v.  Langton,  Brightly   (N.  P.) 

1212,   18   Sup.   Ct.  942)  ;   Williamson  (Pa.)    191. 

V.  Monroe,  101  Fed.  322.  ^o  starr  v.   Case,   59  Iowa  491,    13 

37  Shrader  v.  Downing,  79  Wash.  N.  W.  645 ;  Dennis  v.  Gordon,  163 
476,  140  Pac.  558,  52  L.  R.  A.  (N.  Cal.  427,  125  Pac.  1063;  Murrell  v. 
S.)   389n;  Latta  v.  Kilbourn,   150  U.  Murrell,  33  La.  Ann.  1233. 

S.  524,  37  L.  ed.  1169,  14  Sup.  Ct.  201  ^i  Cane  v.  Macdonald,  23  Can.  Law 

(revg.   5   Mackey  304,  60  Am.   Rep.  Times  Occ.  N.  32,  9  B.  C.  297;  War- 

373)  ;  Dennis  v.  Gordon,  163  Cal.  427,  ing  v.   Cram,   1    Pars.   Sel.   Eq.    Cas. 

125  Pac.   1063;   Parnell  v.  Robinson,  516,  12  Mor.  Min.  Rep.  280. 

58  Ga.  26;  Metcalfe  v.  Bradshaw,  145  ^2  Pryer  v.   Harker,   142   Iowa  708, 

111.  124,  33  N.  E.  1116,  36  Am.  St.  478;  121  N.  W.  526,  23  L.  R.  A.   (N.  S.) 

Martin  v.  Stout   (Iowa),   127  N.  W.  477;  McMullen  v.  Hoffman,  174  U.  S. 

49;  Aas  v.  Benham  [1891],  2  Ch.  244,  639,  43  L.  ed.  1117,  19  Sup.  Ct.  839; 

65  L.  T.  N.  S.  25,  19  Eng.  Rul.  Cas.  Wheeler   v.    Sage,    1    Wall.    (U.    S.) 

582;  Dean  v.  MacDowell,  L.  R.  8  Ch.  518,  17  L.  ed.  646;  Bartle  v.  Nutt,  4 

Div.  345,  38  L.  T.  N.  S.  862,  47  L.  J.  Pet.   (U.  S.)   184,  7  L.  ed.  825;  Boyd 

Ch.  N.  S.  537,  26  Wkly.  Rep.  486.  v.  Barclay,   1   Ala.  34,  34  Am.   Dec. 


885 


ACCOUNTING,    SETTLEMENT,    DISTRIBUTION 


655 


public  contracts ;^^  to  carry  on  a  lottery  business;"  letting  fur- 
nished apartments  for  the  purposes  of  prostitution;'*^  operating 
a  faro  bank;*°  highway  robbery;*^  sharing  in  profits  made  in 
dealing  with  a  corporation  of  which  the  partners  are  officers, 
whether  the  corporation  be  private,*^  or  governmental ;"  or  where 
one  partner  was  a  government  official,  and  the  partnership  scheme 
was  to  defraud  the  government  through  a  contract  made  by  such 
official  ;^°  or  where  the  business  was  the  illegal  manufacture  of 
spirituous  liquors. ^^  Sometimes,  however,  an  accounting  has  been 
allowed  where  the  illegal  transaction  has  been  completed  and  the 
profits  have  been  turned  over  to  the  defendant  partner"  or  have 


762;  Chateau  v.  Singla,  114  Cal.  91, 
45  Pac.  1015,  33  L.  R.  A.  750,  55  Am. 
St.  63 ;  Shafifner  v.  Pinchback,  133 
111.  410,  24  N.  E.  867,  23  Am.  St.  624; 
Northrup  v.  Phillips,  99  111.  449 ;  Craft 
V.  McConoughy,  79  111.  346,  22  Am. 
Rep.  171;  Skeels  v.  Phillips,  54  111. 
309;  Miller  v.  Davidson,  3  Gil.  (111.) 
518,  44  Am.  Dec.  715;  Hunter  v. 
Pfeiffer,  108  Ind.  197,  9  N.  E.  124; 
Anderson  v.  Powell,  44  Iowa  20 ;  Cen- 
tral Trust  Co.  V.  Respass,  112  Ky. 
606,  66  S.  W.  421,  56  L.  R.  A.  479, 
99  Am.  St.  317;  Barrow  v.  Pike,  21 
La.  Ann.  14;  Spies  v.  Rosenstock,  87 
Aid.  14,  39  Atl.  268;  Dunham,  v. 
Presby,  120  Mass.  285;  Sampson  v. 
Shaw,  101  Mass.  145,  3  Am.  Rep.  327 ; 
Durant  v.  Rhener,  26  Minn.  362,  4  N. 
W.  610;  Jackson  v.  McLean,  100  Mo. 
130.  13  S.  W.  393 ;  Green  v.  Corrigan, 
87  Mo.  359;  Morrison  v.  Bennett,  20 
Mont.  560,  52  Pac.  553,  40  L.  R.  A. 
158;  Todd  v.  Rafferty,  30  N.  J.  Eq. 
254;  Kelly  v.  Devlin,  58  How.  Pr. 
(N.  Y.)  487  (affd.  47  N.  Y.  Super.  Ct. 
555)  ;  Wiggins  v.  Bisso,  92  Tex.  219, 
47  S.  W.  637,  71  Am.  St.  837 ;  Read  v. 
Smith,  60  Tex.  379;  Lane  v.  Thomas, 
37  Tex.  157;  Gordon  v.  Howden,  12 
CI.  &  F.  237;  Armstrong  v.  Lewis,  4 
Moo.  &  S.  1,  30  E.  C.  L.  539;  Sykes 


v.  Beadon,  11  Ch.  Div.  170;  Tench 
v.  Roberts,  6  Madd.  145.  See  also 
Wheeler  v.  Sage,  1  Wall.  (U.  S.) 
518,  17  L.  ed.  646. 

43  McMullen  v.  Hofifman,  174  U.  S. 
639,  43  L.  ed.  1117,  19  Sup.  Ct.  839; 
Hunter  v.  Pfeiffer,  108  Ind.  197,  9  N. 
E.  124;  King  v.  Winants,  71  N.  Car. 
469,  17  Am.  Rep.  11. 

44  Watson  V.  Murray,  23  N.  J.  Eq. 
257. 

45  Chateau  v.  Singla,  114  Cal.  91, 
45  Pac.  1015,  33  L.  R.  A.  750,  55  Am. 
St.  63. 

46  Watson  v.  Fletcher,  7  Grat.  (Va.) 
1. 

47  Everet  v.  Williams,  9  Law  Quart. 
Rev.  197. 

48  Cook  v.  Sherman,  20  Fed.  167, 
4  McCrary  (U.  S.)  20;  Jackson  v. 
McLean,  100  Mo.  130,  13  S.  W.  393. 

49  Collins  V.  Swindle,  6  Grant  Ch. 
(U.  C.)   282. 

soBartle  v.  Nutt,  4  Pet.  184,  7  L. 
ed.  825. 

^1  Vandegrift  v.  Vandegrift,  226 
Pa.  254,  75  Atl.  365,  18  Ann.  Cas.  404. 

S2  Sharp  V.  Taylor,  2  Phil.  (Eng.) 
801 ;  Planters  Bank  v.  Union  Bank, 
16  Wall.  (U.  S.)  483,  21  L.  ed.  473; 
McBlair  v.  Gibbes,  17  How.  (U.  S.) 
232,    15    L.    ed.    132;    Cook   v.    Sher- 


§    656  LAW    OF    PARTNERSHIP  886 

been  reinvested. ^^  It  is  said  that  a  recovery  can  not  be  had  where 
the  party  seeking  it  must  show  the  illegal  transaction  in  order  to 
make  out  his  case,  but  when  the  advances  have  been  made  on  a 
new  contract,  remotely  connected  with  the  original  illegal  transac- 
tion, and  the  right  of  recovery  does  not  depend  upon  the  illegal 
contract  but  may  be  proved  without  reference  to  it,  then  a  re- 
covery may  be  allowed,^* 

§  655.  Some  leading  cases  on  accounting  where  partner- 
ship is  illegal. — In  the  leading  case  of  Brooks  v.  Martin,  in 
which  an  accounting  was  allowed,  soldiers  claims  for  land  war- 
rants had  been  purchased  in  violation  of  statute  by  a  firm  with 
money  furnished  by  one  partner,  the  court  said  :^^  "When  the 
bill  in  the  present  case  was  filed,  all  the  claims  of  soldiers  thus 
illegally  purchased  by  the  partnership,  with  money  advanced  by 
complainant,  had  been  converted  into  land  warrants,  and  all  the 
warrants  had  been  sold  or  located.  The  original  defect  in  the 
purchase  had,  in  many  cases,  been  cured  by  the  assignment  of  the 
warrant  by  the  soldier  after  its  issue.    A  large  proportion  of  the 

man,   20    Fed.    167,   4   McCrary    (U.  v.   Barclay   Coal   Co.,   68   Pa.   173,   8 

S.)   20;  Burke  v.  Flood,   1   Fed.  541,  Am.    Rep.    159;    Lestapies    v.    Ingra- 

6    Savvy.    220;    Crescent    Ins.    Co.    v.  ham,  5  Pa.  St.  71;  Wiggins  v.  Bisso, 

Bear,  23  Fla.  50,  1   So.  318,   11   Am.  92  Tex.  219,  47   S.  W.  637,  71   Am. 

St.  331;   Fryer  v.   Harker,   142  Iowa  St.  837;  Floyd  v.  Patterson,  72  Tex. 

708,  121  N.  W.  526,  23  L.  R.  A.  (N.  202,    10   S.   W.   526,    13   Am.   St.   787 

S.)  477;  Harvey  v.  Varney,  98  Mass.  (affd.    18   S.   W.   654)  ;    De   Leon   v. 

118;   Howe  v.  Jolly,  68  Miss.  323,  8  Trevino,    49    Tex.    88,    30    Am.    Rep. 

So.  513;  Pfeuffer  v.  Maltby,  54  Tex.  101;   Boggess  v.  Lilly,   18  Tex.  200: 

454,    38   Am.    Rep.   631;    DeLeon    v.  Wells   v.   McGeoch,   71   Wis.   196,   35 

Trevino,    49    Tex.    88,    30   Am.    Rep.  N.  W.  769.     See  also  Armstrong  v. 

101;    McDonald   v.   Lund,    13   Wash.  Toler,   11   Wheat.   (U.   S.)   258,  6  L. 

412,  43  Pac.  348.     See  also  Crescent  ed.  468. 

Ins.    Co.   V.    Baer,   23   Fla.   50,    1    So.  s^Vandegrift    v.     Vandegrift,     226 

318,  11  Am.  St.  331.     Compare  Craft  Pa.   254,    75    Atl.   365,    18   Ann.    Cas. 

V.  McConoughty,  79  111.  346,  22  Am.  404;    quoting    Story    Agenc3^    §    347, 

Rep.  171.  note.     See  also  Cook  v.  Sherman,  20 

S3  Brooks   V.   Martin,   2   Wall.    (U.  Fed.    167,    4    McCrary    (U.    S.)    20; 

S.)   70,  17  L.  ed.  732;  Dent  v.  Fer-  Sharp  v.  Taylor,  2  Phil.  Ch.  801. 

guson,  132  U.  S.  50,  10  Sup.  Ct.  13,  ss  Brooks   v.   Martin,   2   Wall.    (U. 

33  L.  ed.  242;  Morris  Run  Coal  Co.  S.)   70,   17  L.  ed.  732. 


887  ACCOUXTIXG,    SETTLEMENT,    DISTUIDUTIOX  §    656 

lands  so  located  had  also  been  sold,  and  the  money  paid  for  some 
of  it,  and  notes  and  mortgages  given  for  the  remainder.  There 
were  then  in  the  hands  of  defendant  lands,  money,  notes  and 
mortgages,  the  results  of  the  partnership  business,  the  original 
capital  for  which  plaintiff  had  advanced.  It  is  to  have  an  account 
of  these  funds,  and  a  division  of  these  proceeds,  that  this  bill  is 
filed.  Does  it  lie  in  the  mouth  of  the  partner  ^\ho  has,  by  fraud- 
ulent means,  obtained  possession  and  control  of  all  these  funds, 
to  refuse  to  do  equity  to  his  other  partners,  because  of  the  wrong 
originally  done  or  intended  to  the  soldier?  It  is  difficult  to  per- 
ceive how  the  statute,  enacted  for  the  benefit  of  the  soldier,  is  to 
be  rendered  any  more  effective  by  leaving  all  this  in  the  hands  of 
Brooks,  instead  of  requiring  him  to  execute  justice  as  between 
himself  and  his  partner;  or  what  rule  of  public  morals  will  be 
weakened  by  compelling  him  to  do  so?  The  title  to  the  lands  is  not 
rendered  void  b}^  the  statute.  It  interposes  no  obstacle  to  the  col- 
lection of  the  notes  and  mortgages.  The  transactions  which  were 
illegal  have  become  accomplished  facts,  and  can  not  be  affected 
by  any  action  of  the  court  in  this  case."  But  many  cases  refuse 
to  allow  an  accounting  of  the  aft'airs  of  illegal  partnerships  merely 
because  the  transaction  is  at  an  end  and  one  partner  holds  the 
funds.°°  In  a  leading  case  the  parties  had  entered  into  a 
secret  agreement  not  to  compete  with  each  other  in  bidding  on 
public  contracts,  and  had  a  written  agreement  to  share  in  the 
profits  of  certain  bids  secured  by  them,  on  suit  by  one  partner  for 
an  accounting,  the  other  defended  by  setting  up  that  the  agree- 
ment to  share  profits  was  a  portion  of  the  entire  illegal  agreement. 
The  court  said:'^'  "In  the  case  at  bar,  the  action  depends  upon 
the  entire  contract  between  the  parties,  part  of  which  we  hold  was 

^x"'  McMuUen  v.  Hoffman,  174  U.  S.  30  N.  J.  Eq.  254 ;  King  v.  Winants, 

639,  19  Sup.  Ct.  839,  43  L.  ed  1117;  71    N.    Car.    469,    17    Ann.    Rep.    11; 

Central    Trust    &c.    Co.    v.    Respass,  Sykes  v.  Beadon,  L.  R.   11   Ch.   Div. 

112  Ky.  606,  66  S.  W.  421,  56  L.  R.  170. 

A.  479,  99  Am.  St.  317;  Dunham  v.  "  McMullen    v.    Hoffman,    174    U. 

Presby,   120  Mass.  285;   Morrison  v.  S.    639,    19   Sup.    Ct.   839,    43    L.    ed. 

Bennett,  20   Mont.   560,   52   Pac.   553,  1117. 
40  L.   R.  A.   158;   Todd  v.   Rafferty, 

6 — Row.  ON  Partn. — Vol.  2 


§    656  LAW    OF    PARTNERSHIP  888 

illegal.  The  partnership  part  of  the  agreement  can  not  be  sep- 
arated from  the  rest.  The  complainant's  claim  to  profits  rests 
upon  the  entire  contract;  his  right  is  based  upon  that  which  is 
illegal  and  utterly  void,  and  he  can  not  separate  his  cause  of  action 
from  the  illegal  part  and  claim  a  recovery  upon  the  written  por- 
tion providing  for  and  evidencing  the  partnership.  *  =i=  *  We 
must  therefore  come  back  to  the  proposition  that  to  permit  a 
recovery  in  this  case  is  in  substance  to  enforce  an  illegal  contract 
and  one  which  is  illegal  because  it  is  against  public  policy  to 
permit  it  to  stand.  The  court  refuses  to  enforce  such  a  contract, 
and  it  permits  defendant  to  set  up  its  illegality,  not  out  of  any 
regard  for  the  defendant  who  sets  it  up,  but  only  on  account  of 
the  public  interest.  It  has  been  often  stated  in  similar  cases  that 
the  defense  is  a  very  dishonest  one,  and  it  lies  ill  in  the  mouth  of 
the  defendant  to  allege  it,  and  it  is  only  allowed  for  public  con- 
siderations and  in  order  the  better  to  secure  the  public  against 
dishonest  transactions.  To  refuse  to  grant  either  party  to  an  il- 
legal contract  judicial  aid  for  the  enforcement  of  his  alleged 
rights  under  it  tends  strongly  toward  reducing  the  number  of 
such  transactions  to  a  minimum.  The  more  plainly  parties  under- 
stand that  when  they  enter  into  contracts  of  this  nature  they  place 
themselves  outside  the  protection  of  the  law,  so  far  as  that  pro- 
tection consists  in  aiding  them  to  enforce  such  contracts,  the  less 
inclined  will  they  be  to  enter  into  them.  In  that  way  the  public 
secures  the  benefit  of  a  rigid  adherence  to  the  law."  The  court 
distinguishes  Brooks  v.  Martin,^®  saying:  "There  is  a  difference 
between  the  case  before  us  and  that  of  Brooks  v.  Martin,  because 
in  the  latter  case  the  fact  existed  that  the  transactions  in  regard 
to  which  the  cause  of  action  was  based,  were  not  fraudulent,  and 
they  related  in  some  sense  to  private  matters,  while  in  the  case 
before  the  court,  the  entire  contract  was  a  fraud  and  was  illegal, 
and  related  to  a  public  letting  by  a  municipal  corporation  for 
work  involving  a  large  amount  of  money,  and  in  which  the  whole 
municipality  was  vitally  interested.     It  may  be  difficult  to  base 

58  2  Wall.  (U.  S.)  70,  17  L.  ed.  112. 


889  ACCOUNTING,    SETTLEMENT,    DISTRIBUTIO:?  'J    656 

a  distinction  of  principle  upon  these  differences.  We  do  not  now 
decide  whether  they  exist  or  not.  We  simply  say  that  taking  that 
case  into  due  and  fair  consideration,  we  will  not  extend  its  au- 
thority at  all  beyond  the  facts  therein  stated."  In  another  case, 
after  a  review  of  authorities,  it  was  said:^^  "But  in  these  cases, 
as  well  as  in  other  cases  which  are  therein  cited  and  reviewed, 
the  partnership  was  in  no  instance  formed  and  conducted  for  a 
traffic  which  the  law  made  a  crime  and  a  nuisance.  The  distinc- 
tion between  enforcing  the  execution  of  an  agreement  to  do  an 
illegal  act,  and  the  distribution  of  the  realized  profits  of  the  act, 
made  use  of  in  those  cases  to  do  justice  between  the  parties,  is 
obviously  not  to  be  regarded  as  one  of  universal  or  general  ap- 
plication. It  would  seem  needless  to  say  that  it  can  not  be  invoked 
to  apportion  among  criminals  the  gains  resulting  from  their 
crimes.  No  case  has  been  referred  to,  and  none,  I  am  sure,  can 
be  found,  where  the  illegal  act  has  been  also  a  misdemeanor,  pun- 
ishable by  fine  and  imprisonment  for  the  protection  of  the  public 
safety  and  morals.  Where  such  is  the  fact,  the  distinction  is 
excluded  by  manifest  considerations  of  example  and  influence; 
considerations  not  deemed  to  exist  in  the  cases  where  the  dis- 
tinction was  allowed."  Where  part  only  of  the  business  is  illegal 
and  part  is  legal,  an  accounting  has  sometimes  been  allowed  as 
to  the  part  which  is  legal. ""^  If  the  partnership  is  legal,  and  the 
partner  who  asks  the  accounting  is  innocent,  the  defendant  can 
not  escape  accounting  by  setting  up  that  the  profits  were  made 
by  his  illegal  acts.*'^ 

^nVatson  V.  Murray,  23  N.  J.  Eq.  1  Ch.  496;  Van  Tine  v.  Hilands,  131 

257.  Fed.    124;    Shriver    v.    McCloud,    20 

«o  Bennett  v.  Woolfolk,  15  Ga.  213;  Nebr.  474,  30  N.  W.  534;   Pennlng- 

Fryer  v.  Harker,   142  Iowa  708.   121  ton   v.   Todd,   47   N.   J.    Eq.   569,   21 

N.  W.  526,  23  L.  R.  A.  (N.  S.)  477;  Atl.  297,  11  L.  R.  A.  589,  24  Am.  St. 

Anderson    v.    Powell,    44    Iowa    20;  419;    Jones    v.    Davidson,    2    Sneed 

Central    Trust    &c.    Co.    v.    Respass,  (Tenn.)      447;      Corralitos      Co.      v. 

112  Ky.  606,  66  S.  W.  42,  56  L.  R.  A.  Alackey,   31   Tex.   Civ.   App.  316,   72 

479,  99  Am.  St.  317 ;  Wishek  v.  Ham-  S.  W.  624.    See  also  Harvey  v.  Var- 

mond,  10  N.  Dak.  72,  84  N.  W.  587.  ney,   98   Mass.   118. 

eiThwaites  v.  Coulthwaite   (1896), 


LAW    OF    PARTNERSHIP 


890 


§  657.  Who  may  require  accounting. — Every  partner  has 
the  right  to  require  an  accounting  upon  dissolution."-  Both  a 
silent  partner/'^  and  the  assignee  or  purchaser  of  a  partner's 
share, '^■^  or  of  a  share  in  the  interests  of  each  partner,"^  have  such 
right  to  accounting  after  dissolution.  A  corporation  which  is  a 
meniher  of  a  partnership,-  is  held  entitled  to  an  accounting/'" 
Where  the  partnership  agreement  provided  that  the  partnership 
should  expire  at  a  fixed  date,  but  the  business  was  permitted  to 
continue  longer,  until  the  formation  of  a  new  firm  from  \\hich 
one  of  the  old  partners  was  omitted,  such  partner  has  a  right  to 
an  accounting  from  the  members  of  the  new  firm."  Generally 
the  right  is  denied  to  individual  creditors  of  a  partner,^^  although 
an  individual  creditor  who  has  levied  execution  on  the  partner's 
interest  in  the  firm  has  been  allowed  by  some  decisions  the  right 
to  an  accounting  in  order  to  ascertain  the  extent  of  such  inter- 
est.*^^  Personal  representatives  of  the  deceased  partner  may  have 
an  accounting  from  the  surviving  partner.'"    Generally,  however. 


'''"  See  cases  cited  in  ante  §  650, 
note  1. 

B3  Harvey  v.  Varney,  98  Mass.  118; 
Maddock  v.  Steel.  68  Hun  522,  23  X. 
Y.  S.  61,  52  N.  Y.  St.  754;  Parsons 
V.  Hayward,  4  DeG.,  F  &  J.  474,  8 
Jur.  (N.  S.)  924;  Brigham  v.  Smith, 
3  Grant.  Err.  &  App.  (U.  C.)  46. 

64  Fountaine  v.  Urquhart,  33  Ga. 
Supp.  184;  Mathewson  v.  Clarke,  6 
How.  (U.  S.)  122,  12  L.  ed.  370; 
Pendleton  v.  Wambersie,  4  Cranch. 
(U.  S.)  73,  2  L.  ed.  554;  Hacker 
V.  Johnson,  66  Alaine  21 ;  Bruns  v. 
Spalding,  90  Md.  349,  45  Atl.  194; 
Stokes  V.  Stokes,  59  Hun  431,  13  N. 
Y.  S.  407,  36  N.  Y.  St.  620  (affd. 
128  N.  Y.  615,  28  N.  E.  253)  ;  Eilers 
Music  House  v.  Reine,  65  Ore.  598, 
133  Pac.  788;  Marx  v.  Goodnough, 
23  Ore.  545,  32  Pac.  511;  Knight  v. 
Ogden.  2  Tenn.  Ch.  473;  Watts  v. 
Driscoll  [19011,  1  Ch.  294,  70  L.  J. 
Ch.   157. 


c^Lovejoy  v.  Bailey,  214  Mass.  134, 
101   N.  E.  63. 

<5<5  Doubleday,  Page  &c.  Co.  v.  Shu- 
maker,  113  N.  Y.  S.  83. 

c"  Near  v.  Lowe,  49  Mich.  482,  13 
N.  W.  825. 

^s  Milleman  v.  Kavanaugh,  213  Pa. 
240,  62  Atl.  907. 

«9  Nixon  V.  Nash,  12  Ohio  St.  647, 
80  Am.  Dec.  390. 

"°  Secor  V.  Tradesmen's  Nat.  Bank, 
92  App.  Div.  294,  87  N.  Y.  S.  181; 
Peck  V.  Knapp,  137  N.  Y.  S.  70; 
Cheeseman  v.  Wiggins,  1  Thomps.  & 
C.  (N.  Y.)  595;  Robertson  v.  Bur- 
rell,  110  Cal.  568,  42  Pac.  1086  (ap- 
plying code  Civ.  Proc.  §  1585)  ;  An- 
drews V.  Stinson,  254  111.  111.  98  N. 
E.  222;  Winslow  v.  Leland,  128  111. 
304,  21  N.  E.  588;  Devine  v.  Cotunio. 
187  111.  App.  414;  Brown  v.  Brown. 
175  Mich.  442,  141  N.  W.  553;  Pitt 
V.  Moore,  99  N.  Car.  85,  5  S.  E.  389. 
6  .'\m.  St.  489:  :McPl;erson  v.  Swift, 


891 


ACCOUNTING,    SETTLEMENT,    DISTRIUUTIOI 


§  658 


the  right  of  the  heirs  is  to  proceed  against  the  personal  representa- 
tive and  not  against  the  surviving  partner.'^  But  the  heirs  or 
creditors,  if  the  surviving  partners  act  as  executors  or  admin- 
istrators of  the  deceased  partner,  may  be  granted  the  right  to 
an  accounting.""  And  where  the  executor  or  administrator  re- 
fuses to  bring  the  action, ^^  or  in  the  existence  of  other  special 
circumstances  such  as  collusion  between  the  personal  repre- 
sentative and  surviving  partner.^*  A  partner  may  by  agreement 
or  by  conduct,  waive  his  right  to  an  accounting." 

§  658.  Who  must  account. — Every  partner  after  dissolu- 
tion is  under  a  duty  to  account  to  copartners  for  his  acts  and  deal- 
ings as  partner,^°  Surviving  partners  after  dissolution  are  under 
the  duty  to  account  to  the  personal  representatives  of  a  deceased 


22  S.  Dak.  165,  116  N.  W.  1^;  Newell 
V.  Humphrey,  Zl  Vt.  265 ;  Clegg  v. 
Fishwick,  1  Hall  &  T.  390,  47  Eng. 
Reprint  1463;  Taylor  v.  Taylor,  28 
L.  T.  Rep.  (N.  S.)  188. 

71  Mason  v.  Hicks,  76  Vt.  287,  56 
Atl.  1011;  Dent  v.  Slough.  40  Ala. 
518;  Rosenzweig  v.  Thompson,  66 
Md.  593,  8  Atl.  659;  Harrison  v. 
Righter,  11  N.  J.  Eq.  389;  Edgar  v. 
Baca,  1  N.  Mex.  613;  Boggs  v.  Bird, 
131  N.  Y.  665,  30  N.  E.  868  (affg.  14 
N.  Y.  S.  344,  60  Hun  579,  38  N.  Y. 
St.  992)  ;  Hyer  v.  Burdett,  1  Edw. 
Ch.    (N.  Y.)   325. 

■72  Beningfield  v.  Baxter,  12  App. 
Cas.  167,  56  L.  J.  P.  C.  13,  56  L.  T. 
Rep.  (N.  S.)  127;  Travis  v.  Milne, 
9  Hare  141,  20  L.  J.  Ch.  665 ;  Crop- 
per V.  Knapman,  6  L.  J.  Exch.  9,  2 
Y.  &  C.  Exch.  338 ;  Bowsher  v.  Wat- 
kins,  1  Russ.  &  M.  277;  Hyer  v. 
Burdett,  1  Edw.  Ch.   (N.  Y.)  325. 

^3  Fleischmann  v.  Fleischmann,  66 
N.  Y.  S.  631;  Byers  v.  Weeks,  105 
AIo.  App.  12,  79  S.  W.  485. 

'4  Conrad  v.  Fuller,  98  Va.  16,  34 
S.  E.  893. 


'^^  Wagner  v.  Wagner,  50  Cal.  76 ; 
Grashell  v.  Knoll,  16  S.  W.  453,  13 
Ky.  L.  241 ;  Thompson  v.  Noble,  108 
Mich.  19,  65  N.  W.  563;  Bassett  v. 
Henry,  34  Mo.  App.  548;  Moffat  v. 
Moffat,  10  Bosw.  (N.  Y.)  468,  17 
Abb.  Pr.  4;  Buford  v.  Neely,  17  N. 
Car.  481 ;  Bradly  v.  Jennings,  201  Pa. 
473,  51  Atl.  343;  McPherson  v.  Swift, 
22  S.  Dak.  165,  116  N.  W.  1(i.  \ 

76Rosenstiel  v.  Gray,  112  111.  282; 
Taylor  v.  Wells,  113  Iowa  326,  85 
N.  W.  30;  Peterson  v.  Poignard,  6 
B.  Mon.  (Ky.)  570;  Feige  v.  Bab- 
cock,  111  Mich.  538,  70  N.  W.  7; 
Ruckman  v.  Decker,  23  N.  J.  Eq. 
283  (revd.  on  other  grounds  in  28 
N.  J.  Eq.  614)  ;  Walford  v.  Harris. 
78  Hun  341.  29  N.  Y.  S.  123,  59  N. 
Y.  St.  527;  Wilson  v.  Keller,  195  Pa. 
St.  98,  45  Atl.  682 ;  O'Meara  v.  Ouel- 
let,  28  Quebec  Super.  Ct.  418;  Eng. 
Partnership  Act  (1890),  §  29.  See 
McGinniss  v.  Fink,  198  Pa.  404,  48 
Atl.  267. 


§  659 


LAW    OF    PARTNERSHIP 


892 


partner/^  but  the  partnership  agreement  may  relieve  them  from 
such  duty.'^  Nor  can  a  personal  representative  of  the  deceased 
escape  the  duty  of  accounting,  where  his  decedent  or  himself  was 
in  management  or  control  of  firm  assets."  The  mere  surety  of 
a  deceased  partner  is  not  liable  to  an  accounting.^^  Fraudulent 
transferees  of  partnership  effects  who  took  part  in  the  fraud,  may 
be  compelled  to  account. ^^ 

§  659.  What  property  must  be  accounted  for. — All  the 
firm  property,  of  whatever  nature  or  kind,  should  be  included  in 
the  final  accounting  and  settlement.*"  This  does  not  include  for- 
mer firm  property  which  has  been  transferred  to  a  partner,  or 
third  persons, '^^  property  held  by  partners  as  joint  owners,**  or 


"Fried  v.  Burk,  125  Md.  500,  94 
Atl.  86;  Chapin  v.  Chapin  (Mass.). 
36  N.  E.  746  (1894)  ;  Ogden  v.  Astor, 
4  Sandf.  (N.  Y.)  311;  Hutchinson 
V.  Campbell,  13  Misc.  152,  34  N.  Y. 
S.  82,  68  N.  Y.  St.  74 ;  Taylor  v.  Tay- 
lor, 28  L.  T.  Rep.  (N.  S.)   188. 

TsVyse  V.  Foster,  L.  R.  7  H.  L. 
318,  44  L.  J.  Ch.  n. 

79Marlatt  v.  Scantland,  19  Ark. 
443;  Hargis  v.  Campbell,  14  Fla.  27; 
Flynn  v.  Scale,  2  Cal.  App.  665,  84 
Pac.  263 ;  Raison  v.  Williams,  19  Ky. 
L.  1142,  42  S.  W.  1108;  Wilby  v. 
Phinney,  15  Mass.  116;  Gaskill  v. 
Adams,  83  Mo.  App.  380;  Kline  v. 
Kline,  3  Ch.  Chamb.  (U.  C.)  137. 
See  Dariano  v.  Fidalgo,  14  Philip- 
pine 62    (dictum). 

soBissell    V.    Ames,    17    Conn.    121. 

51  Lovejoy  v.  Bailey,  214  Mass. 
134,  101  N.  E.  63. 

52  Russell  V.  Green,  10  Conn.  269 ; 
Swafiford  V.  White,  89  S.  W.  129,  28 
Ky.  L.  119;  Klotz  v.  Macready,  39 
La.  Ann.  638,  2  So.  203;  Wiggins  v. 
Brand,  202  Mass.  141,  88  N.  E.  840; 
Gay  V.  Ray,  195  Mass.  8,  80  N.  E. 
693;  Killefer  v.  McLain,  70  Mich. 
508,  38  N.  W.  455 ;  Arthur  v.  Sire,  105 


App.  Div.  454,  94  N.  Y.  S.  346  (mod. 
45  Misc.  257,  92  N.  Y.  S.  158)  ; 
Church  V.  Adams,  2)1  Ore.  355,  61 
Pac.  639;  Plumly  v.  Plumly,  6  Pa. 
Co.  Ct.  12 ;  Washburn  v.  Washburn, 
23  Vt.  576;  Moore  v.  Wheeler,  10 
W.  Va.  35;  Aldecoa  v.  Warner,  16 
Philippine  423.  See  Bushby  v.  Berke- 
ley, 153  App.  Div.  742,  138  N.  Y.  S. 
831 ;  Consaul  v.  Cummings,  30  App. 
(D.  C.)  540;  Whitney  v.  Whitney, 
27  Ky.  L.  1197,  88  S.  W.  311;  Mor- 
rill V.  Weeks,  70  N.  H.  178,  46  Atl. 
32. 

83  Rushing  v.  Peoples,  42  Ark.  390 ; 
Price  V.  Hicks,  14  Fla.  565 ;  Rhoton's 
Succession,  34  La.  Ann.  893 ;  Blake- 
ley  V.  LeDuc,  22  Minn.  476;  Burress 
V.  Blair,  61  Mo.  133 ;  Tygart  v.  Wil- 
son, 39  App.  Div.  58,  56  N.  Y.  S. 
827;  Fellerman  v.  Goldberg,  28  Misc. 
235,  58  N.  Y.  S.  1113;  Browne  v. 
Scull,  27  Pa.  Super.  Ct.  513;  Betts 
V.  Letcher,  1  S.  Dak.  182,  46  N.  W. 
193.  Compare  Gresham  v.  Harcourt 
(Tex.  Civ.  App.),  SO  S.  W.  1058. 

84  Gordon  v.  Gordon,  49  Mich.  501, 
13  N.  W.  834;  Jones  v.  Jones,  23 
Ark.  212;  Crocker  v.  Barteau,  212 
Mo.  359,  110  S.  W.  1062. 


893  ACCOUNTING,    SETTLEMENT,    DISTRIBUTION  §    659 

property  which  never  belonged  to  the  firm.^^  Partnership  real 
estate  is  included,  as  well  as  personal  property.^®  Where  the 
same  persons  engaged  in  two  separate  partnerships  under  differ- 
ent agreements,  so  that  the  one  was  not  a  continuation  of  the 
other,  a  settlement  as  to  the  second  partnership  should  not  take 
into  account  contributions  to  the  capital  of  the  first,  unless  it  is 
so  provided  or  agreed. ^^  A  surviving  or  liquidating  partner  is 
usually  held  accountable  for  the  fair  value  of  firm  assets  at  the 
time  of  dissolution.^®  "In  stating  partnership  accounts,  where 
one  partner  has  had  entire  charge  of  the  business,  he  is  to  be 
debited  with  the  whole  capital  placed  in  his  hands,  as  well  as 
with  the  proceeds  of  sales  realized  by  him.  If  part  of  the  cap- 
ital consisted  of  stock,  which  has  been  used  in  the  business,  or 
disposed  of  and  the  proceeds  charged  against  him,  he  should  be 
credited  with  such  stock  as  a  disbursement,  to  the  amount  at 
which  it  was  originally  charged  against  him."^^  Debts  and  ex- 
penditures on  behalf  of  the  firm  should  also  be  included  in  the 
account.''^  Bad  debts  may  be  stricken  off,  if  not  the  result  of 
the  negligence  of  the  partner  who  is  accounting,''^  and  worthless 
assets  may  be  appraised  as  valueless. °-  Ordinarily  in  this  country 
courts  will  not  order  a  return  of  a  premium  paid  for  admission 

ssWaisner    v.    Waisner,    15    Wyo.  63  Vt.   158,  21  Atl.  535,  25  Am.   St. 

420,  89   Pac.  580,   123  Am.   St.   1081.  752;    Simmons   v.   Leonard,    3    Hare 

See  Moore  v.  Rawson,  199  Mass.  493,  581,  25  Eng.  Ch.  581.     See  Taylor  v. 

85  N.  E.  586.  Hutchinson,  25   Grat.    (Va.)    536,    18 

88  Godfrey  v.  White,  43  Mich.  171,  Am.  Rep.  699;   Frierson  v.   Morrow 

5    N.    W.   243;    Burkardt   v.    Walsh,  (Tenn.  Ch.  App.),  48  S.  W.  245. 

64  N.  Y.  S.  779.     Compare  Comstock  s^  Gunnell   v.    Bird,    10   Wall.    (U. 

V.  McDonald,  136  Mich.  489,  101  N.  S.)  304,  19  L.  ed.  913. 

W.  55.  so  Chambers  v.  Crook,  42  Ala.  171, 

87  Nicholson  v.  Kinsey  (Tenn.),  38  94  Am.  Dec.  637;  Lusk  v.  Graham, 
S.  W.  1033.  21  La.  Ann.  159;   Stitzel  v.  Ehrman 

88  Gunnel!  v.  Bird,  10  Wall.  (U.  (Ky.),  114  S.  W.  280;  Ridgway  v. 
S.)  304,  19  L.  ed.  913;  Cheeseman  Clare,  19  Beav.  Ill,  52  Eng.  Reprint 
V.  Wiggins,  1  Thomps.  &  C.  (N.  Y.)  291.  See  Gorman  v.  Madden,  27  S. 
595;    Parker   v.    Broodbent,    134    Pa.  Dak.  319,  131  N.  W.  290. 

St.  322,  19  Atl.  631 ;  Kinloch  v.  Ham-  si   Evans  v.  Weatherhead,  24  R.  I. 

lin,  2  Hill.  Eq.  (S.  Car.)   19,  27  Am.  394,  53  Atl.  286. 

Dec.  441 ;  Morris  v.  Owen  (Tex.  Civ.  ^^  Douthart  v.  Logan,   190  111.  243, 

App.),  143  S.  W.  227;  King  v.  White,  60  N.  E.  507  (affg.  86  111.  App.  294). 


§  660 


].AW    OF    rAKTNERSlIIP 


894 


into  a  firm  whether  it  was  to  continue  a  specified  time,  or  be  ter- 
minated at  will,  unless  it  was  obtained  by  fraud.'*'^  In  England 
a  return  of  a  part  of  the  premium  is  allowed  where  the  duration 
of  the  partnership  was  short,  upon  the  theory  of  a  partial  failure 
of  the  consideration  for  the  premium.^*  There  is  no  right  to  an 
accounting  partially,  or  as  to  particular  items,"^  nor  while  the 
partnership  continues,  except  in  cases  of  extreme  necessity. °'^ 

§  660.  Good-will  of  firm. — The  good-will  of  the  firm 
should  be  converted  into  cash  and  included  in  the  firm  accounts, 
as  it  is  a  part  of  the  firm  assets."^  However,  a  partner  may  b}^ 
his  agreement  or  conduct  lose  his  right  to  an  accounting  of  the 

Where  a  business  has  been  conducted 


good-will  of  the  firm,' 


93  Harrington  v.  Walthal,  98  Ga. 
lid,  25  S.  E.  836;  Petrie  v.  Steedly, 
94  Ga.  196,  21  S.  E.  512;  Durham  v 
Hartlett,  32  Ga.  22;  McCandless  v, 
Grouse,  220  III.  344,  11  N.  E.  202 
Grouse  v.  McGandless,  121  111.  App 
2Z1  (affd.  220  111.  344,  11  N.  E.  202)  : 
Carlton  v.  Gummins,  51  Ind.  478: 
Swift  V.  Ward,  80  Iowa  700,  45  N 
W.  1044,  11  L.  R.  A.  302;  Boughner 
V.  Black,  83  Ky.  521,  7  Ky.  L.  562,  4 
Am.  St.  174;  Gaty  v.  Tyler,  iZ  Mo. 
App.  494.  See  also  Henderson  v. 
Ries,  108  Fed.  709,  47  G.  G.  A.  625. 

0*  Pease  v.  Hewitt,  31  Beav.  22,  8 
Jur.  (N.  S.)  1166;  Bury  v.  Allen,  1 
Goll.  589,  66  Rev.  Rep.  200,  28  Eng. 
Gh.  589;  Freeland  v.  Stansfeld,  2  Eq. 
1181,  1  Jur.  (N.  S.)  8,  23  L.  J.  Gh. 
923;  Bullock  v.  Grockett,  3  Giffard 
507,  8  Jur.  (N.  S.)  502;  Lyon  v. 
Tweddell,  17  Gh.  D.  529,  45  J.  P. 
680;  Bluck  v.  Gapstick,  12  Gh.  D. 
863;  Lee  v.  Page,  7  Jur.  (N.  S.) 
768 ;  Yates  v.  Gousins,  60  L.  T.  Rep. 
(N.  S.)  535;  Brewer  v.  Yorke,  46 
L.  T.  Rep.  (N.  S.)  289;  Rawlins  v. 
Wickham,  3  DeG.  &  J.  304;  Jauncey 
V.  Knowles,  29  L.  J.  Gh.  95,  1  L.  T. 


(N.  S.)  116;  Eng.  Partnership  Act 
(1890),  §§  40,  4L 

95  Thompson  v.  Lowe,  111  Ind.  272, 
12  N.  E.  476;  Walmsley  v.  Mendel- 
sohn, 31  La.  Ann.  152;  Davis  v.  Davis, 
60  Aliss.  615. 

9«Lord  V.  Hull,  178  N.  Y.  9,  70 
N.  E.  69,  102  Am.  St.  484 ;  Fairthorne 
V.  Weston,  3  Hare  387,  8  Jur.  353. 

s^Rice  V.  Baggot,  54  Hun  637,  7 
N.  Y.  S.  518,  4  Silv.  383,  27  N.  Y. 
St.  181 ;  Williams  v.  Wilson,  4  Sandf. 
Gh.  (N.  Y.)  379;  Matter  of  Silk- 
man,  121  App.  Div.  202,  105  N.  Y. 
S.  872  (affd.  190  N.  Y.  560,  83  N. 
E.  1131)  ;  Hutchins  v.  Page,  204  Mass. 
284,  90  N.  E.  565,  134  Am.  St.  656; 
Moore  v.  Rawson,  199  Mass.  493,  85 
N.  E.  586;  Rammelsberg  v.  Mitchell, 
29  Ohio  St.  22.  See  In  re  Moore's 
Estate,  228  Pa.  523,  11  Atl.  902; 
Frear  v.  Lewis,  166  App.  Div.  210,  151 
N.  Y.  S.  486;  In  re  Wood,  34  Ont. 
L.  278,  8  Ont.  W.  N.  583.  Gompare 
Hirschberg  v.  Backer,  150  Wis.  207, 
149  N.  W.  383. 

98  Didlake  v.  Grocery  Go.,  160  Ala. 
484,  49  So.  384,  22  L.  R.  A.  (N.  S.) 
907;  Douthart  v.  Logan,  190  111.  243, 


895 


ACCOUNTING,    SETTLEMENT,    DlSTRIEb'TION 


§  661 


at  a  loss,  the  good-will  may  be  of  no  value. ^^  It  is  held  that  the 
value  of  the  good-will  of  a  business  at  the  death  of  a  partner  may 
be  estimated  by  the  annual  profits  before  that  time/  It  is  each 
partner's  right  to  have  the  good-will  of  the  business  converted 
into  cash,"  if  it  has  any  value. ^  The  rights  of  the  purchaser  of 
the  good-will,  and  of  a  former  partner  after  dissolution,  were 
considered  in  a  former  chapter.^ 

§  661.     Other   matters   to   be    included    in   accounting. — 

Claims  against  a  partner  held  by  the  firm  should  be  charged 
against  him  on  final  settlement'  and  claims  by  a  partner  against 


60  N.  E.  507;  Withers  v.  Mills,  153 
N.  Y.  S.  1016;  Kates  v.  Bok,  139  App. 
Div.  640,  124  N.  Y.  S.  297;  Smith 
V.  Wood,  12  N.  Y.  S.  724,  36  N.  Y. 
St.  847;  McCall  v.  Moschowitz,  14 
Daly  (N.  Y.)  16,  1  N.  Y.  St.  99,  10 
N.  Y.  Civ.  Proc.  107;  Van  Dyke  v. 
Jackson,  1  E.  D.  Smith  (N.  Y.)  419; 
Smith  V.  Greer,  7  Ont.  L.  Rep.  332; 
O'Keefe  v.  Curran,  17  Can.  Sup.  Ct. 
596  (revg.  15  Ont.  84,  afifg.  15  Ont. 
App.  103).  See  Ryan  v.  Franklin, 
199  N.  Y.  347,  92  N.  E.  673. 

99FarweIl  v.  Huling,  132  111.  112, 
23  N.  E.  438. 

1  Matter  of  Silkman,  121  App.  Div. 
202,  105  N.  Y.  S.  872  (affd.  190  N.  Y. 
560,  83  N.  E.  1131). 

2  Brooklyn  Trust  Co.  v.  McCutchen, 
189  Fed.  273.  See  Knapp  v.  Reed, 
88  Nebr.  754,  130  N.  W.  430,  32  L. 
R.  A.  (N.  S.)  869n,  Ann.  Cas.  1912 
B,  1095n;  Griffith  v.  Kirley,  189 
Mass.  522,  76  N.  E.  201;  Moore  v. 
Rawson,  185  Mass.  264,  70  N.  E.  64; 
McMurtrie  v.  Guiler,  183  Mass.  451, 
67  N.  E.  358;  Iman  v.  Inkster,  90 
Nebr.  704,  134  N.  W.  265;  Sheppard 
V.  Boggs,  9  Nebr.  257,  2  N.  W.  370 ; 
Slater  v.  Slater,  175  N.  Y.  143,  67 
N.  E.  244,  61  L.  R.  A.  796,  96  Am. 
St.  605  ;  Read  v.  Mackay,  47  Misc.  435, 


95  N.  Y.  S.  935,  17  N.  Y.  Ann.  Cas.  43  ; 
Dayton  v.  Wilkes,  17  How.  Pr.  (N. 
Y.)  510;  Snyder  Mfg.  Co.  v.  Snyder, 
54  Ohio  St.  86,  43  N.  E.  325,  31  L.  R. 
A.  657 ;  In  re  Wood,  34  Ont.  L.  278,  8 
Ont.  W.  N.  583  (rev.  8  Ont.  W.  N. 
267)  ;  Townsend  v.  Jarman  [1900],  2 
Ch.  698,  69  L.  J.  Ch.  823,  83  L.  T. 
Rep.  366,  49  Wkly.  Rep.  158. 

2  Snyder  Mfg.  Co.  v.  Snyder,  54 
Ohio  St.  86,  43  N.  E.  325,  31  L.  R. 
A.  657;  In  re  Musselman's  Appeal, 
62  Pa.  St.  81,  1  Am.  Rep.  382 ;  Dyer 
v.  Shove,  20  R.  I.  259,  38  Atl.  498; 
Rice  V.  Angell,  13  Tex.  350,  11  S. 
W.  338,  3  L.  R.  A.  769. 

4  See  ch.   12. 

5  Reynolds  v.  Locke,  218  Fed.  442, 
134  C.  C.  A.  242;  Cooper  v.  Olcott, 
1  App.  Cas.  (D.  C.)  123;  Scroggs 
V.  Cunningham,  81  111.  110;  Francis  v. 
Shearer,  16  S.  W.  365,  17  S.  W.  165, 
13  Ky.  L.  283;  Silver  v.  St.  Louis 
&c.  R.  Co.,  72  Mo.  194  (aflfg.  5  Mo. 
App.  381)  ;  Tygart  v.  Wilson,  39 
App.  Div.  58,  56  N.  Y.  S.  827 ;  Brown 
V.  McFarland,  41  Pa.  St.  129,  80  Am. 
Dec.  598;  Gorman  v.  Madden,  27  S. 
Dak.  319,  131  N.  W.  290;  Hancock 
V.  Heaton,  22  Wkly.  Rep.  784  (afifg. 
30  L.  T.  Rep.  (N.  S.)  592)  ;  Wright 
V.  Kane   (Nov.  Sc),  Cass.  Dig.  596; 


§  661 


LAW    OF    PARTNERSHIP 


896 


the  firm  on  firm  transactions  should  be  credited  to  him.*'  Claims 
concerning  individual  transactions  between  partners  and  not  con- 
nected with  partnership  affairs  have  no  place  in  a  partnership 
accounting/  If  the  rights  of  creditors  have  not  attached,  as 
between  partners  there  can  be  no  objection  if  an  individual  debt 
from  one  to  the  other  is  deducted  from  a  partnership  balance  due 
to  the  former  from  the  latter.^  Transactions  connected  with 
winding  up  firm  affairs  or  the  completion  of  firm  contracts  after 
dissolution  should  be  included  in  the  final  settlement,^  and  part- 
ners who  have  made  individual  use  of  firm  property  after  dis- 
solution, must  account,^"  but  any  other  transactions  between  part- 
ners after  dissolution,  which  occasion  merely  individual  liability 
from  one  to  the  other,  should  not  be  included/^    Unless  there  is 


Eng.  Partnership  Act  (1890),  §§  29, 
30.  See  Royster  v.  Johnson,  7Z  N. 
Car.  474. 

sNorthen  v.  Tatum,  164  Ala.  368, 
51  So.  17;  Roberts  v.  Eldred,  72,  Cal. 
394,  15  Pac.  16;  Ruth  v.  Flynn,  26 
Colo.  App.  171,  142  Pac.  194;  Gan- 
dolfo  V.  Appleton,  40  N.  Y.  533; 
Parker  v.  Parker,  65  Barb.  (N.  Y.) 
205;  Whittle  v.  McFarlane,  1  Knapp 
311,  12  Eng.  Reprint  338;  Lawton 
Saw  Co.  V.  Machum,  2  N.  Brunsw. 
Eq.  191. 

^Nirns  V.  Nims,  23  Fla.  69,  1  So. 
527;  Bishop  v.  Pendley,  138  Ga.  738, 
76  S.  E.  63 ;  Berry  v.  Powell,  18  111. 
98;  McMahon  v.  Brown,  219  Mass. 
23,  106  N.  E.  576 ;  Goldthwait  v.  Day, 
149  Mass.  185,  21  N.  E.  359;  Vaiden 
V.  Hawkins  (Miss.),  6  So.  227 
(1889)  ;  Crocker  v.  Barteau,  212  Mo. 
359,  110  S.  W.  1062;  Reid  v.  Mc- 
Questen,  61  N.  H.  421;  Caldwell  v. 
Leiber,  7  Paige  (N.  Y.)  483;  Looney 
V.  Gillenwaters,  11  Heisk.  (Tenn.) 
133. 

8  Jones  V.  Jones,  23  Ark.  212 ; 
Parker  v.  Parker,  65  Barb.  (N.  Y.) 
205. 


0  Little  V.  Caldwell,  101  Cai.  553, 
Z6  Pac.  107,  40  Am.  St.  89;  Daven- 
port V.  Henderson,  47  111.  74 ;  Per- 
kins V.  Stern,  152  Mass.  518,  25  N. 
E.  969 ;  Cowham  v.  Shipman,  164 
Mich.  419,  129  N.  W.  678;  Thomp- 
son V.  Noble,  108  Mich.  19,  65  N.  W. 
563;  Beller  v.  Murphy,  139  Mo.  App. 
663,  123  S.  W.  1029 ;  Harris  v.  Rosen- 
berg, 161  Pa.  St.  367,  29  Atl.  44; 
Kennedy  v.  Hill,  89  S.  Car.  462,  71 
S.  E.  974;  Carrere  v.  Whaley,  17  S. 
Car.  595 ;  McClean  v.  Kennard,  L.  R. 
9  Ch.  2?>6,  43  L.  J.  Ch.  323. 

loLigare  v.  Peacock,  109  111.  94; 
Freeman  v.  Freeman,  136  Mass.  260 ; 
McGraw  v.  Dole,  63  Mich.  1,  29  N. 
W.  477;  Chittenden  v.  Witbeck,  50 
Mich.  401,  15  N.  W.  526;  Grier  v. 
Strother,  153  Mo.  App.  292,  133  S. 
W.  404 ;  Pine  v.  Ormsbee,  2  Abb.  Pr. 
(N.  S.)  (N.  Y.)  375;  Stoughton  v. 
Lynch,  2  Johns.  Ch.  (N.  Y.)  209. 

11  Patterson  v.  Kellogg,  53  Conn.  38, 
22  Atl.  1096;  Goodburn  v.  Stevens, 
5  Gill.  (Md.)  1;  Candler  v.  Stange, 
53  Mich.  479,  19  N.  W.  154;  Ten- 
nant  v.  Guy,  49  Hun  610,  3  N.  Y. 
S.  697,  19  N.  Y.  St.  667;  Broughton 


897  ACCOUNTING,    SETTLEMENT,    DISTRIBUTION  §    662 

an  agreement  therefor,  express  or  implied,  there  is  no  right  to 
bring  into  the  accounting  matters  connected  with  a  previous  part- 
nership/" Where  the  partnership  was  formed  to  sell  land  under 
an  option,  and  the  land  was  not  sold  within  the  time  expressed  in 
the  option,  this  does  not  prevent  the  profits  from  being  con- 
sidered part  of  the  firm  assets." 

§  662.  Distribution,  generally. — Upon  an  accounting  be- 
tween partners,  it  is  usually  necessary,  in  order  to  determine  the 
respective  rights  of  each  partner,  to  first  determine  the  rights 
of  third  persons.  The  general  rule  is  thus  stated  :^*  "Undoubt- 
edly, the  usual  order  of  distribution  of  the  assets  of  a  copartner- 
ship upon  dissolution  is  as  stated  by  counsel,  to  wit :  ( 1 )  Pay- 
ment of  the  debts  or  liabilities  due  third  persons;  (2)  repaying 
to  each  partner  his  advances;  (3)  repaying  to  each  partner  his 
capital;  (4)  division  of  the  balance  as  profits.  While  this  is  the 
usual  order,  it  may  be  altered  by  agreement  of  the  parties,  and 
in  this  case  we  think,  from  the  evidence  and  the  conditions  un- 
der which  the  copartnership  was  formed  and  the  firm  business 
transacted,  the  referee  correctly  determined  that  the  amount  con- 
tributed by  the  several  partners  was  to  be  considered  as  assets  of 
the  firm,  and  to  be  distributed  accordingly."  In  one  case^^  the 
court  held  that :  "The  sum  advanced  must  be  repaid  before  the 
surplus  can  be  ascertained;  and  from  that  surplus  alone  can 
there  be  a  contribution;  then  to  each  partner  equally;  and  if  a 
loss  is  incurred,  its  ratio  must  be  ascertained  as  originally 
agreed  by  the  parties."  In  other  words,  the  law  holds  that  the 
primary  fund  for  the  payment  of  losses  is  the  capital,  and  that, 
consequently,  the  capital  must  share  last  in  any  of  the  assets  of 
the  firm,  upon  distribution,  making  the  partners,  as  such,  bear 

V.   Broughton,   44   L.   J.   Ch.   526,   23  Toulmin  v.   Copland,  3  Y.  &  C.  625 

Wkly.  Rep.  770;  Cane  v.  Macdonald,  (affd.  7  CI.  &  F.  350). 

10  Brit.  Col.  444;  O'Lone  V.  O'Lone,  i^  Thomas     v.    HolHngsworth,     181 

2  Grant  Ch.   (U.  C.)   125.  Ind.  411,  103  N.  E.  840. 

i2Burchard    v.    Boyce,    21    Ga.    6;  "  Groth  v.  Kersting,  23  Colo.  213, 

Beeson's    Appeal,    1    Sad.    (Pa.)    465,  47  Pac.  393   (1896). 

2     Atl.    683;     Nicholson     v.     Kinsey  i^  Legerman  v.  Bernheimer,  113  N. 

(Tenn.),    38    S.    W.     1033     (1896);  Y.  39,  20  N.  E.  869  (1889). 


§    663  LAW    OF    PARTNERSHIP  898 

the  losses  first.  The  creditors  of  the  firm  are  entitled  first  to  any 
assets  distributed,  according  to  their  respective  priorities.  The 
individual  partners  who  may  also  be  creditors,  as  such,  of  the 
firm,  are  likewise  entitled  to  partake  of  the  assets  before  any 
partner,  as  a  partner,  may  participate  therein,  but  are  second  to 
nonpartner  creditors,  inasmuch  as  each  partner  is,  as  heretofore 
shown,  liable  personally  for  firm  debts,  and  if  lie  were  allowed  to 
participate  equally  with  other  creditors,  and  there  should  be  a 
deficit,  and  creditors  not  be  paid  in  full,  it  would  result  in  a 
multiplicity  of  suits,  in  collecting  back  the  creditor  partner's  divi- 
dend for  the  benefit  of  nonpartner  creditors,  upon  his  partner- 
ship liability.  After  all  creditors  are  paid  in  full,  the  remaining 
assets,  if  any,  go  to  the  partners  as  such,  and  if  the  assets  are 
exhausted  before  all  creditors  are  fully  paid,  the  partners  are 
personally  liable  for  such  amount  as  will  pay  creditors.  Even 
among  nonpartner  creditors  there  may  be  priorities,  by  reason  of 
judgments,  or  other  liens.  Taxes,  costs,  etc.,  are  by  law  in  most 
states,  made  a  first  claim  upon  the  firm  assets  in  an  accounting. 
As  between  the  partners  themselves,  the  partnership  contract  may 
change  the  usual  rule  of  distribution,  and  it  may  even  be  stip- 
ulated that  one  or  more,  less  than  all,  of  the  partners  share  all 
the  loss,  or  that  remaining  assets  shall  be  distributed  to  part.  In 
such  cases,  excepting  agreements  against  public  policy,  or  fraud- 
ulent, the  law  will  follow  the  agreement  of  the  parties  as  to  dis- 
tribution, as  between  themselves. 

§  663.     Rules  for  distribution — Uniform  Partnership  Act. 

— The  Uniform  Partnership  Act  provides  the  following  rules 
for  distribution  :^'"'  "In  settling  accounts  between  the  partners  after 
dissolution,  the  following  rules  shall  be  observed,  subject  to  any 
agreement  to  the  contrary:  (a)  The  assets  of  the  partnership 
are:  I.  The  partnership  property,  II.  The  contributions  of  the 
partners  necessary  for  the  payment  of  all  the  liabilities  specified 
in  clause  (b)  of  this  paragraph,  (b)  The  liabilities  of  the  part- 
nership shall  rank  in  order  of  payment,  as  follows:    I.  Those 

'■'^Uniform  Partnership  Act.  §  40. 


899  ACCOUNTING,    SETTLEMENT,    DISTRIBUTION  §    664 

owing  to  creditors  other  than  partners,  II.  Those  owing  t(j  part- 
ners other  than  for  capital  and  profits,  III.  Those  owing  to  part- 
ners in  respect  of  capital,  IV.  Those  owing  to  partners  in  re- 
spect of  profits,  (c)  The  assets  shall  be  applied  in  the  order  of 
their  declaration  in  clause  (a)  of  this  paragraph  to  the  satisfac- 
tion of  the  liabilities,  (d)  The  partners  shall  contribute,  as  pro- 
vided by  section  18  (a),  the  amount  necessary  to  satisfy  the  lia- 
bilities; but  if  any,  but  not  all,  of  the  partners  are  insolvent,  or, 
not  being  subject  to  process,  refuse  to  contribute,  the  other  part- 
ners shall  contribute  their  share  of  the  liabilities,  and,  in  the 
relative  proportions  in  which  they  share  the  profits,  the  addi- 
tional amount  necessary  to  pay  the  liabilities,  (e)  An  assignee 
for  the  benefit  of  creditors  or  any  person  appointed  by  the  court 
shall  have  the  right  to  enforce  the  contributions  specified  in  clause 
(d)  of  this  paragraph,  (f)  Any  partner  or  his  legal  repre- 
sentative shall  have  the  right  to  enforce  the  contributions  speci- 
fied in  clause  (d)  of  this  paragraph,  to  the  extent  of  the  amount 
which  he  has  paid  in  excess  of  his  share  of  the  liability,  (g)  The 
individual  property  of  a  deceased  partner  shall  be  liable  for  the 
contributions  specified  in  clause  (d)  of  this  paragraph,  (h) 
When  partnership  property  and  the  individual  properties  of  the 
partners  are  in  the  possession  of  a  court  for  distribution,  part- 
nership creditors  shall  have  priority  on  partnership  property  and 
separate  creditors  on  individual  property,  saving  the  rights  of 
lien  or  secured  creditors  as  heretofore,  (i)  Where  a  partner 
has  become  bankrupt  or  his  estate  is  insolvent  the  claims  against 
his  separate  property  shall  rank  in  the  following  order :  I.  Those 
owing  to  separate  creditors,  II.  Those  owdng  to  partnership 
creditors.  III.   Those  owing  to  partners  by  way  of  contribution." 

§  664.  Determining  partner's  share — In  general. — The  de- 
termination of  a  partner's  share  is  made  by  a  conversion  of  the 
firm's  assets  into  money,  payment  of  firm  obligations,  and  di- 
vision of  the  balance  in  the  proportions  to  which  each  partner  is 
entitled.^^    Other  methods  of  determination  may  be  followed  by 

i^Torbe  V.  Strauss,  155  Wis.  518.     ington,   17  Wall.    (U.  S.)   417,  21   L. 
144  N.  W.  184,  1136;  Moore  v.  Hunt-     ed.  642;  Sigourney  v.  Munn,  7  Conn. 


§  665 


LAW    OF    PARTNERSHIP 


900 


agreement/^  Whenever  a  partner  has  taken  and  kept  a  portion 
of  the  firm  assets  and  prevented  their  vahiation,  or  sale,  he  may 
be  charged  with  their  fair  vahie/°  Valueless  portions  of  the  firm 
assets  should  not  be  included  in  reckoning  the  value  of  a  part- 
ner's share.^'*  Property  contributed  by  a  partner  to  the  firm 
should  be  credited  at  an  agreed  price  or  with  its  fair  valuation.-^ 
It  is  held  that  an  ofifer  to  purchase  may  be  regarded  as  the  basis 
of  the  value  of  the  assets,  although  the  name  of  the  proposed  pur- 
chaser is  not  revealed,"^ 


§  665.  Discharge  of  partnership  liabilities. — It  is  a  funda- 
mental and  elementary  rule  of  partnership  law  which  has  been 
many  times  stated  in  this  work  that  the  primary  liability  of  part- 
nership assets  is  to  pay  partnership  creditors.-^    Therefore,  all 


11;  Austin  v.  Da  Rocha,  23  La.  Ann. 
44;  Darby  v.  Darby,  3  Drew  495,  2 
Jur.  (N.  S.)  271;  Eng.  Partnership 
Act  (1890),  §  39.  See  Kennedy  v. 
Hill,  89  S.  Car.  462,  71  S.  E.  974; 
Machuca  v.  Chuidian,  2  Philippine 
210. 

IS  Coffey  V.  Coffey,  210  Mass.  480, 
96  N.  E.  1027;  Phillips  v.  Crown- 
field,  124  Md.  443,  92  Atl.  1030 ;  Cha- 
pin  V.  Chapin  (Mass.),  36  N.  E.  746 
(1894)  ;  Quinlivan  v.  English,  42  Mo. 
362;  Van  Horn  v.  Van  Horn  (N.  J.), 
20  Atl.  826;  Marquand  v.  New  York 
Mfg.  Co.,  17  Johns.  (N.  Y.)  525; 
Holloway  v.  Prick,  149  Pa.  St.  178, 
24  Atl.  201 ;  Kennedy  v.  Hill,  89  S. 
Car.  462,  71  S.  E.  974 ;  Veck  v.  Cul- 
bertson  (Tex.  Civ.  App.),  42  S.  W. 
253;  Bell  v.  Barnett,  21  Wkly.  Rep. 
119. 

"Gillett  V.  Hall,  13  Conn.  426; 
Thomas  v.  Winchester  Bank,  105  Ky. 
694,  49  S.  W.  539,  20  Ky.  L.  1502; 
Bush  V.  Guion,  6  La.  Ann.  797; 
Hutchins  v.  Page,  204  Mass.  284,  90 
N.  E.  565,  134  Am.  St.  656;  Randle 


V.  Richardson,  53  Miss.  176;  Phil- 
Hps  V.  Reeder,  18  N.  J.  Eq.  95; 
Turner  v.  Weston,  133  N.  Y.  650,  31 
N.  E.  91 ;  White  v.  Reed,  124  N.  Y. 
468,  26  N.  E.  1037;  Peck  v.  Knapp, 
137  N.  Y.  S.  70;  Barclay's  Appeal, 
5  Sad.  (Pa.)  26,  8  Atl.  169;  Evans 
V.  Weatherhead,  24  R.  I.  394,  53  Atl. 
286;  Stinson  v.  Barley  (Va.),  4  S. 
E.  531  (1892).  See  Oustad  v.  Hahn, 
27  N.  Dak.  334,  146  N.  W.  557. 

20Douthart  v.  Logan,  190  111.  243, 
60  N.  E.  507  (affg.  86  111.  App.  294). 

21  Wolf  V.  Levi,  33  S.  W.  418,  17 
Ky.  L.  1024;  Flagg  v.  Stowe,  85  111. 
164;  Scudder  v.  Budd,  52  N.  J.  Eq. 
320,  26  Atl.  904;  Goldman  v.  Rosen- 
berg, 116  N.  Y.  78,  22  N.  E.  259; 
Leonard  v.  Martin,  52  Barb.  (N.  Y.) 
113;  Frierson  v.  Morrow  (Tenn.), 
48  S.  W.  245  (1898)  ;  Cooke  v.  Ben- 
bow,  3  DeG.,  J.  &  S.  1,  6  New  Rep. 
135. 

22  Peck  V.  Knapp,  137  N.  Y.  S.  70. 

23  See  ch.  17.  See  also  ante  §§  662, 
663. 


901 


ACCOUNTING,    SETTLEMENT,    DISTRIBUTION 


§    666 


firm  debts  must  be  paid  before  any  partner  is  entitled  to  any  por- 
tion of  the  assets  of  the  firm."*  "Until  the  creditors  are  paid  no 
member  of  the  firm  can  recover,  for  his  own  use,  any  part  of  the 
partnership  assets."'^  Further,  before  a  partner  can  claim  a  por- 
tion of  the  firm  assets  to  his  own  use,  debts  of  the  firm  to  part- 
ners must  be  paid,  this  being  the  second  liability  imposed  on  the 
partnership  assets,^*'  and  interest  on  advancements  to  a  partner, 
if  there  is  an  express  or  implied  agreement  to  pay  interest. ^^ 

§  666.     Contribution — Repayment  of  advances. — Partners 
after  the  partnership  has  been  closed-^  or  where  there  is  an  agree- 


-*  Honore  v.  Colmesnil,  1  J.  J. 
Marsh.  (Ky.)  506;  Brewer  v.  John- 
son (Ark.),  112  S.  W.  364;  Bishop 
V.  Pendley,  138  Ga.  738,  76  S.  E.  63 ; 
Page  V.  Thompson,  23  Ind.  137; 
Hirsch-Wickwire  Co.  v.  Denison 
Clothing  Co.,  158  Iowa  117,  138  N. 
W.  1101;  Ward  v.  Brandt,  11  Mart. 
(O.  S.)  (La.)  331,  13  Am.  Dec.  352; 
Mourain  v.  Delamarre,  2  La.  Ann. 
142;  Conkling  v.  Washington  Uni- 
versity, 2  Md.  Ch.  497;  Pease  v. 
Rush,  2  Minn.  107  (Gil.  89)  ;  Gaines 
V.  Coney,  51  Miss.  323 ;  Lawson  v. 
Dunn,  66  N.  J.  Eq.  90,  57  Atl.  415; 
Burger  v.  Robinson,  81  Misc.  678,  143 
N.  Y.  S.  530;  Woolverton  v.  Austin, 
57  App.  Div.  347,  68  N.  Y.  S.  47; 
Martin  v.  Carlisle  (Okla.),  148  Pac. 
833 ;  White  v.  Union  Ins.  Co.,  1  Nott 
&  McC.  (S.  Car.)  556,  9  Am.  Dec. 
726.  A  partner  in  an  equitable  action 
for  an  accounting  has  the  right  to 
require  payments  by  the  other  part- 
ner from  firm  funds  to  be  applied 
to  firm  debts,  and  that  nothing  shall 
be  credited  on  a  copartner's  debts, 
save  payments  by  him  from  his  in- 
dividual funds.  Hirsch-Wickwire  Co. 
V.  Denison  Clothing  Co.,  158  Iowa 
117,   138   N.  W.   1101. 

25  Powell  V.  Bennett,  131  Ind.  465, 
30  N.  E.  518. 


26  Henderson  v.  Ries,  108  Fed.  709, 
47  C.  C.  A.  625;  Nims  v.  Nims,  23 
Fla.  69,  1  So.  527 ;  Snell  v.  De  Land, 
136  III.  533,  27  N.  E.  183;  Whitney 
v.  Whitney,  115  Ky.  552,  24  Ky.  L. 
2465,  74  S.  W.  194,  88  S.  W.  311,  27 
Ky.  L.  1197;  Matthews  v.  Adams,  84 
Md.  143,  35  Atl.  60 ;  Beck  v.  Thomp- 
son, 22  Nev.  368,  40  Pac.  516;  Mason 
V.  Gibson,  73  N.  H.  190,  60  Atl.  96; 
Leserman  v.  Bernheimer,  113  N.  Y. 
39,  20  N.  E.  869 ;  Rodgers  v.  Clement, 
15  App.  Div.  561,  44  N.  Y.  S.  516 
(revd.  on  other  grounds  in  162  N. 
Y.  422,  56  N.  E.  901,  76  Am.  St. 
342)  ;  Christman  v.  Baurichter,  31 
Leg.  Int.  (Pa.)  68,  10  Phila.  115; 
Robertson  v.  Read,  17  Grat.  (Va.) 
544;  Gorman  v.  Madden,  27  S.  Dak. 
319,  131  N.  W.  290;  Bury  v.  Allen, 
1  Coll.  589,  66  Rev.  Rep.  200,  28  Eng. 
Ch.  589.  See  ch.  17,  on  application 
of  assets.  See  also  ante  §§  662,  663, 
on  distribution. 

-''  Thomas  v.  Winchester  Bank,  105 
Ky.  694,  49  S.  W.  539,  20  Ky.  L.  1502 ; 
Lee  V.  Lashbrooke,  8  Dana  (Ky.) 
214;  Young  v.  Barras,  74  Mich.  343, 
42  N.  W.  42;  Folsan  v.  Marlette, 
23  Nev.  459,  49  Pac.  39;  Rodgers  v. 
Clement,  162  N.  Y.  422,  56  N.  E.  901, 
76  Am.  St.  342. 

28  Johnson    v.    Peck,    58   Ark.    580, 


§  666 


LAW    OF    rARTNERSHIP 


902 


ment  between  such  partners  to  adjust  a  single  item  without  a 
general  accounting,*^  may  enforce  contributions  when  the  parties 
arc  in  equity,  and  one  of  them  has  been  compelled  to  pay  the 
whole  or  more  than  his  share  on  the  obligation,""  and  if  there  are 
no  firm  assets  with  which  to  indemnify  such  partner,  he  has  a 
right  to  compel  his  copartners  to  contribute,"^  equally  if  there  is 
no  agreement,^"  otherwise  in  the  proportion  in  which  profits  are 
to  be  shared.""  Where  some  of  the  partners  are  insolvent,  or  are 


25  S.  W.  865 ;  Mussetter  v.  Timmer- 
man,  11  Colo.  201,  17  Pac.  504;  Bur- 
gess V.  Badger,  124  111.  288,  14  N.  E. 
850;  Downs  v.  Jackson,  33  111.  464, 
85  Am.  Dec.  289 ;  Warring  v.  Hill,  89 
Ind.  497;  Tibbetts  v.  Magruder,  9 
Dana  (Ky.)  79;  Maginnis  v.  Crosby, 
11  La.  Ann.  400;  Smith  v.  Ayrault, 
71  Mich.  475,  39  N.  W.  724,  1  L.  R. 
A.  311;  Wendlandt  v.  Sohre,  37 
Minn.  162,  33  N.  W.  700;  Bohrer  v. 
Drake,  33  Minn.  408,  23  N.  W.  840; 
Lyons  V.  Murray,  95  Mo.  23,  8  S.  W. 
170,  6  Am.  St.  17;  Mendez  v.  Schleu- 
ter,  9  N.  Y.  S.  278,  30  N.  Y.  St.  150 ; 
Buie  V.  Kennedy,  164  N.  Car.  290,  80 
S.  E.  445 ;  Gardner  v.  Conn,  34  Ohio 
St.  187 ;  Jenkins  v.  Jenkins,  66  Ore. 
12.  132  Pac.  542;  Wall  v.  Fife,  37 
Pa.  St.  394;  Brown  v.  Agnew,  6 
Watts  &  S.  (Pa.)  235;  Gorman  v. 
Madden,  27  S.  Dak.  319,  131  N.  W. 
290;  Isler  v.  Outlaw,  4  Humph. 
(Tenn.)  118;  Sullivan  v.  Sullivan, 
122  Wis.  326,  99  N.  W.  1022;  Wells 
V.  McGeoch,  71  Wis.  196,  35  N.  W. 
769 ;  Honsinger  v.  Love,  16  Ont.  170. 

-''Foster  v.  Allanson,  2  T.  R.  479; 
Blakely  v.  Graham,  111  Mass.  8;  Gib- 
son V.  Moore,  6  N.  H.  547. 

30  "The  right  to  contributions  being 
founded  in  natural  justice,  is  not  re- 
stricted to  any  special  relation,  but 
applies  to  original  contractors,  or 
any  other  relation,  where  equity  be- 
tween the  parties  is  equality  of  bur- 


den, and  one  discharges  more  than 
his  share  of  the  common  obligation." 
Bragg  V.  Patterson,  85  Ala.  233,  4  So. 
716. 

31  Burgess  v.  Badger,  124  111.  288, 
14  N.  E.  850 ;  Warring  v.  Hill,  89  Ind. 
497;  Tibbetts  v.  Magruder,  9  Dana 
(Ky.)  79;  Maginnis  v.  Crosby.  11  La. 
Ann.  400 ;  Smith  v.  Ayrault,  71  Mich. 
475,  39  N.  W.  724,  1  L.  R.  A.  311; 
Bohrer  v.  Drake,  33  Minn.  408,  23  N. 
W.  840;  Lyons  v.  Murray,  95  Mo. 
23,  8  S.  W.  170,  6  Am.  St.  17; 
Mendez  v.  Schleuter,  9  N.  Y.  S.  278, 
30  N.  Y.  St.  150;  Buie  v.  Kennedy. 
164  N.  Car.  290,  80  S.  E.  445 ;  Gard- 
ner V.  Conn,  34  Ohio  St.  187 ;  Jenkins 
V.  Jenkins,  66  Ore.  12,  132  Pac.  542; 
Wall  V.  Fife,  37  Pa.  St.  394;  Gor- 
man V.  Madden,  27  S.  Dak.  319,  131 
N.  W.  290 ;  Isler  v.  Outlaw,  4  Humph. 
(Tenn.)  118;  Danforth  v.  Levin 
(Tex.  Civ.  App.),  156  S.  W.  569; 
Sullivan  V.  Sullivan,  122  Wis.  326.  99 
N.  W.  1022 ;  Honsinger  v.  Love,  16 
Ont.  170;  Lamb  v.  North,  22  Man. 
360;  Ex  parte  Good,  5  Ch.  Div.  46. 
46  L.  J.  Bankr.  65,  35  L.  T.  Rep.  (N. 
S.)  554;  Sedgwick  v.  Daniell,  2  H. 
&  N.  319,  27  L.  J.  Exch.  116;  Eng. 
Partnership  Act  (1890),  §  24;  Cal. 
Civ.  Code,   §  1432. 

32  Yatsuyanage  v.  Shimamura,  59 
Wash.  24,  109  Pac.  282;  Eng.  Part- 
nership Act  (1890).  §  24  (1). 

33  Flagg  V.  Stowe,  85  111.  164;  Whit- 


903 


ACCOUNTING,    SETTLEMENT,    DISSOLUTION 


§  666 


nonresidents,  the  others  must  contribute  to  the  loss  as  if  the  in- 
solvent or  nonresident  partners  were  not  members  of  the  firm."* 
This  duty  of  contribution  is  probably  imposed  by  law  as  an 
element  of  the  relation,^^  though  it  has  been  said  to  arise  from 
the  implied  agreement  of  the  parties. "'^  The  right  to  enforce  con- 
tribution may  be  lost  by  misconduct,^^  or  contracted  away.^*  It 
was  seen  that  debts  owing  to  a  partner  by  the  firm  for  advances 
made  to  it  in  addition  to  capital  must  be  repaid  in  full  if 
firm  assets  are  sufficient,  otherwise  ratably,  before  his  share 
can  be  ascertained."^  He  should  be  credited  with  all  moneys 
properly  expended,  for  the  common  enterprise,  whether  of  ma- 
terial benefit  or  not.'**^  A  partner  should  be  charged  with  ad- 
vances made  by  the  firm  to  him  individually,'*^  and  if  his  share  in 
firm  profits  or  firm  assets  are  insufiicient  to  repay  his  share  he  is 


comb  V.  Converse,  119  Mass.  38,  20 
Am.  Rep.  311 ;  In  re  Albion  L.  Assur. 
Soc,  16  Cb.  Div.  83. 

24:Whitcomb  v.  Converse,  119  Mass. 
38,  20  Am.  Rep.  311;  Whitman  v. 
Porter,  107  Mass.  522 ;  Scott  v. 
Bryan,  96  N.  Car.  289,  3  S.  E.  235; 
Henry  v.  Jackson,  Zl  Vt.  431 ;  Lamb 
V.  North,  22  Man.  360;  Ex  parte 
Plowden,  2  Deac.  456,  3  Mont.  &  A. 
402. 

35  Pollock  Dig.  Partnership  (Sth 
ed.),  72. 

36  Sells  V.  Hubbell,  2  Johns.  Ch. 
(N.  Y.)  394;  Wright  v.  Hunter,  1 
East  20,  5  Ves.  Jr.  792,  31  Eng.  Re- 
print 861. 

37  Morris  v.  Neel,  78  Ga.  797,  3  S.  E. 
643;  Clayton  v.  Davett  (N.  J.  Eq.), 
38  Atl.  308  (1897)  ;  Thomas  v.  Ather- 
ton,  10  Ch.  D.  185,  48  L.  J.  Cb.  370,  40 

L.  T.  (N.  s.)  n. 

38McCormick  v.  Stofer,  12  S.  W. 
151,  11  Ky.  L.  Rep.  398;  Scudder  v. 
Ames,  142  Mo.  187,  43  S.  W.  659; 
McFadden  v.  Leeka,  48  Ohio  St.  513, 
28  N.  E.  874;  Magilton  v.  Stevenson, 
173  Pa.  St.  560,  34  Atl.  235. 

7 — Row.  ON  Partn. — Vol.  2 


39Nims  V.  Nims,  23  Fla.  69,  1  So. 
527;  Allen  v.  Hawley,  6  Fla.  142,  63 
Am.  Dec.  198 ;  Heffron  v.  Gore,  40  III. 
App.  257 ;  Turner  v.  Turner,  9  Ky.  L. 
456,  5  S.  W.  457 ;  Matthews  v.  Adams 
(Md.),  ZZ  Atl.  645  ;  Conkling  v.  Wash- 
ington University,  2  Md.  Ch.  497; 
Young  V.  Barras,  74  Mich.  343,  42  N. 
W.  42;  Beck  v.  Thompson,  22  Nev. 
368,  40  Pac.  516;  Leserman  v.  Bern- 
heimer,  113  N.  Y.  39,  20  N.  E.  869; 
Huey  V.  Christ,  232  Pa.  131, 
81  Atl.  159;  Christman  v.  Bau- 
richter,  31  Leg.  Int.  (Pa.)  68, 
10  Phila.  115;  Gorman  v.  Madden,  27 
S.  Dak.  319,  131  N.  W.  290;  Ex  parte 
Shepherd,  3  Tenn,  Cb.  189.  See  ante 
§  665,  on  discbarge  of  partnership 
liabilities. 

^<>  Campbell  v.  Northwest  Ecking- 
ton  Imp.  Co.,  229  U.  S.  561,  57  L. 
ed.  1330,  ZZ  S.  Ct.  796,  revg.  decree 
Zd  App.  D.  C.  149. 

41  Sandias  v.  Mustacchi,  153  App. 
Div.  810,  138  N.  Y.  S.  875;  Gorman 
v.  Madden,  27  S.  Dak.  319,  131  N.  W. 
290. 


§  (^(>7 


LAW    OF    PARTNERSHIP 


904 


personally  liable  for  the  remainder,*-  It  is  provided  by  the  Uni- 
form Partnership  Act  that,  in  the  absence  of  agreement,  "each 
partner  shall  be  repaid  his  contributions,  whether  by  way  of 
capital  or  advances  to  the  partnership  property,  and  share  equally 
in  the  profits  and  surplus  remaining  after  all  liabilities,  including 
those  to  partners,  are  satisfied;  and  must  contribute  toward  the 
losses,  whether  of  capital  or  otherwise,  sustained  by  the  part- 
nership according  to  his  share  in  the  profits."*^  And  that  "the 
partnership  must  indemnify  every  partner  in  respect  to  pay- 
ments made  and  personal  liabilities  reasonably  incurred  by  him 
in  the  ordinary  and  proper  conduct  of  its  business,  or  for  the 
preservation  of  its  business  or  property."** 

§  667.  Compensation  for  services  and  expenses  of  v\7inding 
up  business. — As  a  general  rule,  there  is  no  right  to  com- 
pensation for  services  after  dissolution  in  winding  up  the  firm 
business,  since  each  partner  is  under  a  duty  implied  from  the 
relation  to  render  his  services  in  winding  up,*^  or,   generally 


42  Sandias  v.  Mustacchi,  153  App. 
Div.  810,  138  N.  Y.  S.  875;  Gorman 
V.  Madden,  21  S.  Dak.  319,  131  N.  W. 
290. 

43  Uniform  Partnership  Act,  § 
18  (a). 

44  Uniform  Partnership  Act,  % 
18   (c). 

4s  Lyman  v.  Lyman,  2  Paine  11, 
Fed.  Cas.  No.  8628;  Shelton  v. 
Knig,ht,  68  Ala.  598;  Kimball  v.  Lin- 
coln, 5  III..  App.  316;  McFarland  v. 
McCormick,  114  Iowa  368,  86  N.  W. 
369;  Wiggins  v.  Brand,  202  Mass. 
141,  88  N.  E.  840;  Hoag  v.  Alder- 
man, 184  Mass.  217,  68  N.  E.  199; 
Dunlap  V.  Watson,  124  Mass.  305; 
Loomis  V.  Armstrong,  49  Mich.  521, 
14  N.  W.  505;  Lamb  v.  Wilson,  3 
Nebr.  (Unof.)  496,  92  N.  W.  167; 
Burgess  v.  Badger,  83  Hun  488; 
31  N.  Y.  S.  614,  64  N.  Y.  St.  327; 
Ames  V.  Downing,  1  Bradf.  Sur.  (N. 
Y.)  321 ;  Hellman  v.  Mendel,  6  Ohio 


Dec.  (reprint)  829,  8  Am.  L.  Rec. 
360;  Stockdale  v.  Maginn,  207  Pa. 
226,  56  Atl.  439;  Brown  v.  McFar- 
land, 41  Pa.  St.  129,  80  Am.  Dec. 
598;  Beatty  v.  Wray,  19  Pa.  St.  516, 
57  Am.  Dec.  677;  Murphy  v.  Mar- 
vel, 49  Pa.  Super.  Ct.  576;  Brien  v. 
Harriman,  1  Tenn,  Ch.  467;  Phoe- 
nix Land  Co.  v.  Exall  (Tex.  Civ. 
App.),  159  S.  W.  474;  Forrer  v. 
Forrer,  29  Grat.  (Va.)  134;  Sand- 
berg  v.  Scougale,  75  Wash.  313,  134 
Pac.  1051;  Smith  v.  Brown,  44  W. 
Va.  342,  30  S.  E.  160;  Liggett  v. 
Hamilton,  24  Can.  Sup.  Ct.  665 ; 
Livingston  v.  Livingston,  7  Ont.  W. 
N.  406  (mod.  26  Ont.  L.  246)  ;  Mac- 
donald  v.  Richardson,  1  Giffard  81,  5 
Jur.  (N.  S.)  9,  10  L.  T.  Rep  (N.  S.) 
166;  Whittle  v.  McFarlane,  1  Knapp 
311,  12  Eng.  Reprint  338;  Eng.  Part- 
nership Act  (1890),  §  24  (6)  ;  Cal. 
Civ.  Code,  §  2413.    See  ante  §  352. 


905  ACCOUNTING,    SETTLEMENT,    DISSOLUTION  §    667 

speaking,  for  any  other  services. ■*"  But  there  may  be  an  ex- 
press,*" or  impHed  agreement  for  compensation  which  the  courts 
will  enforce;*®  or  compensation  may  sometimes  be  allowed  for 
services  more  than  ordinarily  beneficial;*^  or  where  the  miscon- 
duct of  a  copartner  has  made  them  necessary  ;^°  or,  in  many  juris- 
dictions, to  a  surviving  partner  who  winds  up  affairs  after  his 
copartner's  death. ^^  "There  are  certain  well-recognized  excep- 
tions to  the  general  rule  where  the  circumstances  are  extraordi- 
nary and  more  is  done  by  the  surviving  partner  than  the  mere 
work  of  selling  the  property,  receiving  the  moneys  due  the  firm, 
paying  the  debts  and  making  distribution.  Thus  where  it  is  nec- 
essary to  continue  the  business  to  realize  the  most  from  the  as- 
sets, and  the  continuance  is  by  authority  of  law  and  is  assented 
to  by  the  legal  representative,  or  to  continue  it  to  complete  spe- 
cific work  undertaken  by  the  partnership  and  unfinished  at  the 
time  of  the  death  of  one  partner  and  the  completion  of  the  Avork 
requires  a  large  amount  of  work  to  be  done  by  the  survivor, 
principles  of  equity  permit  an  allowance  for  the  extra  service. 
And  even  when  the  business  is  continued  by  the  survivor  with- 
out the  consent  of  the  personal  representative  and  a  profit  is 
realized,  such  survivor  is  usually  entitled  to  compensation  if  the 
estate  elects  to  share  in  the  profits."^"  By  the  Uniform  Partner- 
's See  ch.  13,  §  350  et  seq.  135  Pac.  841 ;  Maynard  v.  Richards, 
47  Gray  v.  Hamll,  82  Ga.  375,  10  166  111.  466,  46  N.  E.  1138,  57  Am. 
S.  E.  205,  6  L.  R.  A,  12;  Pierce  St.  145  (aff.  61  111.  App.  ZZl)  ;  Thay- 
V.  Cubberly,  19  Ind.  157 ;  Gar-  er  v.  Badger,  171  Mass.  279,  50  N.  E. 
retson  v.  Brown,  185  Pa.  St.  447,  541;  Lamb  v.  Wilson,  3  Nebr.  (Un- 
40  Atl.  293;  Murphy  v.  Marvel,  49  of.)  496,  92  N.  W.  167;  McCul- 
Pa.  Super.  576.  lough  v.  Barr,  145  Pa.  St.  459,  22 
48Utley  V.  Smith,  24  Conn.  290,  Atl.  962;  In  re  Zell's  Appeal,  126 
63  Am.  Dec.  163 ;  Maynard  v.  Pa.  St.  329,  17  Atl.  647. 
Richards,  166  111.  466,  46  N.  E.  so  Mattingly  v.  Stone,  35  S.  W. 
1138,  57  Am.  St.  145  (affirming  921,  18  Ky.  L.  187;  Clement  v.  Dit- 
61  111.  App.  336)  ;  Honore  v.  Colmes-  terline,  11  S.  W.  658,  11  Ky.  L.  294; 
nil,  1  J.  J.  Marsh.  (Ky.)  506;  Hutch-  Airey  v.  Borham,  29  Beav.  620,  4 
inson  V.  Onderdonk,  6  N.  J.  Eq.  277  L.  T.  Rep.  (N.  S.)  391,  54  Eng.  Re- 
(revd.  on  the  facts  in  6  N.  J.  Eq.  print  768. 
632)  ;  Bradley  v.  Chamberlin,  16  Vt.  ^i  See  ch.  20,  §  637. 
613.  "Harrah  v.  Dyer,  180  Ind.  229, 
49  Jones  V.  Marshall,  24  Idaho  678,     102  N.  E.  14. 


§  668 


LAW    OF    PARTNERSHIP 


906 


ship  Act :  "No  partner  is  entitled  to  remuneration  for  acting  in 
the  partnership  business,  except  that  a  surviving  partner  is  en- 
titled to  reasonable  compensation  for  his  services  in  winding  up 
partnership  affairs."^^  Reasonable  expenses  lawfully  incurred  by 
a  partner  upon  winding  up  should  be  allowed  to  a  partner's 
credit/* 

§  668.  Interest. — As  a  general  rule  there  is  no  right  to 
interest  on  capital,^^  unless  it  has  been  so  agreed,^*^  and  then  there 
is  no  right  to  interest  after  dissolution.^^  Generally  there  is  no 
right  to  interest  on  balances,  in  the  absence  of  agreement.^'^ 
Where  a  partner  holds  balances  after  dissolution,  he  is  not  to  be 
charged  with   interest  unless  there  is   an  agreement,^^  or  the 


53  Uniform  Partnership  Act,  § 
18   (f). 

54  Lewis  V.  Loper,  54  Fed.  237 ; 
Brownell  v.  Steere,  128  111.  209,  21 
N.  E.  3  (affg.  29  111.  App.  358); 
Pratt  V.  McHatton,  11  La.  Ann.  260; 
Tyng  V.  Thayer,  8  Allen  (Mass.) 
391;  Converse  v.  Hobbs,  64  N.  H. 
42,  5  Atl.  832;  Peck  v.  Knapp,  137 
N.  Y.  S.  70;  Rockefeller  v.  More- 
house, 4  Ohio  Dec.  247  (1  Clev.  L. 
Rep.  158)  ;  In  re  Kalbfell,  27  Pittsb. 
Leg.  J.  (N.  S.)  210;  Bufford  v.  Ash- 
croft,  72  Tex.  104,  10  S.  W.  346; 
Fish  V.  Thompson,  68  Vt.  273,  35 
Atl.  174;  Sandberg  v.  Scougale,  75 
Wash.  313,  134  Pac.  1051. 

55Julliard  V.  Orem,  70  Md.  465, 
17  Atl.  333;  St.  Paul  Trust  Co.  v. 
Finch,  52  Minn.  342,  54  N.  W.  190; 
Rodgers  v.  Clement,  162  N.  Y.  422, 
56  N.  E.  901,  76  Am.  St.  342 ;  Bren- 
ner V.  Carter,  10  Pa.  Dist.  457;  Wil- 
son V.  McCarty,  13  Can.  L.  J.  (N. 
S.)  303;  Jardine  v.  Hope,  19  Grant. 
Ch.  (U.  C.)  76.   See  ante,  §  362. 

scTaft  V.  Schwamb,  80  111.  289; 
Keiley  v.  Turner,  81  Md.  269,  31 
Atl.  700;  Wells  v.  Babcock,  56  Mich. 
276,  22  N.  W.  809,  27  N.  W.  575; 


Kennedy  v.  Hill,  89  S.  Car.  462,  71 
S.  E.  974;  Bartlett  v.  Boyles,  66  W. 
Va.  327;  Barfield  v.  Loughborough, 
L.  R.  8  Ch.  1. 

57  St.  Paul  Trust  Co.  v.  Finch,  52 
Minn.  342,  54  N.  W.  190;  Lesser- 
man  V.  Bernheimer,  45  Hun  590,  10 
N.  Y.  St.  47;  Mosapp  v.  Stevens, 
158  App.  Div.  874,  142  N.  Y.  S.  690. 

sspalkner  v.  Hendy,  80  Cal.  636, 
22  Pac.  401;  McFarland  v.  McCor- 
mick,  114  Iowa  368,  86  N.  W.  369; 
Bradley  v.  Brigham,  137  Mass.  545 ; 
Kirkwood  v.  Smith,  132  App.  Div. 
758,  117  N.  Y.  S.  686;  Van  Loon  v. 
Lindsay,  12  (Pa.)  Luz.  Leg.  Reg. 
(N.  S.)  93;  Barfield  v.  Loughbor- 
ough, L.  R.  8  Ch.  1.    See  ante,  §  362. 

59  Wilson  v.  Wilkinson,  97  Ga.  814, 
25  S.  E.  908 ;  Ashbrook  v.  Ashbrook, 
28  S.  W.  660,  16  Ky.  L.  593;  Lamb 
V.  Rowan,  83  Miss.  45,  35  So.  427, 
690;  Campbell  v.  Coquard,  93  Mo. 
474,  6  S.  W!  360;  Smith  v.  Smith, 
18  R.  I.  722,  29  Atl.  584,  30  Atl.  602 ; 
Hart  v.  Hart,  117  Wis.  639,  94  N. 
W.  890;  Ewing  v.  Ewing,  8  App. 
Cas.  822 ;  Pirn  v.  Harris,  Ir.  R.  10  Eq. 
442 ;  Beater  v.  Murray,  19  Wkly.  Rep. 


907                     ACCOUNTING,    SETTLEMENT,    DISSOLUTION  |    668 

equitable  circumstances  seem  to  require  a  charge  of  interest,"" 

as  where  he  holds  the  money  for  an  unreasonable  time,*'^  or 
wrongfully  refuses  to  turn  it  over."    Ordinarily,  the  right  of  a 

partner  to  interest  on  advances  is  recognized,"^  though  in  some 
states  the  contrary  is  held,  unless  authorized  by  agreement.®* 

92;  Watney  v.  Wells,  9  Jur.  (N.  S.)  N.   E.    193;    Robbins   v.   Laswell,   58 

396,  32  L.  J.  Ch.  194.  111.   203;    Sanders   v.    Scott,    68    Ind. 

GO  Donahue    v.    McCosli,    70    Iowa  130;   Turner  v.   Otis,   30  Kans.    1,    1 

7oZ,  30  N.  W.  14;  Lovejoy  v.  Bailey,  Pac.   19;   Taylor  v.   Young,   2   Bush 

214  Mass.  134,  101  N.  E.  63;  Leser-  (Ky.)    428;    Honore  v.    Colmesnil,   7 

man    v.    Bernheimer,    113    N.    Y.    39,  Dana  (Ky.)   199;  Bowling  v.  Dobyns, 

20  N.  E.  869;  Johnson  v.  Hartshorne,  5   Dana    (Ky.)    434;   Powell  v.   Hor- 

52  N.  Y.  173 ;  Stoughton  v.  Lynch,  2  rell,  92  Mo.  App.  406 ;  Blum  v.  Mayer, 

Johns.    Ch.    (N.    Y.)    209;    Beacham  189  N.  Y.   153,  81   N.   E.  780    (affg. 

V.    Eckford,   2    Sandf.   Ch.    (N.    Y.)  113   N.  Y.  App.   Div.  247,  99  N.  Y. 

116;  Andrews  v.  Andrews,  3  Bradf.  S.  25);   White  v.   White,   55   N.   Y. 

Sur.    (N.  Y.)   99;  Holden  v.  Peace,  Super.    Ct.    417,    14    N.   Y.    St.   738; 

39   N.    Car.   223,   45   Am.    Dec.   514;  Ahl  v.  Ahl,   186  Pa.   St.  99,  40  Atl. 

In  re  Gyger's  Appeal,  62  Pa.  St.  72,  405 ;    Corralitos    Co.    v.    Mackay,    31 

1   Am.  Rep.  382;   Swepson  v.   Davis  Tex.  Civ.  App.  316,  72  S.  W.  624. 

(Tenn.),     60     S.     W.     619     (1900);  cs  McCall    v.    Moss,    112    111.    493 

Hutcheson  v.   Smith,   5   Ir.   Eq.   117.  Wolf  v.  Levi,  2>Z  S.  W.  418,  17  Ky 

Compare    Phillips    v.    Reynolds,    236  L.    1024;    Hoss'    Succession,    42    La 

111.  119,  86  N.  E.  193.  Ann.   1022,  8   So.   833;    Matthews   v 

GiBeale   v.    Beale    (111.),   2    N.   E.  Adams,    84    Md.    143,    35    Atl.    60 

65    (1885)  ;    Randolph    v.    Inman,    71  Keiley  v.  Turner,  81  Md.  269,  31  Atl 

111.   App.    176;   Harrah  v.    Dyer,    180  700;     Winchester     v.     Glazier,      152 

Ind.  229,  102  N.  E.  14 ;  Hite  v.  Hite,  Mass.  316,  25  N.  E.  728,  9  L.  R.  A. 

1  B.  Alon.  (Ky.)   177;  Klotz  v.  Mac-  424;   Dougherty  v.  Van  Nostrand,   1 

cready,  39  La.  Ann.  638,  2  So.  203;  Hoff.    Ch.    (N.    Y.)    68;    Wayne    v. 

Wiggins  V.  Brand,  202  Mass.  141,  88  Hinkle,   20  Wkly.   L.    Bui.    19    (afifg. 

N.  E.  840;   Crabtree  v.  Randall,   133  9   Ohio    Dec.   389,    12   Wkly.   L.   Bui. 

Mass.    552;    Dunlap   v.    Watson,    124  282);    Bufiford   v.   Ashcroft,   72   Tex. 

Mass.    305;    Washburn    v.    Goodman,  104,  10  S.  W.  346;  Bartlett  v.  Boyles, 

17  Pick.  (Mass.)  519;  Blum  v.  Mayer,  66  W.  Va.  327,  66  S.   E.  474;   Ben- 

189  N.  Y.   153,  81   N.   E.   780   (affg.  nett   v.    McKay,    4    Newfoundl.    178, 

113   N.  Y.  App.   Div.  247,  99  N.  Y.  462   (1879).     See  ante  §  361. 

S.   25)  ;    Johnson    v.    Hartshorne,    52  C4  Prentice    v.    Elliott,    72    Ga.    154 

N.    Y.    173;    Steiger    v.    Bradley,    34  (applying    Code,     §    2885);     Lee    v. 

Wkly.   Notes   Gas.   123.  Lashbrooke,  8  Dana  (Ky.)  214;  Hol- 

f'2  Christian     &c.     Grocery     Co.     v.  lowa^^  v.  Turner,  61  Md.  217;  Masury 

Hill,  122  Ala.  490,  26  So.  149;   San-  v.  Whiton,  43  Hun  638,  6  N.  Y.  St. 

derson    v.    Sanderson,    20    Fla.    292;  697    (affd.    Ill    N.   Y.  679,    18   N.    E. 

Phillips  V.  Reynolds,  236  111.  119,  86  638,  2  Silv.  Ct.  App.   123) ;   Holden 


§    668  LAW    OF    PARTNERSHIP  908 

It  was  said  in  a  leading  New  York  case:'"""'  "If  the  moneys 
advanced  by  the  plaintiff  to  the  firm  were  contributions  of  capital 
or  additions  to  plaintiff's  capital,  then  he  was  not  entitled  to  in- 
terest on  the  same,  since  he  must  rely  upon  the  profits  of  the 
business  to  compensate  him  for  the  investment,  unless  there  was 
a  special  agreement  between  the  partners  that  interest  should 
be  allowed  i"*^  But,  on  the  other  hand,  if  the  moneys  so  paid  or 
advanced  by  the  plaintiff  for  the  use  of  the  firm  were  in  fact 
loans,  and  the  plaintiff  as  to  such  advances  was  a  creditor  of  the 
firm,  he  stands  upon  the  same  footing  as  any  other  creditor  with 
respect  to  the  right  to  be  allowed  interest  upon  the  accounting. 
A  partner  may  loan  money  to  the  firm  of  which  he  is  a  member, 
and  when  he  does  his  right  to  interest  is  to  be  determined  in  the 
same  way  as  that  of  any  other  creditor.  In  such  cases  the  gen- 
eral rule  is  to  allow  interest  upon  the  advances,  although  there 
was  no  express  agreement  by  the  firm  to  pay  it,  in  the  absence  of 
some  agreement  to  the  contrary,  express  or  implied.  The  right 
to  interest  or  an  agreement  to  pay  or  allow  it  is  to  be  implied  in 
such  cases  without  any  express  promise,  as  in  like  transactions 
between  parties  holding  no  partnership  relation  to  each  other  f'' 

V.    Peace,   39   N.    Car.   223,   45   Am.  J.  Eq.  44;  Reid  v.  Rensselaer  Glass 

Dec.   514;    Dinham   v.   Bradford,   L.  Factory,  3  Cow.  (N.  Y.)   399;  Rens- 

R.  5  Ch.  519.  selaer  Glass  Factory  v.  Reid,  5  Cow. 

esRodgers  v.   Clement,   162   N.   Y.  (N.  Y.)   587;  Woerz  v.  Schumacher, 

422,  56  N.  E.  901,  76  Am.  St.  342.  161  N.  Y.  530,  56  N.  E.  72 ;  Chester 

66  Citing  in  re  James,  146  N.  Y.  78,  v.  Jumel,    125   N.   Y.  237,  26   N.   E. 

40  N.  E.  876,  48  Am.  St.  774;  Jack-  297;  Beach  v.  Colles,  85  N.  Y.  511; 

son  V.  Johnson,  74  N.  Y.  607;  John-  Collender  v.   Phelan,   79   N.   Y.   366; 

son    V.    Hartshorne,    52    N.    Y.    173 ;  Gillet  v.   Van   Rensselaer,    15    N.    Y. 

Sandford  v.  Barney,  50  Hun   108,  4  397;  Liotard  v.  Graves,  3  Caines  (N. 

N.  Y.  S.  500;  Cheever  v.  Lamar,  19  Y.)    226;    Foley    v.    Foley,    15    App. 

Hun   (N.  Y.)   130;  Jackson  v.  John-  Div.  276,  44  N.  Y.  S.  588;  Lloyd  v. 

son,    11   Hun    (N.  Y.)    509;    Stough-  Carrier,  2  Lans.  (N.  Y.)  364 ;  Hodges 

ton  V.  Lynch,  2  Johns.  Ch.    (N.  Y.)  v.   Parker,   17  Vt.  242,  44  Am.   Dec. 

209 ;     Collyer     Partnership,     §     318 ;  331 ;  In  re  German  Min.  Co.,  4  DeG., 

Lindley    Partnership,    389.  M.    &    G.    19,    35;    In    re    Norwich 

6''  Citing    Ligare    v.    Peacock,    109  Yarn  Co.,  22  Beav.  143,  168 ;  Troup's 

III.  94;   Matthews  v.  Adams,  84  Md.  Case,    29    Beav.    353;    In    re    Beulah 

143,  35  Atl.  60;  Baker  v.  Mayo,   129  Park    Estate,    L.    R.    15    Eq.    43;    1 

Mass.   517;    Morris   v.   Allen,    14    N.  Lindley  Partnership,   390. 


909 


ACCOUNTING,    SETTLEMENT,    DISSOLUTION 


§  669 


When  the  money  has  been  paid  in  as  capital,  or  where  there  is  an 
express  agreement  between  the  parties  that  interest  is  not  to  be 
allowed  or  charged,  this  rule,  of  course,  has  no  application.  So 
the  plaintiff's  right  to  the  item  of  interest  must  depend  upon  the 
fact  that  the  money  was  a  loan  to  the  firm  and  not  a  contribution 
to  capital."  A  partner  should  be  charged  with  interest  on  money 
borrowed  from  the  firm.''^  The  Uniform  Partnership  Act  pro- 
vides :  "A  partner  shall  receive  interest  on  the  capital  con- 
tributed by  him  only  from  the  date  when  repayment  should  be 
made,"°^  and  "a  partner  who,  in  aid  of  the  partnership,  makes 
any  payment  or  advance  beyond  the  amount  of  capital  which  he 
agreed  to  contribute,  shall  be  paid  interest  from  the  date  of  the 
payment  or  advance."^" 

§  669.  Lien  for  advances  or  balances. — A  partner  has  an 
equitable  lien  on  firm  assets,  after  dissolution,  for  the  payment  of 
advances  or  balances  due  to  him,  after  paying  firm  debts."^  The 
court  said,  in  an  early  Indiana  case  :^-   "The  only  question  before 


68  Ferguson  v.  Cripps,  87  Conn. 
241,  87  Atl.  792;  McCall  v.  Moss,  112 
111.  493;  Atherton  -i-,  Cochran,  9  S. 
W.  519,  11  S.  W.  JOl,  11  Ky.  L. 
185.  See  Kennedy  v.  Hill,  89  S. 
Car.  462,  71  S.  E.  974;  Eng.  Partn. 
Act   (1890),  §  24   (3). 

•59  Uniform  Partnership  Act, 
§   18    (d). 

■^0  Uniform  Partnership  Act,  § 
18  (c). 

'■1  Hoxie  V.  Carr,  1  Sumn.  (U.  S.) 
173,  Fed.  Cas.  No.  6802;  Marnet 
Oil  &c.  Co.  V.  Staley,  218  Fed.  45, 
133  C.  C.  A.  108;  Henderson  v.  Ries, 
108  Fed.  709,  47  C.  C.  A.  625 ;  Donel- 
son  V.  Posey,  13  Ala.  752 ;  Gray  v. 
Palmer,  9  Cal.  616;  Roberts  v.  Mc- 
Carty,  9  Ind.  16,  68  Am.  Dec.  604; 
Pierce  v.  Wilson,  2  Iowa  20;  Burk 
V.  Burk  (Ky.),  128  S.  W.  315;  Con- 
well  V.  Sandidge,  8  Dana  (Ky.)  273; 
Hodges  V.  Holeman,  1  Dana  (Ky.) 
SO;    Dilworth  v.   Mayfield,    36   Miss. 


40;  Standish  v.  Babcock,  52  N.  J. 
Eq.  628,  29  Atl.  327  (revd.  on  other 
grounds,  53  N.  J.  Eq.  Z16,  ZZ  Atl. 
385,  30  L.  R.  A.  604,  51  Am.  St. 
633)  ;  Hooley  v.  Gieve,  9  Abb.  N. 
Cas.  8,  9  Daly  (N.  Y.)  104  (affd.  82 
N.  Y.  625)  ;  Wade  v.  Rusher,  4 
Bosw.  (N.  Y.)  537;  Frith  v.  Law- 
rence, 1  Paige  (N.  Y.)  434;  Hefner 
V.  Hefner,  26  S.  Dak.  74,  127  N.  W. 
634;  Betts  v.  Letcher,  1  S.  Dak.  182, 
46  N.  W.  193;  Williams  v.  Love,  2 
Head  (Tenn.)  80,  1Z  Am.  Dec.  191 ; 
Ex  parte  Taylor,  12  Ch.  D.  366,  41 
L.  T.  Rep.  (N.  S.)  6,  28  Wkly.  Rep. 
205;  Ex  parte  Delhasse,  7  Ch.  Div. 
511,  38  L.  T.  Rep.  (N.  S.)  106,  26 
Wkly.  Rep.  338  (affg.  Z1  L.  T.  Rep. 
(N.  S.)  440)  ;  Ex  parte  Macarthur, 
40  L.  J.  Bankr.  86,  19  Wkly.  Rep. 
821. 

■^2  Roberts   v.    McCarty,   9   Ind.    16, 
68  Am.  Dec.  604. 


§  670 


LAW    OF    PARTNERSHIP 


910 


US  is — ^Was  the  mill  property  partnership  stock?  If  it  was,  Rob- 
erts for  the  balance  due  on  settlement  with  his  copartner  has  a 
right  to  the  lien."  So  has  a  partner  who  is  a  creditor  of  the  firm 
a  lien  on  the  share  of  a  partner  who  is  a  debtor,  for  whatever  is 
due  him  on  claims  connected  with  the  partnership,^^  but  no  lien 
for  claims  outside  the  partnership  relation. '^^  Such  lien  may  be 
waived  or  lost  by  conduct.'^^ 

§  670.  Apportionment  of  losses. — If  there  is  no  contrary 
agreement,^^  losses  are  to  be  borne  by  the  partners  in  the  same 
proportion  as  they  share  profits,'^ ^  prima  facie  in  equal  propor- 


■^3  Marnet  Oil  &c.  Co.  v.  Staley, 
218  Fed.  45,  133  C.  C.  A.  108;  War- 
ren V.  Taylor,  60  Ala.  218;  Mack  v. 
Woodruff,  87  III.  570;  Karthaus  v. 
Owings,  4  Harr.  &  J.  (Md.)  263; 
Brandt  v.  Edwards,  91  Minn.  505,  98 
N.  W.  647 ;  Fish  v.  Thompson,  68  Vt. 
273,  35  Atl.  174;  Mycock  v.  Beatson, 
13  Ch.  D.  384,  49  L.  J.  Ch.  127; 
PajTie  V.  Hornby,  25  Beav.  280,  53 
Eng.  Reprint  643 ;  Cal.  Civ.  Code, 
§  2405;  N.  Dak.  Civ.  Code,  §  4377; 
Eng.   Partn.  Act    (1890),   §  41. 

'  *  Nichol  V.  Stewart,  36  Ark.  612 ; 
Moffatt  V.  Thomson,  5  Rich.  Eq.  (S. 
Car.)    155,  57  Am.  Dec.  IZI. 

75  Robertson  v.  Baker,  11  Fla.  192; 
Kemmerer  v.  Kemmerer,  85  Iowa 
193,  52  N.  W.  194;  Wilhite's  Admr.  v. 
Boulware,  88  Ky.  169,  10  S.  W.  629, 
11  Ky.  L.  59;  Wishek  v.  Hammond, 
10  N.  Dak.  72,  84  N.  W.  587.  Com- 
pare Brewer  v.  Johnson,  87  Ark.  641, 
112  S.  W.  364. 

76  Huger  v.  Cunningham,  126  Ga. 
684,  56  S.  E.  64;  Taylor  v.  Coffing, 
18  111.  422;  Baker  v.  Baltimore  Safe 
Deposit  &c.  Co.,  90  Md.  744,  45  Atl. 
1028,  78  Am.  St.  463;  Woelfel  v. 
Thompson,  173  Mass.  301,  IZ  N.  E. 
819;  Jones  v.  Butler,  87  N.  Y.  613 
(affg.   23    Hun    (N.    Y.)    367);    Ex 


parte  Barber,  L.  R.  5  Ch.  687,  23  L. 
T.  Rep.  (N.  S.)  230;  Wood  v.  Scoles, 
L.  R.  1  Ch.  369,  12  Jur.  (N.  S.)  555; 
In  re  Aldridge  [1894],  2  Ch.  97,  63 
L.  J.  Ch.  465 ;  Gillan  v.  Alorrison, 
1  DeG.  &  Sm.  421,  11  Jur.  861. 

77  Hellebush  v.  Coughlin,  Zl  Fed. 
294;  Houston  v.  Polk,  124  Ga.  103, 
52  S.  E.  83;  Taft  v.  Schwamb,  80 
111.  289;  Bradbury  v.  Smith,  21 
Maine  117;  Julliard  v.  Orem,  70  Md. 
465,  17  Atl.  ZZZ;  Craig  v.  Warner, 
216  Mass.  386,  103  N.  E.  1032;  Whit- 
comb  v.  Converse,  119  Mass.  38,  20 
Am.  Rep.  311;  Raymond  v.  Putnam, 
44  N.  H.  160;  Shearman  v.  Cameron, 
76  N.  J.  Eq.  426,  74  Atl.  979 ;  Sandias 
V.  Mustacchi,  153  App.  Div.  810,  138 
N.  Y.  S.  875 ;  Gausevoort  v.  Ken- 
nedy, 30  Barb.  (N.  Y.)  279;  Has- 
brouck  v.  Childs,  3  Bosw.  (N.  Y.) 
105;  Emerick  v.  Moir,  124  Pa.  St. 
498,  17  Atl.  1;  In  re  Hall,  32  R.  I. 
424,  79  Atl.  966;  Shea  v.  Donahue, 
15  Lea  (Tenn.)  160,  54  Am.  Rep. 
407;  Smiley  v.  Smiley,  112  Va.  490, 
71  S.  E.  532,  Ann.  Cas.  1913  B, 
1159n;  Wipperman  v.  Stacy,  80 
Wis.  345,  50  N.  W.  336;  In  re  Al- 
bion L.  Assur.  Soc,  16  Ch.  D.  83 ; 
Nowell  v.  Nowell,  L.  R.  7  Eq.  538; 
Collins  V.  Jackson,  31   Beav.  645,  54 


911  ACCOUNTING,    SETTLEMENT,    DISSOLUTION  §    670 

tions^*  even  though  they  have  not  contributed  equally  to  capital, 
thus  if  nothing  to  the  contrary  appears,  losses  of  capital  must  be 
shared  equally.^^  The  Uniform  Partnership  Act  provides  that  a 
partner  must  contribute  toward  losses,  whether  of  capital  or  other- 
wise, according  to  his  share  in  the  profits,  in  the  absence  of  con- 
trary agreement.^''  It  was  said  in  a  leading  case  :^^  "In  the  absence 
of  controlling  agreement,  partners  must  bear  the  losses  in  the  same 
proportion  as  the  profits  of  the  partnership,  even  if  one  con- 
tributes the  whole  capital,  and  the  other  nothing  but  his  labor  or 
services.*^  Whether  a  loss  of  capital  is  a  partnership  loss,  to  be 
borne  by  all  the  partners,  depends  upon  the  nature  and  extent  of 
the  contract  of  partnership.  If,  as  is  not  un frequently  the  case 
in  a  partnership  for  a  single  adventure,  the  mere  use  of  the  cap- 
ital is  contributed  by  one  partner,  and  the  partnership  is  in  the 
profits  and  losses  only,  the  capital  remains  the  property  of  the 
individual  partner  to  whom  it  originally  belonged,  any  loss  or 
destruction  of  it  falls  upon  him  as  owner,  and,  as  it  never  be- 
comes the  property  of  the  partnership,  the  partnership  owes  him 
nothing  in  consideration  thereof.^^  But  where,  as  is  usual  in  an 
ordinary  mercantile  partnership,  a  partnership  is  created  not 
merely  in  profits  and  losses,  but  in  the  property  itself,  the  prop- 
erty is  transferred  from  the  original  owners  to  the  partnership, 
and  becomes  the  joint  property  of  the  latter;  a  corresponding 
obligation  arises  on  the  part  of  the  partnership  to  pay  the  value 
thereof  to  the  individuals  who  originally  contributed  it;  such 
payment  can  not  indeed  be  demanded  during  the  continuance  of 
the  partnership,  nor  are  the  contributors.  In  the  absence  of  agree- 
ment or  usage,  entitled  to  interest;  but  if  the  assets  of  the  part- 

Eng.  Reprint  1289;  Foster  v.  Chap-  so  Uniform   Partnership   Act,    §    18 

lin,  19  Grant.  Ch.   (U.  C.)  251;  Eng.  (a). 

Partnership  Act  (1890),  §  44     (a).  si  Whitcomb      v.      Converse,      119 

"Buie    V.    Kennedy,    164    N.    Car.  Mass.  38,  20  Am.  Rep.  311. 

290,  80  S.  E.  445.  »2  citing  3  Kent  Com.  28,  29. 

"Smiley   v.    Smiley,    112   Va.   490,  ss  Story    Partnership,     §§    27,    29; 

71  S.  E.  532,  Ann.  Cas.  1913  B.  1159n.  Heran  v.  Hall,  1  B.  Mon.  159,  35  Am. 

Citing  Lindley  Partnership,  vol.  2,  p.  Dec.  178. 
676. 


§    671  LAW    OF    TARTNERSHIP  912 

nership,  upon  a  final  settlement,  are  insufficient  to  satisfy  this 
obligation  all  the  partners  must  bear  it  in  the  same  proportion  as 
other  debts  of  the  partnership."  A  partner  who  has  caused  losses 
by  his  gross  negligence,  or  breach  of  contract,  must  bear  them 
alone.^*  Where  one  partner  has  furnished  the  labor,  and  an- 
other the  money  it  is  often  held  that  the  one  furnishing  labor  is 
not  compelled  to  contribute  to  the  losses  of  the  one  furnishing 
money.^^  Other  courts  have,  under  some  circumstances,  com- 
pelled the  partner  who  was  to  furnish  services  merely,  to  con- 
tribute to  a  loss  of  capital,  as  where  the  loss  was  caused  by  fire.**' 
And  it  is  held  that  where  there  is  a  partnership  in  property  and 
not  merely  in  profits  and  loss,  the  depreciation  caused  in  ap- 
paratus contributed  by  one  partner  as  his  share  of  the  capital, 
must  be  borne  by  the  partnership,  not  by  the  partner  alone." 
Where  the  partners  entered  into  a  dissolution  agreement,  by 
which  one  of  them  assumed  all  liabilities,  estimating  losses  at 
six  hundred  dollars,  actual  losses  of  five  thousand  dollars  were  so 
much  larger  than  contemplated  that  the  contract  will  not  be  en- 
forced, being  the  result  of  mutual  mistake.®* 

§  671.  Repayment  of  capital. — After  liabilities  to  third 
persons  and  firm  debts  to  partners  are  paid,  each  partner  is  en- 
titled to  the  repayment  of  the  capital  contributed  by  him,*'*  or  if 

s*  Bonis   V.   Louvrier,    8    La.   Ann.  tal  Food  Co.  v.  Globe  Coal  Co.,  142 

4;  Tygart  v.  Wilson,  39  App.  Div.  58,  Iowa  134,  120  N.  W.  704;  Frederick 

56  N.  Y.  S.  827.  v.   Cooper,   3   Iowa   171;   Johnson  v. 

85  Meadows  v.  Mocquot,  110  Ky.  Jackson,  130  Ky.  751,  114  S.  W.  260, 
220,  61  S.  W.  28,  22  Ky.  L.  1646;  Rau  17  Ann.  Cas.  699;  Thomas  v.  Win- 
V.  Boyle,  5  Bush  (Ky.)  253;  Heran  Chester  Bank,  105  Ky.  694,  49  S.  W. 
V.  Hall,  1  B.  Mon.  (Ky.)  159,  35  539,  20  Ky.  L.  1502 ;  Sanders  v.  Hern- 
Am.  Dec.  178;  Everly  v.  Durborrow,  don,  110  S.  W.  862,  33  Ky.  L.  669; 
8  Phila.   (Pa.)   93.  Frigerio  v.  Crottes,  20  La.  Ann.  351; 

86  Gore  V.  Vines,  72  W.  Va.  783,  79  Whitcomb  v.  Converse,  119  Mass.  38, 
S.  E.  820.  20  Am.  Rep.  311 ;  Treacy  v.   Power, 

87  In  re  Hall,  32  R.  I.  424,  79  Atl.  112  Minn.  226,  127  N.  W.  936;  Jones 
966.  V.    Butler,    87    N.    Y.    613    (affg.    23 

88  Taylor  v.  Wrather,  155  Ky.  25,  Hun  (N.  Y.)  367);  Neudecker  v. 
159  S.  W.  662.  Kohlberg,  3  Daly  (N.  Y.)  407;  Buie 

89  Bullock  V.  Ashley,  90  111.  102;  v.  Kennedy,  164  N.  Car.  290.  80  S. 
Jackson  v.  Crapp,  32  Ind.  422;  Capi-  E.  445;  Adams  v.  Hubbard,  221  Pa. 


913 


ACCOUNTING,    SETTLEMENT,    DISSOLUTION 


§  671 


the  assets  are  insufficient  to  do  this,  then  to  the  repayment  of  his 
ratable  proportion  of  capital. "^  This  mode  of  distributing  cap- 
ital may  be  changed  by  agreement,^^  and  a  partner  may  lose  his 


511,  70  Atl.  835;  Rowland  v.  Miller, 
7  Phila.  (Pa.)  362;  In  re  Hall,  32 
R.  I.  424,  79  Atl.  966;  Kennedy  v. 
Hill,  89  S.  Car.  462,  71  S.  E.  974; 
Wilson  V.  Wilson,  74  S.  Car.  30,  54 
S.  E.  227;  Johnston  v.  Ballard,  83 
Tex.  486,  18  S.  W.  686;  Smiley  v. 
Smiley,  112  Va.  490,  71  S.  E.  532; 
Ann.  Cas.  1913  B,  1159;  Gore  v. 
Vines,  72  W.  Va.  783,  79  S.  E.  820; 
Fouse  V.  Shelly,  64  W.  Va.  425,  63  S. 
E.  208;  Hall  v.  Antrobus,  44  Nova 
Scotia  96;  Cameron  v.  Peters,  8  Ont. 
W.  R.  359. 

^°  Capital  Food  Co.  v.  Globe  Coal 
Co.,  142  Iowa  134,  120  N.  W.  704; 
Hasbrouck  v.  Childs,  3  Bosw.  (N.  Y.) 
105 ;  In  re  Hall,  32  R.  I.  424,  79  Atl. 
966;  Kennedy  v.  Hill,  89  S.  Car. 
462,  71  S.  E.  974;  Eng.  Partn.  Act 
(1890),  §  40  (b)  3.  Compare  Brew- 
er V.  Johnson,  87  Ark.  641,  112  S.  W. 
364.  See  cases  cited  in  precedmg 
note. 

siGroth  V.  Kersting,  23  Colo.  213, 
47  Pac.  393;  Sciitt  v.  Robertson,  127 
111.  135,  19  N.  E.  851,  17  N.  E.  14 
(1888)  ;  Burger  v.  Robinson,  81 
Misc.  678,  143  N.  Y.  S.  530 ;  Wood  v. 
Scoles,  L.  R.  1  Ch.  369,  12  Jur.  (N. 
S.)  555,  35  L.  J.  Ch.  547;  Lawton 
Saw  Co.  V.  Machum,  2  N.  Brunsw. 
Eq.  191.  Although  it  is  the  general 
rule,  that  in  the  absence  of  any  agree- 
ment, express  or  implied,  partners 
share  profits  and  losses  of  tlie  busi- 
ness equally,  who  have  not  contrib- 
uted equally  to  the  partnership  capi- 
tal, this  does  not  apply  to  the  divi- 
sion of  partnership  capital ;  and  part- 
ners may  by  agreement  provide  for 
an  equal  share  in  the  capital,  when 


their  contributions  thereto  are  un- 
equal. Smiley  v.  Smiley's  Admx., 
112  Va.  490,  71  S.  E.  532,  Ann.  Cas. 
1913  B,  1159n.  A  partnership  con- 
tract provided  that  the  capital  should 
be  $105,000;  that  plaintiffs  together 
had  contributed  $25,000,  that  defend- 
ant had  contributed  $80,000,  and  it 
was  error  for  the  court  on  dissolu- 
tion and  accounting  to  take  the  value 
of  the  assets  at  the  time  of  account- 
ing as  shown  by  an  inventory  instead 
of  the  amount  stated  in  the  contract 
as  ihe  original  capital  as  a  basis  for 
distribution.  Kennedy  v.  Hill,  89  S. 
Car.  462,  71  S.  E.  974.  Where 
a  partnership  contract  provided  that 
upon  final  accounting  one  partner 
should  receive  from  the  copart- 
nership moneys  the  sum  of  $1,000 
"in  excess  of  his  one-half  interest  :n 
said  copartnership  assets,"  such  sum 
must  be  subtracted  from  the  other 
partner's  half  of  the  assets  and 
added  to  the  half  of  his  copartner. 
Hetzel  v.  Fadner,  167  111.  App.  92. 
On  dissolution  of  a  partnership, 
a  partner  took  possession  of  a 
firm'  asset,  treated  it  as  his 
own,  and  carried  on  the  business  in 
his  own  name,  and  on  his  account. 
The  excluded  partner  who  had 
a  right  at  his  election  to  demand 
either  the  actual  profits  made  by  the 
partner  continuing  his  business  or 
his  share  of  tlie  capital  thus  em- 
ployed with  interest,  might,  where 
at  the  time  of  the  accounting 
the  amount  due  the  retiring  partner 
is  less  than  the  value  of  the  firm 
assets  at  the  dissolution,  charge  the 
continuing    partner    with    the    larger 


§  672 


LAW    OF    PARTNERSHIP 


914 


right  to  a  return  of  capital  by  misconduct,  or  by  contract.^^  Where 
a  partnership  sold  its  plant  and  assets  to  a  corporation,  and  re- 
ceived corporate  stock  distributed  among  the  constituent  com- 
panies of  the  corporation  in  proportion  to  the  value  of  the  plant 
and  in  part  in  proportion  to  its  earnings,  the  court  held  that  the 
stock  issued  on  the  basis  of  earnings  should  go  two-thirds  to  one 
partner,  the  remainder  to  the  other,  in  the  proportions  in  which 
they  had  contributed  capital.^^ 

§  672.  Partition  of  assets. — Partition  of  the  firm  property 
may  be  had  by  the  partners  only  in  case  the  firm  creditors  are 
not  harmed.^*  In  the  absence  of  an  express  or  implied  agree- 
ment to  the  contrary,^^  the  presumption  is  that  partners  are  to 
share  equally.^*^  A  partner's  indebtedness  to  the  firm  must  either 
be  paid  by  him,  or  deducted  from  his  share,  in  ascertaining  what 


amount.      Treacy    v.     Powers,     112 
Minn.  226,  127  N.  W.  936. 

92Kibby  v.  Kimball,  63  Iowa  665, 
19  N.  W.  825;  Clink  v.  Carpenter, 
122  Mich.  681,  81  N.  W.  932;  Neu- 
decker  v.  Kohlberg,  3  Daly  (N.  Y.) 
407;  Shea  v.  Donahue,  15  Lea 
(Tenn.)  160,  54  Am.  Rep.  407;  Es- 
callier  v.  Baines,  40  Wash.  176,  82 
Pac.  181.  See  Smiley  v.  Smiley,  112 
Va.  490,  71  S.  E.  532,  Ann.  Cas. 
1913  B,  1159n;  Thomas  v.  Win- 
chester Bank,  105  Ky.  694,  49  S.  W. 
539,  20  Ky.  L.  1502. 

93  Whittle  V.  Davie  (Va.),  82  S. 
E.  724. 

94  Donelson  v.  Posey,  13  Ala.  752 ; 
Harper  v.  Lamping,  33  Cal.  641 ; 
Commonwealth  v.  Bracken,  32  S.  W. 
609,  17  Ky.  L.  785;  Turner  v.  Tur- 
ner, 98  Md.  22,  55  Atl.  1023;  Leach 
V.  Leach,  18  Pick.  (Mass.)  68;  Mil- 
ler V.  Hale,  96  Mo.  App.  427,  70  S. 
W.  258;  Krigbaum  v.  Vindquest,  10 
Nebr.  435,  6  N.  W.  631;  Ratzer  v. 
Ratzer,  28  N.  J.  Eq.  136;  Jones  v. 
Jones,  36  N.  Car.  332 ;  Christman  v. 


Baurichter,  10  Phila.  115,  31  Leg. 
Int.  (Pa.)  68;  McAlister  v.  Mont- 
gomery, 3  Hayw.  (Tenn.)  94;  Mc- 
Cormick  v.  Bailey,  17  W.  Va.  585; 
Nelson  v.  Bealby,  30  Beav.  472,  5  L. 
T.  Rep.  (N.  S.)  599. 

95  Chouteau  v.  Barlow,  110  U.  S. 
238,  28  L.  ed.  132,  3  Sup.  Ct.  620; 
Adams  v.  Gordon,  98  III.  598;  Klotz 
V.  Macready,  39  La.  Ann.  638,  2  So. 
203;  Brandt  v.  Edwards,  91  Minn. 
505,  98  N.  W.  647;  Krigbaum  v. 
Vindquest,  10  Nebr.  435,  6  N.  W. 
631 ;  Molineaux  v.  Raynolds,  54  N. 
J.  Eq.  559,  35  Atl.  536 ;  Parks  v.  Corn- 
stock,  59  Barb.  (N.  Y.)  16;  McCul- 
lough  V.  Barr,  145  Pa.  St.  459,  22 
Atl.  962;  Wilson  v.  Wilson,  74  S. 
Car.  30,  54  S.  E.  227.  See  Stein- 
berg v.  Eagan,  234  Pa.  291, 83  Atl.  272. 

96  Sloan  V.  Wilson,  117  Ala.  583, 
23  So.  145;  McKee  v.  Cowles,  161 
111.  201,  43  N.  E.  785  (affg.  59  111. 
App.  28)  ;  Curry  v.  Burnett,  36  Ind. 
102;  Proper  v.  Lambert  (Iowa),  95 
N.  W.  251  (1903)  ;  Leach  v.  Leach,  18 
Pick.    (Mass.)    68;   Langlois   v.   Du- 


915 


ACCOUNTING,    SETTLEMENT,    DISSOLUTION 


§    672 


is  due  him.^''  Real  estate  held  as  partnership  property,  if  not 
needed  to  pay  firm  debts,  may  be  partitioned  by  the  partners,  or 
by  judicial  decree,®^  except  where  it  has  been  by  agreement  con- 
verted into  out  and  out  personalty.®^  As  said  in  one  case,^  "in 
this  country  the  land  is  held  to  be  personal  assets  so  far  only  as 
it  may  be  needed  to  pay  firm  creditors. ^^  Out  of  this  equity  of 
each  partner  to  have  the  firm  property  applied  to  the  payment 
of  firm  debts  in  order  that  he  may  be  discharged  from  personal 
liability,  has  emerged  the  rule  that  the  partition  of  the  real  prop- 
erty of  a  firm  will  not  be  decreed  so  long  as  debts  of  the  part- 
nership remain  unliquidated."  By  the  rule  laid  down  in  these 
cases,  the  only  method  by  which  a  partner,  under  such  conditions, 
can  compel  a  division  of  the  firm  property,  is  by  a  bill  to  admin- 
ister and  settle  the  partnership  affairs.  It  is  apparent,  however, 
that  inasmuch  as  the  ground  for  refusing  partition  is  that  part- 


bra3%  17  Quebec  Super.  Ct.  328.  See 
Lesamis  v.  Greenberg,  225  Fed.  449. 

o^Harrah  v.  Dyer,  180  Ind.  229, 
102  N.  E.  14;  Corbin  v.  Henry,  36 
Ind.  App.  184,  74  N.  E.  1096;  Green- 
well  V.  Negley,  101  S.  W.  961,  31  Ky. 
L.  Rep.  144 ;  Leserman  v.  Bernheim- 
er,  113  N.  Y.  39,  20  N.  E.  869 ;  Lyons 
V.  Lyons,  207  Pa.  St.  7,  56  Atl.  54,  99 
Am.  St.  779;  Binney  v.  Mutrie,  12 
App.  Gas.  160,  36  Wkly.  Rep.  129; 
Ross  V.  White  [1894],  3  Ch.  326,  64 
L.  J.  Gh.  48. 

ssHolton  V.  Guinn,  65  Fed.  450; 
Carpenter  v.  Hathaway,  87  Gal.  434, 
25  Pac.  549;  Gooper  v.  Frederick,  4 
G.  Greene  (Iowa)  403;  Ghambers  v. 
Ghambers,  11  S.  W.  469,  11  Ky.  L. 
25 ;  Gomstock  v.  McDonald,  126 
Mich.  142,  85  X.  W.  579;  Way  v. 
Stebbins,  47  Mich.  296,  11  N.  W. 
166;  Gollins  v.  Warren,  29  Mo.  236; 
Pitt  V.  Moore,  99  N.  Gar.  85,  5  S.  E. 
389,  6  Am.  St.  489;  Burnside  v. 
Savier,  6  Ore.   154. 

99  Hiscock  V.  Jaycox,  Fed.  Gas.  No. 
6531,   12  Nat.  Bankr.  Reg.  507;  Da- 


vis V.  Smith,  82  Ala.  198,  2  So.  897; 
NicoU  V.  Ogden,  29  111.  323,  81  Am. 
Dec.  311;  Patrick  v.  Patrick,  71  N. 
J.  Eq.  347,  63  Atl.  848;  MoHneaux 
V.  Raynolds,  54  N.  J.  Eq.  559,  35 
Atl.  536;  Maddock  v.  Astbury,  32 
N.  J.  Eq.  181 ;  Darrow  v.  Galkins,  154 
N.  Y.  503,  49  N.  E.  61,  48  L.  R.  A. 
299,  61  Am  St.  637;  Barney  v.  Pike, 
94  App.  Div.  199,  87  N.  Y.  S.  1038; 
Ludlow  V.  Gooper,  4  Ohio  St.  1 ; 
In  re  Leaf's  Appeal,  105  Pa.  St.  505 ; 
Davis  V.  Christian,  15  Grat.  (Va.)  11. 
See  sections  in  preceding  chapter  on 
status  of  partnership  real  estate 
after  death  of  partner. 

1  MoHneaux  v.  Raynolds,  54  N.  J. 
Eq.  559,  35  Atl.  536. 

la  Freem.  Partnership,  ^  118,  cit- 
ing Bank  of  the  Metropolis  v. 
Sprague,  5  G.  E.  Gr.   (N.  J.)   13. 

-  Giting  Pennybacker  v.  Leary,  65 
Iowa  220,  21  N.  W.  575 ;  Mendenhall 
v.  Benbow,  84  N.  Gar.  646 ;  Kruschke 
V.  Stefan,  83  Wis.  373,  53  N.  W. 
679 ;  Freem.  Partnership,  ^  443. 


673 


LAW    OF    PARTNERSHIP 


916 


ners  may  be  protected  from  future  calls  to  pay  firm  debts,  there- 
fore, if  it  should  be  made  to  appear  that  the  property  involved 
in  the  application  for  partition  will  not  be  needed  to  meet  such 
obligations,  the  objection  to  the  distribution  of  the  property  dis- 
appears." 

§  673.  Division  of  profits. — The  general  rule  is  that  after 
all  debts  of  the  firm  have  been  paid,  and  its  liabilities  to  partners 
for  advances  and  capital,  the  balance  is  considered  firm  profits, 
to  be  divided  among  the  partners.^  It  seems  that  any  change  in 
the  value  of  the  capital,  such  as  an  increase  in  the  value  of  the 
plant,*  or  deterioration  caused  by  use,^  should  be  considered  in 
apportioning  profits.  By  agreement  a  portion  of  profits  may  be 
added  to  the  capital,  or  distributed  at  intervals  while  the  firm 


3  Coward  v.  Clanton,  79  Cal.  23, 
21  Pac.  359;  Lacon  v.  Davenport,  16 
Conn.  331 ;  Norris  v.  Rogers,  107 
111.  148;  Smith  v.  Hazelton,  34  Ind. 
481 ;  Clift  V.  Stockdon,  4  Litt.  (Ky.) 
215 ;  Washburn  v.  Goodman,  17 
Pick.  (Mass.)  519;  Oppe  v.  Webens- 
dorfer,  43  Hun  640,  7  N.  Y.  St.  283 ; 
Gill  V.  Geyer,  IS  Ohio  St.  399;  Wol- 
denberg  v.  Berg,  45  Ore.  291,  11  Pac. 
873;  McCIusky  v.  Klosterman,  20 
Ore.  108,  25  Pac.  366,  10  L.  R.  A. 
785n;  Smith  v.  Smith,  18  R.  I.  722, 
29  Atl.  584,  30  Atl.  602;  Russell  v. 
Nail,  79  Tex.  664,  15  S.  W.  635; 
Knauss  v.  Cahoon,  7  Utah  182,  26 
Pac.  295;  Brigham  v.  Dana,  29  Vt. 
1 ;  Dinham  v.  Bradford,  L.  R.  5  Ch. 
519;  Badham  v.  WilHams,  86  L.  T. 
Rep.  (N.  S.)  191;  Eng.  Partnership 
Act  (1890),  §  44.  See  Grier  v. 
Strother,  153  Mo.  App.  292,  133  S. 
W.  404;  Jackson  v.  Jackson,  224  Fed. 
888;  Buie  v.  Kennedy,  164  N.  Car. 
290,  80  S.  E.  445.  "Profits"  are  the 
excess  of  the  returns  over  advances 
made  by  the  partners,  and  the  term 
"profits"    is    synonymous    with    "net 


profits,"  while  "losses"  are  the  ex- 
cess of  advances  over  returns ;  there- 
fore all  profits  are  necessarily  net 
profits,  though  the  term  "gross 
profits"  is  sometimes  inaccurately 
used  to  designate  the  returns. 
Buie  V.  Kennedy,  164  N.  Car.  290, 
80  S.  E.  445.  "When  persons  en- 
gage as  partners  in  buying  and  sell- 
ing stocks,  bonds,  and  other  securi- 
ties for  their  mutual  profit,  the  gains 
made  by  purchases  and  sales  are 
profits  of  the  partnership  divisible  as 
such  among  those  entitled  to  the 
profits  of  the  partnership."  Williams 
V.  Inhabitants  of  Milton,  215  Mass. 
1,   102   N.  E.  355. 

4Woldenberg  v.  Berg,  45  Ore.  291, 
n  Pac.  873. 

5  The  amount  by  which  the  capital 
of  a  firm  which  consisted  of  tur- 
pentine trees,  has  been  reduced  in 
value  by  use  in  the  business,  as  by 
the  sale  of  the  manufactured  prod- 
uct, should  be  deducted  from  the 
gross  returns  in  determining  the 
profits.  Buie  v.  Kennedy,  164  N. 
Car.  290,  80  S.  E.  445. 


917  ACCOUNTING,    SETTLEMENT,    DISSOLUTION  §    673 

is  going.®  On  this  point  it  was  said  in  a  New  Jersey  case  :^  "The 
contention  of  the  complainant  is  that  this  real  estate  represents 
accumulated  profits,  and  therefore  should  be  divided  in  the  pro- 
portions to  which  the  several  partners  were  entitled  to  share  in 
profits.  The  contention  of  the  defendants  is  that  this  real  estate 
represents  capital,  and  it  should  be  divided  in  proportion  to  each 
partner's  contribution  of  capital.  Inasmuch  as  the  partners, 
under  the  different  partnership  agreements,  were  entitled  to 
share  in  profits  in  proportions  differing  from  his  proportionate 
contribution  of  capital,  it  follows  that  by  the  adoption  of  the 
one  or  the  other  of  these  theories  the  interest  of  the  complain- 
ant in  the  firm  property  is  differently  affected.  As  has  been 
already  displayed,  these  partners  had  transacted  partnership  busi- 
ness, under  successive  agreements,  from  1867.  Each  agreement 
set  out  the  amount  of  capital  which  each  partner  had  contrib- 
uted and  prescribed  the  proportion  of  profits  to  which  each 
partner  was  to  be  entitled  during  the  term  of  the  partnership. 
He  was  also  to  have  the  right  to  draw  interest  upon  his  capital. 
Now,  some  partners  drew  out  all  of  their  interest  and  all  of 
their  profits;  others  let  a  portion  of  their  profits  or  a  portion 
of  their  interest  remain  in  the  business.  By  the  apparent  acqui- 
escence of  all  the  partners,  the  balance  of  these  profits  or  inter- 
est remaining  at  the  end  of  each  year  undrawn  was  added  to 
the  amount  of  the  capital  of  those  of  the  partners  who  saw  fit 
to  permit  it  to  remain  in  the  business.  By  reason  of  the  unequal 
additions  to  the  capital  from  year  to  year,  the  proportions  of 
capital  respectively  contributed  constantly  shifted,  and  the  total 
amount  of  capital  contributed  by  all  increased.  Now,  the  theory 
of  the  complainant  is  that  the  original  amount  of  firm  property 
was  increased  by  the  employment  of  the  profits  which  were  per- 
mitted to  remain  in  the  business,  in  improving  and  purchasing 
property.     It  is  insisted  that  by  the  sale  of  the  personal  property 

6  O'Conner   v.   Stark,   2   Cal.    153 ;  nedy  v.  Hill,  89  S.  Car.  462,  71  S.  E. 

Safe  Deposit  &c.  Co.  v.  Turner,  98  974. 

Md.  22,  55  Atl.  1023 ;  In  re  Wood,  34  ^  Molineaux  v.  Raynolds,  54  N.  J. 

Ont.  L.  278,  8  Ont.  W.  N.  583 ;  Ken-  Eq.  559,  35  Atl.  536. 


§    (Ji7Z  LAW    OF    TARTNERSIIIP  918 

by  the  old  firm  to  the  new  firm  in  1889,  the  members  of  the  old 
firm  were  paid  for  all  the  property  which  represented  the  prod- 
uct of  the  original  capital,  and  that  what  remained  is  to  be 
regarded  as  the  product  of  the  profits,  and  should  therefore  be 
divided  as  such.  Now,  it  seems  to  be  entirely  clear  that  the 
end  of  each  year  the  net  profits  of  the  business  were  divided 
between  the  respective  partners,  in  the  proportions  in  which  prof- 
its were  to  be  divided  by  the  terms  of  the  agreement.  It  is 
clear  that  when  these  profits  were  calculated  and  divided  accord- 
ing to  the  terms  of  the  agreement,  and  the  share  of  each  partner 
was  put  to  his  credit,  then,  as  between  the  partners,  these  profits 
ceased  to  be  assets  of  the  firm  and  became  debts  due  from  the 
firm  to  each  member  of  the  firm.  The  sum  set  apart  to  each 
partner  at  the  end  of  each  year  was  at  the  disposal  of  the  part- 
ner as  so  much  cash  put  to  his  credit.  He  could  draw  it  out 
and  use  it  as  he  chose.  If  he  chose  to  invest  it  in  the  business, 
it  was  to  be  regarded  as  any  other  money  which  he  saw  fit  to 
so  invest.  It  became  a  part  of  the  capital  or  it  became  a  loan, 
just  as  he  and  the  partners  agreed.  That  they  agreed  to  regard 
these  sums  as  additions  to  the  capital  appears  beyond  all  ques.- 
tion."  The  firm  profits  include  profits  made  by  a  receiver,  by 
a  surviving  partner  or  liquidating  partner  after  dissolution,  and 
by  a  partner  who  has  excluded  wrongfully  his  partner.^  If  a 
partner  becomes  the  owner  of  all  the  firm  assets,  profits  made 
by  him  are  not  firm  profits.^ 

8  Osment  v.  McElrath,  68  Cal.  466,  Ohio  311 ;  Smith  v.  Ervin,  3  Pa. 
9  Pac.  731,  58  Am.  Rep.  17 ;  Kim-  Dist.  485 ;  Cole  v.  Moxley,  12  W.  Va. 
ball  V.  Lincoln,  5  111.  App.  316;  Var-  730;  Lambert  v.  Lambert,  L.  R.  16 
num  V.  Winslow,  106  Iowa  287,  76  Eq.  320,  43  L.  J.  Ch.  106;  Cook  v. 
N.  W.  708;  Oteri  v.  Oteri,  2>1  La.  Collingridge,  Jac.  607,  1  L.J.  Ch.  (O. 
Ann.  74;  Freeman  v.  Freeman,  142  S.)  74.  Compare  Whitesides  v.  Laf- 
Mass.  98,  7  N.  E.  710;  Hughes  v.  ferty,  3  Humph.  (Tenn.)  150.  Con- 
Love,  136  Mich.  169,  98  N.  W.  977 ;  tra :  McMahon  v.  McClernan,  10  W. 
138  Mich.  281,  101  N.  W.  536;  Berry  Va.  419;  Hampton  v.  Wooley  (Tex. 
V.  Folkes,  60  Miss.  576;  Hartman  v.  Civ.  App.),  136  S.  W.  1140. 
Woehr,  18  N.  J.  Eq.  383;  Tolan  v.  » Patterson  v.  Kellogg,  12>  Conn. 
Carr.  12  Daly  (N.  Y.)  520;  Pitt  v.  38,  22  Atl.  1096;  Reybold  v.  Dodd, 
Moore,  99  N.  Car.  85,  5  S.  E.  389,  6  1  Harr.  401  (Del.),  26  Am.  Dec.  401; 
Am.    St.   489;    Durbin   v.   Barber,    14  Phillips  v.  Reeder,  18  N.  J.  Eq.  95; 


919                     ACCOUNTING,    SETTLEMENT,    DISSOLUTION  §    674 

§  674.  Proportionate  share  of  each  partner  in  profits. — 
Every  partner  is  entitled  to  share  in  firm  profits,^"  though  this 
right  may  be  forfeited,  or  contracted  away/^  Unless  there  is 
an  express  or  implied  agreement  to  the  contrary,^'  each  part- 
ner shares  equally  in  profits."  Judge  Story  very  pertinently 

White  V.  Reed,  124  N.  Y.  468,  26  N.  134   Am.   St.   565 ;   Jackson  v.  Jack- 

E.   1037;  White  v.  White,  55   N.  Y.  son,  224  Fed.  888. 

Super.    Ct.    417,    14    N.    Y.    St.    738.  is  Kimberly  v.  Arms,  129  U.  S.  512, 

PUimly's    Appeal,    1    Monag.     (Pa.)  32  L.  ed.  764,  9  Sup.  Ct.  355;  Pearce 

177,    16   Atl.    728    (1889).      Compare  v.   Ham,    113   U.    S.   585,   28   L.   ed. 

Gresham  v.   Harcourt,   93   Tex.   149,  1067,  5  Sup.  Ct.  (ild;  Foster  v.  God- 

53  S.  W.  1019  (revg.  [Tex.  Civ.  App.]  dard,  1  Black  (U.  S.)  506,  17  L.  ed. 

50  S.  W.  1058).  228;  Van  Tine  v.  Hilands,  142  Fed. 

10  Beck  V.  Thompson,  22  Nev.  109,  613;  Duden  v.  Maloy,  dZ  Fed.  183,  11 
36  Pac.  562;  Hartman  v.  Woehr,  18  C.  C.  A.  119;  Dumonfi  v.  Ruep- 
N.  J.  Eq.  383 ;  King  v.  Leighton,  100  precht,  38  Ala.  175 ;  Desha  v.  Smith, 
N.  Y.  386,  3  N.  E.  594;  Wight  v.  20  Ala.  747;  Donelson  v.  Posey,  13 
Wood,  85  N.  Y.  402;  Thomas  v.  Ala.  752;  Turnipseed  v.  Goodwin,  9 
Rogers,  44  Hun  624,  8  N.  Y.  St.  Ala.  372 ;  Gorham  v.  Heiman,  90  Cal. 
284  (afifd.  120  N.  Y.  dil ,  24  N.  E.  346,  27  Pac.  289;  Carpenter  v.  Hath- 
1096);-  Garrett  v.  Bradford,  28  away,  87  Cal.  434,  25  Pac.  549; 
Gratt.  (Va.)  609;  Singer  v.  Heller,  Griggs  v.  Clark,  23  Cal.  427;  Pond 
40  Wis.  544.  V.   Clark,  24  Conn.  370;   Plunkett  v. 

11  White  V.  Reed,  124  N.  Y.  468,  26  Dillon,  4  Houst.  (Del.)  338;  San- 
N.  E.  1037;  Westwood  v.  Cole,  66  derson  v.  Sanderson,  20  Fla.  292; 
Misc.  53,  120  N.  Y.  S.  884;  Jen-  Parnell  v.  Robinson,  58  Ga.  26;  Van 
kins  V.  Jenkins,  66  Ore.  12,  132  Pac.  Housen  v.  Copeland,  180  111.  74,  54 
542;  Yoos  v.  Doyle,  4  Lack.  Leg.  N.  N.  E.  169  (afifg.  79  111.  App.  139)  ; 
(Pa.)  128;  Taylor  v.  Hutchinson,  25  Burgess  v.  Badger,  124  111.  288,  14 
Grat.   (Va.)   536,  18  Am.  Rep.  699.  N.    E.    850;    Helmer    v.    Yetzer,    92 

12  Moore  v.  Trieber,  31  Ark.  113;  Iowa  627,  61  N.  W.  206;  Norman  v. 
Little  V.  Caldwell,  112  Cal.  2:i ,  44  Conn,  20  Kans.  159;  Honore  v.  Col- 
Pac.  340;  Fleischmann  v.  Gottschalk,  mesnil,  1  J.  J.  Marsh.  (Ky.)  506; 
70  Md.  523,  17  Atl.  384 ;  In  re  Laney,  Stuart  v.  Harmon,  12  S.  W.  365,  24 
119  N.  Y.  607,  23  N.  E.  1143  (affg.  Ky.  L.  1829,  75  S.  W.  257,  25  Ky. 
50  Hun  15,  2  N.  Y.  S.  443,  18  N.  L.  439;  Avritt  v.  Russell,  58  S.  W. 
Y.  St.  463)  ;  Davenport  v.  Morrissey,  811,  22  Ky.  L.  752;  Atherton  v.  Coch- 
14  N.  Y.  App.  Div.  586,  44  N.  Y.  S.  ran,  9  S.  W.  519,  11  S.  W.  301,  11 
29  (afifd.  154  N.  Y.  782,  49  N.  E.  Ky.  L.  185;  Wolfe  v.  Gilmer,  7  La. 
1095)  ;  Binney  v.  Mutrie,  12  App.  Ann.  583 ;  Zacharie  v.  Blandin,  6  La. 
Cas.  160,  36  Wkly.  Rep.  129 ;  Straker  193 ;  Fleischmann  v.  Gottschalk,  70 
V.  Wilson,  L.  R.  6  Ch.  503,  40  L.  J.  Md.  523,  17  Atl.  384;  Welsh  v.  Can- 
Ch.  630.  See  Moore  v.  Rawson,  199  field,  60  Md.  469;  Harris  v.  Carter, 
Mass.  493,  85  N.  E.  586;  Hutching  147  Mass.  313,  17  N.  E.  649:  Meserve 
V.  Page,  204  Mass.  284,  90  N.  E.  565,  v.   Andrews,    106   Mass.   419 ;    Fuller 

8 — Row.  ON  Partn. — Vol.  2 


§  674 


LAW    OF    PARTNERSHIP 


920 


says:^*  "In  the  absence,  however,  of  all  precise  stipulations  be- 
tween the  partners,  as  to  their  respective  shares  in  the  profits  and 
losses,  and  in  the  absence  of  all  other  controlling  evidence  and  cir- 
cumstances, the  rule  of  the  common  law  is,  that  they  are  to  share 
equally  of  both;  for  in  such  a  case  equality  would  seem  to  be 
equity.^^  And  the  circumstance,  that  each  partner  has  brought  an 
unequal  amount  of  capital  into  the  common  stock,  or  that  one  or 
more  has  brought  in  the  whole  capital,  and  the  others  have  only 
brought  industry,  skill,  and  experience,  would  not  seem  to  furnish 
any  substantial  or  decisive  ground  of  difference,  as  to  the  distribu- 
tion. On  the  contrary,  the  very  silence  of  the  partners,  as  to 
any  particular  stipulation,  might  seem  fairly  to  import,  either, 
that  there  was  not,  all  things  considered,  any  real  inequality  in 
the  benefits  to  the  partnership  in  the  case,  or  that  the  matter 
was  waived  upon  grounds  of  good-will,  or  affection,  or  liberality, 
or  expediency."^*'   There  is  some  confusion  in  the  authorities  in 


V.  Miller,  105  Mass.  103;  Snyder  v. 
O'Beirne,  132  Mich.  340,  93  N.  W. 
872;  Houghton  v.  Bradley,  113  Mich. 
599,  71  N.  W.  1112;  Wingarden  v. 
Verhage,  68  Mich.  14,  35  N.  W.  801 ; 
Clark  V.  Clark  (Miss.),  17  So.  510; 
Randle  v.  Richardson,  53  Miss.  176; 
Miller  V.  Hale,  96  Mo.  App.  427,  70 
S.  W.  258;  Murphy  v.  Patterson,  24 
Mont.  575,  63  Pac.  375;  Warren  v. 
Raben,  33  Nebr.  380,  50  N.  W.  257; 
Ratzer  v.  Ratzer,  28  N.  J.  Eq.  136; 
Evans  v.  Warner,  20  App.  Div.  230, 
47  N.  Y.  S.  16;  Caldwell  v.  Leiber,  7 
Paige  (N.  Y.)  483;  Jones  v.  Jones, 
36  N.  Car.  332;  Taylor  v.  Taylor,  6 
N.  Car.  70;  Gill  v.  Geyer,  15  Ohio 
St.  399;  Keys  v.  Baldwin,  10  Ohio 
Dec.  (Reprint)  268,  19  Cine.  L.  Bui. 
375 ;  Frazer  v.  Linton,  183  Pa.  St. 
186,  38  Atl.  589;  Fulmer's  Appeal, 
90  Pa.  St.  143;  Mclntire's  Appeal, 
118  Pa.  St.  421,  11  Atl.  784;  Broad- 
foot  V.  Eraser,  73  Vt.  313,  50  Atl. 
1054 ;  Towner  v.  Lane,  9  Leigh 
(Va.)    262;    Brown    v.    Dale,    9    Ch. 


Div.  78,  27  Wkly.  Rep.  149;  Collins 
V.  Jackson,  31  Beav.  645,  54  Eng. 
Reprint  1289;  Robinson  v.  Anderson, 
20  Beav.  98,  52  Eng.  Reprint  539 
(affd.  7  DeG.,  M.  &  G.  239,  56  Eng. 
Ch.  239,  44  Eng.  Reprint  94)  ;  Robley 
v.  Brooke,  7  Bligh  (N.  S.)  90,  5  Eng. 
Reprint  705 :  Webster  v.  Bray,  7 
Hare  159,  27  Eng.  Ch.  159,  68  En- 
Reprint  65 ;  Stewart  v.  Forbes,  13 
Jur.  523,  1  Macn.  &  G.  137,  47  Eng. 
Ch.  137;  Eng.  Partnership  Act  (1890), 
§  24  (1). 

1*  Story  Partnership  (5th  ed.), 
§  24. 

1^  Citing  Watson  Partnership,  ch. 
1  (2d  ed.),  pp.  59,  60;  Collyer  Partn. 
B.  1  (2d  ed.),  ch.  1,  §  2,  pp.  105,  106; 
3  Kent.  Comm.  Lect.  43  (4th  ed.),  p. 
28;  Donelson  v.  Posey,  13  Ala.  752; 
Roach  v.  Perry,  16  111.  37;  Gould  v. 
Gould,  6  Wend.  (N.  Y.)  263. 

1*5  Citing  Collyer  Partnership,  B.  2 
(2nd  ed.),  ch.  1,  §  2,  pp.  105,  107;  3 
Kent.  Comm.  Lect.  43  (4th  ed.),  p. 
28;    Watson    Partnership    (2nd    ed.), 


921 


ACCOUNTING,    SETTLEMENT,    DISSOLUTION 


8  675 


regard  to  accounting  for  profits  in  an  illegal  partnership/^  An 
innocent  partner  may  recover  his  share  of  firm  profits,  though 
they  have  been  made  greater  because  his  copartner  cheated  firm 
customers/^ 

§  675.  Private  settlement. — The  partners  may  settle  firm 
affairs  by  a  private  accounting,  or  even  without  accounting,^^  if 
there  is  no  fraud  on  creditors.-"  To  make  such  accounting  bind- 
ing, all  partners  must  assent,  and  all  partnership  transactions  must 
be  included  in  order  to  make  a  final  settlement.-^  The  courts 
will  enforce  such  a  settlement,  if  clear  and  complete,"-  but  if  the 
terms  and  intent  of  the  settlement  are  not  clear,  the  court  will 
construe  all  written  instruments,  and  look  to  the  conduct  of  the 
parties  in  order  to  ascertain  what  was  the  real  intention  of  the 


ch.  1,  pp.  56,  60;  Gould  v.  Gould,  6 
Wend.  (N.  Y.)  263. 

"McMullen  v.  Hoffman,  174  U. 
S.  639,  43  L.  ed.  1117,  19  Sup.  Ct. 
839;  Brooks  v.  Martin,  2  Wall.  (U. 
S.)  70,  17  L.  ed.  732;  Wann  v.  Kelly, 
5  Fed.  584,  2  McCrary  (U.  S.)  628; 
Watson  V.  Murray,  23  N.  J.  Eq.  257; 
Wiggins  V.  Bisso,  92  Tex.  219,  47 
S.  W.  62,7,  71  Am.  St.  837;  Pfeiffer 
V.  Maltby,  38  Tex.  523;  Lane  v. 
Thomas,  37  Tex.  157.  See  §§  655,  656, 
this  chapter,  on  that  -subject. 

18  Pennington  v.  Todd,  47  N.  J. 
Eq.  569,  21  Atl.  297,  11  L.  R.  A.  589, 
24  Am.  St.  419. 

13  Scheuer  v.  Berringer,  102  Ala. 
216,  14  So.  640;  Spratt  v.  Dwyer 
(Iowa),  151  N.  W.  474;  Kolb  v.  Du- 
bois, 150  Ky.  92,  149  S.  W.  1134;  Sil- 
verman V.  Kogut,  143  N.  Y.  S.  947. 

20  Sage  V.  Woodin,  66  N.  Y.  578 ; 
Ex  parte  Walker,  4  DeG.,  F.  &  J. 
509,  6  L.  T.  Rep.  (N.  S.)  631;  Ex 
parte  Mayor,  4  DeG.,  J.  &  S.  664,  34 
L.  J.  Bankr.  25 ;  Ex  parte  Brewster, 
22  L.  J.  Bankr.  62. 

21  Kimberly  v.  Arms,  129  U.  S.  512, 
32  L.  ed.  764,  9  Sup.  Ct.  355 ;  Lama- 


lere  v.  Gaze,  1  Wash.  435,  14  Fed. 
Gas.  No.  8003;  Chadsey  v.  Har- 
rison, 11  111.  151 ;  Gooper  v.  Fred- 
erick, 4  G.  Greene   (Iowa)   403. 

--  Goodenow  v.  Parkinson,  67 
Iowa  95,  24  N.  W.  608;  Burley  v. 
Brown,  73  Kans.  780,  85  Pac.  527; 
Kyle  V.  McKerrall,  52  La.  Ann.  1235, 
27  So.  667 ;  Dorsey  v.  Dashiell,  1 
Md.  198;  Robinson  v.  Simmons,  156 
Mass.  123,  30  N.  E.  362 ;  Blakeley  v. 
Le  Due,  22  Minn.  476;  Paul  v.  Ed- 
wards, 1  Mo.  30;  Cochrane  v.  Allen, 
58  N.  H.  250;  Warrin  v.  Warrin, 
154  N.  Y.  S.  458;  Bastable  v.  Car- 
roll, 116  App.  Div.  205,  101  N.  Y. 
S.  637;  Smith  v.  Proskey,  177  N.  Y. 
526,  69  N.  E.  1131  (revg.  82  App. 
Div.  19,  81  N.  Y.  S.  424,  revg.  39 
Misc.  385,  79  N.  Y.  S.  851)  ;  Gram 
V.  Gad  well,  5  Cow.  (N.  Y.)  489; 
Little  V.  Stanton,  32  Pa.  St.  299; 
Brigham  v.  Dana,  29  Vt.  1;  Holt 
V.  Holt,  46  W.  Va.  397,  35  S.  E.  19; 
Jackson  v.  Stopherd,  2  Cromp.  &  M. 
361,  3  L.  J.  Exch.  95;  Jackson  v. 
Drake,  37  Can.  S.  Ct.  315;  Ex  parte 
Banks,  1  Newfoundl.  349.  See  Gal- 
sell  V.  Johnston,  68  Wash.  470,   123 


§  675 


LAW    OF    PARTNERSHIP 


922 


partners."^  The  ordinary  rules  as  to  the  vahdity  of  contracts  are 
applicable  to  contracts  of  settlement  of  firm  affairs  by  partners.^* 
Such  settlement  should  be  supported  by  a  valid  consideration.^^ 
An  agreement  between  the  partners  for  a  settlement  and  disso- 
lution may  be  annulled  or  set  aside  for  fraud  or  mistake."*^     If 


Pac.  783;  Evans  v.  Mackey  (Ala.), 
66  So.  3 ;  Andrews  v.  Stinson,  254 
111.  Ill,  98  N.  E.  222,  Ann.  Cas.  1913 
B,  927n  (revg.  judgment  164  111. 
App.  25)  ;  Silverman  v.  Kogut,  143 
N.  Y.  S.  947;  Babcock  v.  Swart- 
wout,  145  App.  Div.  203,  129  N.  Y. 
S.  1042 ;  Spencer  v.  Bynum  (N. 
Car.),  85  S.  E.  216. 

23  Sanford  v.  Embry,  151  Fed.  977, 
81  C.  C  A.  167;  Shows  v.  Fol- 
mar,  133  Ala.  599,  32  So.  495 ;  Hurl- 
but  V.  Phelps,  30  Conn.  42;  Beach 
V.  Hotchkiss,  2  Conn.  425 ;  Neal  v. 
Conwell,  115  Ga.  471,  41  S.  E.  607; 
Blalock  V.  Jackson,  94  Ga.  469,  20 
S.  E.  346;  Thomas  v.  Gaboury,  80 
Ga.  443,  7  S.  E.  690;  Home  v.  In- 
graham,  125  111.  198,  16  N.  E.  868; 
Muhlhiem  v.  Foster,  41  111.  App.  458; 
Barker  v.  McClelland,  50  Ind.  App. 
296,  98  N.  E.  300 ;  McDowell  v.  North, 
24  Ind.  App.  435,  55  N.  E.  789 ;  Dona- 
hue V.  McCosh,  70  Iowa  7Z3,  30  N. 
W.  14;  Murphy  v.  Murphy,  45  La. 
Ann.  433,  12  So.  496;  Farnsworth  v. 
Whitney,  74  Maine  370 ;  Trump  v. 
Baltzell,  3  Md.  295;  Stoddard  v. 
Wood,  9  Gray  (Mass.)  90;  In  re 
Judy,  166  Mo.  13,  65  S.  W.  993; 
Martin  v.  Smith  (N.  J.  Eq.),  13  Atl. 
398 ;  Ralph  v.  Eldridge.  137  N.  Y.  525, 
2Z  N.  E.  559  (revg.  58  Hun  203,  11  N. 
Y.  S.  840,  34  N.  Y.  St.  191)  ;  Eno  v. 
Diefendorf,  102  N.  Y.  720,  7  N.  E. 
798,  1  Silv.  Ct.  App.  157;  Jarvie  v. 
Arbuckle,  163  App.  Div.  199,  148  N. 
Y.  S.  189;  Gilliam  v.  Newland,  Z7 
Okla.  36,  130  Pac.  133;  Adams  v. 
Hubbard,   221    Pa.   511,   70   Atl.   835; 


Seaton  v.  Shaner,  158  Pa.  St.  69,  27 
Atl.  871;  Schmidt  v.  Lebby,  11  Rich. 
Eq.  (S.  Car.)  329;  Babb  v.  Mosby, 
7  Lea  (Tenn.)  105;  Morris  v.  Nunn, 
79  Tex.  125,  15  S.  W.  220;  Upton 
V.  Johnston,  84  Wis.  8,  54  N.  W. 
266;  Ex  parte  Barber,  L.  R.  5  Ch. 
687,  23  L.  T.  Rep.  (N.  S.)  230; 
Lawes  v.  Lawes,  9  Ch.  Div.  98,  38  L. 
T.  Rep.  (N.  S.)  370.  See  Fritz  v. 
Fritz,  141  Iowa  721,  118  N.  W.  769; 
Milloy  v.  Hoyt,  123  111.  App.  568; 
Stevens  v.  Clark,  112  Md.  659,  77 
Atl.  307 ;  Coffey  v.  Coffey,  210  Mass. 
480,  96  N.  E.  1027;  Dille  v.  Parker, 
204  Mass.  163,  90  N.  E.  520;  Jarvie 
V.  Arbuckle,  163  App.  Div.  199,  148 
N.  Y.  S.  189. 

24Cayton  v.  Walker,  10  Cal.  450; 
Herald  v.  Harper,  8  Blackf.  (Ind.) 
170;  Nystuen  v.  Hanson  (Iowa),  91 
N.  W.  1071;  Landry  v.  Landry,  23 
La.  Ann.  312 ;  Wiggin  v.  Goodwin,  63 
Maine  389;  Trump  v.  Baltzell,  3  Md. 
295 ;  Forward  v.  Forward,  6  Allen 
(Mass.)  494;  Scudder  v.  Andrus,  124 
Mich.  252,  82  N.  W.  1050;  Buckham 
V.  Singleton,  10  Mo.  405;  Manufac- 
turers' Nat.  Bank  v.  Cox,  2  Hun  572, 
5  Thomp.  &  C.  126  (affd.  59  N.  Y. 
659)  ;  Moore  v.  Bivins  (Tex.  Civ. 
App.),  ZZ  S.  W.  881. 

25  Home  V.  Ingraham,  125  111.  198, 
16  N.  E.  868;  Selz  v.  Mayer,  151 
Ind.  422,  51  N.  E.  485;  Gauger  v. 
Pautz,  45  Wis.  449. 

2s  Rentz  v.  Granger,  64  Fla.  445,  60 
So.  221 ;  Bigham  v.  Tinsley,  140  S.  W. 
1193,  adopting  opinion  149  Mo.  App. 
467,  130  S.  W.  506;  Vechsler  v.  Blit- 


923  ACCOUNTING,    SETTLEMENT,    DISSOLUTION  §    675 

something  of  value  was  received  in  the  settlement  by  the  partner 
alleged  to  have  been  defrauded,  he  must  return  it  in  order  to 
rescind  the  contract."^  Where  the  personal  representative  of  a 
deceased  partner  sues  the  surviving  partner  to  set  aside  a  disso- 
lution agreement  for  fraud,  the  partnership  being  for  the  specu- 
lative purchase  of  cotton  which  was  of  fluctuating  value,  the 
question  whether  he  was  damaged  in  the  settlement  depends  on 
conditions  at  the  time  of  settlement.^^  A  partner  may  sue  at 
law  to  recover  his  share  of  the  value  of  a  single  asset  which 
was  not  included  in  a  settlement  of  partnership  affairs  made  by 
his  copartners  without  his  knowledge.'^  Partners  are  concluded 
by  a  private  settlement  and  accounting,  in  the  absence  of  fraud 
or  mistake,^*  and  the  burden  of  showing  fraud  or  mistake  is 

zer,    150    N.   Y.    S.    770;    Morris    v.  476;   Eddy  v.   Fogg,   192   Mass.   543, 

Owen    (Tex.  Civ.  App.),   143   S.  W.  78  N.  E.  549;  McGunn  v.  Hanlin,  29 

227 ;  Johnson  v.  Belanger,  85  Vt.  249,  Mich.   476 ;    Corner   v.    Mackey,    147 

81  Atl.  621.  N.  Y.  574,  42  N.  E.  29  (affg.  7Z  Hun 

27  Johnson  v.  Belanger,  85  Vt.  249,  236,  25  N.  Y.  S.  1023)  ;  Ledyard  v. 
81  Atl.  621.  Bull,   119  N.   Y.  62,  23   N.  E.  444; 

28  Morris  v.  Owen  (Tex.  Civ.  Silverman  v.  Kogut,  143  N.  Y.  S.  947; 
App.),  143  S.  W.  227.  Pemberton  v.  McAdoo,  149  App.  Div. 

29  Inman  v.  Inkster,  90  Nebr.  704,  20,  133  N.  Y.  S.  627 ;  Dorsett  v.  Or- 
134  N.  W.  265.  miston,  53  App.  Div.  629,  65  N.  Y.  S. 

30  Sanford  v.  Embry,  151  Fed.  977,  931  (affg.  25  Misc.  570,  55  N.  Y.  S. 
81  C.  C.  A.  167 ;  Hallock  v.  Streeter,  1037)  ;  Patterson  v.  Martin,  28  N. 
102  Fed.  193;  Adams  v.  Atkinson,  158  Car.  Ill;  Lay  v.  Emery,  8  N.  Dak. 
Ala.  225,  48  So.  346;  Scheuer  v.  Ber-  515,  79  N.  W.  1053;  Little  v.  Little, 
ringer,  102  Ala.  216,  14  So.  640 ;  Cay-  2  N.  Dak.  175,  49  N.  W.  72,6 ;  Shirk's 
ton  V.  Walker,  10  Cal.  450;  Gibson  Appeal,  3  Brewst.  (Pa.)  119;  Main 
V.  Glover,  3  Colo.  App.  506,  34  Pac.  v.  Rowland,  Rich.  Eq.  Cas.  352  (S. 
687;  McMichael  v.  Mackey,  7  Ga.  Car.);  Dyer  v.  Adams,  56  Tex.  Civ. 
App.  773,  68  S.  E.  332;  Andrews  v.  App.  400,  120  S.  W.  946;  Kneeland 
Stinson,  254  III.  Ill,  98  N.  E.  222;  v.  McLachlen,  4  Tex.  Civ.  App.  203, 
Hamilton  v.  Wells,  182  111.  144,  55  23  S.  W.  309;  Lehman  v.  Heuston, 
N.  E.  143;  Milloy  v.  Hoyt,  123  111.  73  Wash.  154,  131  Pac.  825;  Holt  v. 
App.  568;  Spratt  v.  Dwyer  (Iowa),  Holt,  46  W.  Va.  397,  35  S.  E.  19; 
151  N.  W.  474;  Howard  v,  Pratt,  110  Heath  v.  Van  Cott,  9  Wis.  516;  Cov- 
lowa  533,  81  N.  W.  722 ;  Knox  v.  entry  v.  Barclay,  3  DeG.,  J.  &  S.  320, 
Pearson,  64  Kans.  711,  68  Pac.  613;  9  Jur.  (N.  S.)  1331,  9  L.  T.  Rep.  (N. 
Ferguson  v.  Hite,  9  Dana  (Ky.)  S.)  496;  Migner  v.  Goulet,  31  Can. 
553 ;  Keough  v.  Foreman,  33  La.  Ann.  Sup.  Ct.  26. 

1434;  Coleman  v.  Marble,  9  La.  Ann. 


§  675 


LAW    OF    PARTNERSHIP 


924 


on  the  partner  asserting  it."-  The  settlement  does  not  bind  third 
persons  not  privies  of  the  parties  to  it,""'"  nor  does  it  bind  any  one 
as  to  matters  not  included."''*  A  private  settlement  is  not  con- 
clusive as  to  matters  later  arising,  such  as  the  payment  of  a  claim 
not  contemplated  in  the  agreement.^^  Creditors  claiming  through 
the  partners  are  bound  if  the  settlement  is  honest,  and  not  in 
violation  of  the  bankruptcy  act.^°  A  partner  who  receives  the 
benefits  of  the  settlement  may  be  estopped  from  questioning  it,^^ 
and  long  delay  in  attacking  such  a  settlement  in  such  laches  as  op- 
erates to  bar  an  action  to  open  it  or  set  it  aside.^^  Delays  of  two,^^ 


32  San  ford  v.  Embry,  151  Fed.  977, 
81  C.  C.  A.  167;  Scheuer  v.  Ber- 
ringer,  102  Ala.  216,  14  So.  640 ;  No- 
ble V.  Faull,  26  Colo.  467,  58  Pac. 
681 ;  Pouder  v.  Tate,  1(s  Ind.  1 ;  Shoe- 
maker V.  Shoemaker,  92  S.  W.  546, 
29  Ky.  L.  134;  Wells  v.  Erstein,  24 
La.  Ann.  317;  Lilly  v.  Kroesen,  3 
Md.  Ch.  83;  Silver  v.  St.  Louis  &c. 
R.  Co.,  72  Mo.  194  (affg.  5  Mo.  App. 
381)  ;  Dovey  v.  Dovey,  95  Nebr.  624, 
146  N.  W.  923 ;  Murray  v.  Elston,  24 
N.  J.  Eq.  310  (affd.  24  N.  J.  Eq. 
589)  ;  Dorsett  v.  Ormiston,  25  Misc. 
570,  55  N.  Y.  S.  1037  (afifd.  53  App. 
Div.  629  65  N.  Y.  S.  931);  Ander- 
son V.  Anderson,  24  Utah  497,  68 
Pac.  319  (affd.  25  Utah  164,  70  Pac. 
608)  ;  Burrows  v.  Williarris,  52 
Wash.  278,  100  Pac.  340;  Mahuke  v. 
Neale,  23  W.  Va.  57;  Cuthbert  v. 
Edinborough,  21  Wkly.  Rep.  98.  See 
Adlecoa  v.  Warner,  16  Philippine 
423. 

33  Boggs  V.  Bird,  131  N.  Y.  665,  30 
N.  E.  868  (affg.  14  N.  Y.  S.  344,  60 
Hun  579,  38  N.  Y.  St.  992). 

34  Barker  v.  Boyd,  71  S.  W.  528,  24 
Ky.  L.  1389;  Hey  v.  Harding,  53  S. 
W.  Zl,  21  Ky.  L.  771 ;  Evans  v.  Clapp, 
123  Mass.  165,  25  Am.  Rep.  52; 
Iman  v.  Inkster,  90  Nebr.  704,  134  N. 
W.  265 ;  Jarvie  v.  Arbuckle,  163  App. 


Div.  199,  148  N.  Y.  S.  189;  Adams  v. 
Hubbard,  221  Pa.  511,  70  Atl.  835; 
Ryman  v.  Machell,  8  Kulp.  (Pa.) 
316;  Home  v.  Greer  (Tenn.),  43  S. 
W.  774;  Morris  v.  Wood  (Tenn.), 
35  S.  W.  1013. 

35  Barker  v.  McClelland,  SO  Ind.  App. 
296,  98  N.  E.  300 ;  Jarvie  v.  Arbuckle, 
163  App.  Div.  199,  148  N.  Y.  S.  189. 

36  Boggs  V.  Bird,  131  N.  Y.  665,  30 
N.  E.  868  (affg.  14  N.  Y.  S.  344,  60 
Hun  579,  38  N.  Y.  St.  992)  ;  Sage  v. 
Woodin,  66  N.  Y.  578;  Ludlow  v. 
Cooper,  4  Ohio  St.  1 ;  Merchants' 
Bank  of  Canada  v.  McLachlan,  23 
Can.  Sup.  Ct.  143  (revg.  2  Quebec 
Q.  B.  431)  ;  Whitmore  v.  Mason,  2 
Johns.  &  H.  204,  8  Jur.  (N.  S.)  278. 

37  Shows  V.  Folmar,  133  Ala.  599, 
32  So.  495 ;  Lucas  v.  Cooper,  23  S.  W. 
959,  15  Ky.  L.  642. 

38  Baker  v.  Cummings,  169  U.  S. 
189,  42  L.  ed.  711,  18  Sup.  Ct.  367; 
Holladay  v.  Land  &c.  Imp.  Co.,  57 
Fed.  774,  6  C.  C.  A.  560.  See  Keeley 
V.  Hargreaves,  236  111.  316,  86  N.  E. 
132;  Fitzsimons  v.  Foley,  80  Mich. 
518,  45  N.  W.  364;  Dovey  v.  Dovey, 
95  Nebr.  624,  146  N.  W.  923;  In  re 
Moore,  228  Pa.  530,  11  Atl.  902.  Com- 
pare Pemberton  v.  McAdoo,  149  App. 
Div.  20,  133  N.  Y.  S.  627. 

39  Dorsett   v.    Ormiston,   53   N.   Y. 


925 


ACCOUNTING,    SETTLEMENT,    DISSOLUTION 


675 


four,^°  six/^  twelve,^^  and  twenty-five  years,*^  have  been  held  un- 
reasonable under  the  particular  circumstances.  But  good  cause  for 
such  delay  may  explain  it  in  such  manner  as  to  allow  attack  of  a 
settlement  after  long  delay,  especially  where  there  was  ignorance 
of  the  fraud  until  shortly  before  the  suit  was  brought/^  Alutual 
mistake  of  the  parties  is  ground  for  relief,  if  definitely  and  clearly 
proved/^  Merely  a  mistaken  construction  by  one  partner  of 
the  effect  of  the  settlement  is  not  ground  for  setting  it  aside  on 
suit  of  the  other  partner,^*^  and  it  seems  there  should  be  a  return 
of  property  received  by  a  settlement,  before  a  suit  is  brought  to 
impeach  it/^  A  settlement  may  be  set  aside  for  fraud,  if  clearly 
proved,^®  although  in  a  few  cases  the  settlement  has  not  been 


App.  Div.  629,  65  N.  Y.  S.  931  (afifg. 
25  Misc.  570,  55  N.  Y.  S.  1037). 

40  Hunt  V.  Stuart,  53  Md.  225. 

4iWinslow  V.  Leland,  128  111.  304, 
21  N.  E.  588. 

42  King  V.  White,  63  Vt.  158,  21 
Atl.  535,  25  Am.  St.  752. 

43  Gilmour  v.  Kerr,  25  S.  W.  270,  18 
Ky.  L.  400. 

44  Murphy  v.  Kirby,  3  App.  Cas.  (D, 
C.)  207;  Stitzel  v.  Ehrman  (Ky.), 
114  S.  W.  280;  Ogden  v.  Astor,  4 
Sandf.  (N.  Y.)  311;  Jarvie  v.  Ar- 
buckle,  163  App.  Div.  199,  148  N.  Y. 
S.  189;  McGinn  v.  Benner,  180  Pa. 
St.  396,  36  Atl.  925. 

45  Blair  v.  Harrison,  57  Fed.  257, 
6  C.  C.  A.  326;  Claflin  v.  Bennett,  51 
Fed.  693  (afifd.  57  Fed.  257,  6  C.  C. 
A.  326)  ;  Desha  v.  Smith,  20  Ala.  747; 
Martin  v.  Solomon,  5  Harr.  (Del.) 
344 ;  Donahue  v.  McCosh,  70  Iowa 
7ZZ,  30  N.  W.  14 ;  Davis  v.  Ferguson, 
92  S.  W.  968,  29  Ky.  L.  214;  Holyoke 
V.  Mayo,  50  Maine  385  ;  Lilly  v.  Kroe- 
sen,  3  Md.  Ch.  83 ;  Gould  v.  Emerson, 
160  Mass.  438,  35  N.  E.  1065,  39  Am. 
St.  501 ;  Cobb  V.  Cole,  51  Minn.  48,  52 
N.  W.  985;  Nicholson  v.  Janeway, 
16  N.  J,  Eq.  285 ;  Augsbury  v.  Flower, 


68  N.  Y.  619;  Springer  v.  Dwyer,  58 
Barb.  (N.  Y.)  189  (revd.  on  other 
grounds,  50  N.  Y.  19)  ;  Roach  v. 
Ivey,  7  S.  Car.  434;  Gething  v. 
Keighley,  9  Ch.  Div.  547,  48  L.  J. 
Ch.  45.  Compare  Adams  v.  Hubbard, 
221  Pa.  511,  70  Atl.  835;  Taylor  v. 
Wrather,  155  Ky.  25,  159  S.  W.  662 ; 
Stitzel  V.  Ehrman  (Ky.),  114  S.  W. 
280. 

46  Sweet  V.  Sweet,  14  Ind.  App.  618, 
43  N.  E.  274. 

47  Mattingly  v.  Elder,  44  S.  W.  139, 
19  Ky.  L.  1647;  Ryman  v.  Machell,  8 
Kulp.  (Pa.)  316.  Compare  McMich- 
ael  V.  Mackey,  7  Ga.  App.  772,  68  S. 
E.  332. 

48  Richardson  v.  Walton,  49  Fed. 
888;  Atwood  v.  Smith,  11  Ala.  894; 
Wiester  v.  Wiester,  117  Cal.  xvii,  48 
Pac.  1086  (1897)  ;  Loesser  v.  Loesser, 
81  Ky.  139,  4  Ky.  L.  942 ;  Gilchrist  v. 
Kelley,  85  Mich.  413,  48  N.  W.  700; 
Campbell  v.  Campbell,  16  N.  Y.  S. 
165,  40  N.  Y.  St.  817;  Ryman  v. 
Machell,  8  Kulp.  (Pa.)  316;  Laing 
V.  Campbell,  36  Beav.  3,  55  Eng.  Re- 
print 1057,  See  Aldecoa  v.  Warner, 
16  Philippine  423 ;  Taylor  v.  Wrather, 
155  Ky.  25,  159  S.  W.  662. 


§    (i7^  LAW    OF    PARTNERSHIP  926 

set  aside,  but  modified.'*^  If  the  dissolution  agreement  contains 
an  account  stated,  and  provides  for  specific  contributions  or  liqui- 
dated damages  as  to  certain  matters,  either  partner  may  sue  the 
other  thereon,  if  nothing  as  to  partnership  accounting  is  in- 
volved.^" The  retention  by  one  partner  of  an  account  stated 
prepared  and  rendered  to  him  by  another,  does  not  raise  a  pre- 
sumption of  settlement  of  partnership  affairs  on  the  basis  stated, ^^ 

§  676.  Assumption  of  firm  debts,  indemnity  and  surety- 
ship.— In  general,  it  is  competent  for  one  partner  to  agree  to 
assume  firm  debts  on  dissolution.  This  subject  was  fully  treated 
in  an  earlier  chapter,  as  well  as  those  of  suretyship  of  a  retiring 
partner  and  indemnity  to  him.^" 

^  677.  Settlement  by  arbitration.—  Tt  is  not  uncommon  to 
provide  in  partnership  articles  for  an  arbitration  of  controversies 
between  partners,  but  such  provision  does  not  oust  courts  of 
jurisdiction"^  unless  it  is  made  a  condition  precedent  to  suit,"*  or 
the  arbitration  is  brought  under  a  statute.""    Agreements  for  ar- 

49  Turner  v.  Otis,  30  Kans.  1,  1  Gunn  v.  Hanlin,  29  Mich.  476;  Hurst 
Pac.  19;  Stitzel  v.  Ehrman  (Ky.),  114  v.  Litchfield,  39  N.  Y.  2>11 ;  Page  v. 
S.  W.  280;  Trump  v.  Baltzell,  3  Md.  Vankirk,  1  Brewst.  (Pa.)  282,  6 
295;  Daniels  v.  Gillespie,  65  W.  Va.  Phila.  264;  Hind  v.  Low,  14  Haw. 
366,  64  S.  E.  254.  438 ;  Cooke  v.  Cooke,  L.  R.  4  Eq.  11, 

50  Silverman  v.  Kogut,  143  N.  Y.  S.  36  L.  J.  Ch.  480 ;  Wellington  v.  Mack- 
947.  intosh,  2  Atk.  569. 

51  Hughes  V.  Smither,  23  App.  Div.  54Altman  v.  Altman,  5  Daly  (N. 
590,  49  N.  Y.  S.  115  (affd.  163  N.  Y.  Y.)  436;  Spurrier  v.  La  Cloche 
553,  57  N.  E.  1112)  ;  Killam  v.  Pres-  [1902],  A.  C.  446,  71  L.  J.  P.  C.  101, 
ton,  4  Watts  &  S.  (Pa.)  14;  Geyer  86  L.  T.  Rep.  (N.  S.)  631;  Dinham  v. 
V.    Carpenter,    15    Phila.     (Pa.)     172.  Bradford,  L.  R.  5  Ch.  519. 

But   compare   Atwater   v.    Fowler,    1  ^s  English  Arb.  Act   (1889);  Vaw- 

Edw.  Ch.   (N.  Y.)   417,  and  Keys  v.  drey  v.   Simpson    [1896],    1    Ch.    166, 

Baldwin,  10  Ohio  Dec.  (Reprint)  268,  65  L.  J.  Ch.  369;  Belfield  v.  Bourne 

which  deny  relief  because  of  laches.  [1894],  1  Ch.  521,  63  L.  J.  Ch.  104; 

52  See  ch.  18,  on  change  of  mem-  Law  v.  Garrett,  8  Ch.  Div.  26,  38  L. 
bership.  T.  Rep   (N.  S.)  3;  Gillett  v.  Thorn- 

53  Meaher  v.  Cox,  Zl  Ala.  201 ;  De  ton,  L.  R.  19  Eq.  559,  44  L.  J.  Ch.  398 ; 
Pusey    V.    Dupont,    1    Del.    Ch.    82 ;  Dennehy  v.  Jolly,  22  Wkly.  Rep.  449 ; 
Waugh  V.  Schlenk,  23  111.  App.  433;  In  re  Evans,  22  L.  T.  (N.  S.)  507. 
Pearl  v.  Harris,  121  Mass.  390;  Mc- 


927 


ACCOUNTING,    SETTLEMENT,    DISSOLJTION 


§  677 


bitration  are  strictly  construed,  since  their  tendency  is  to  deprive 
courts  of  jurisdiction.''^''  There  is  apparently  no  restriction  on 
the  right  of  partners  after  dissolution  to  submit  controversies  to 
arbitration.^^  Proceedings  upon  arbitration  should  follow  the 
specifications  of  the  submission  agreement.^^  It  has  been  held 
that  there  is  no  right  to  revoke  the  submission  after  the  arbi- 
trators have  begun  their  proceedings,^^  although  the  general 
rule  as  to  a  common  law  submission  is  that  it  may  be  revoked  any 
time  before  award. ^""^  Each  partner  is  under  a  duty  to  present  the 
facts  fully,''°  and  if  the  arbitration  fails  without  fault  of  the  part- 
ners, but  from  failure  of  arbitrators  to  agree,  then  there  is  a  right 
to  a  judicial  accounting.^^  The  award  should  be  in  accordance 
with  the  submission  and  should  fully  dispose  of  all  the  questions 
presented,®"  in  definite  and  certain  terms.®^    Such  an  award  may 


56  De  Pusey  v.  Du  Pont,  1  Del.  Ch. 
82;  Gallier  v.  Walsh,  1  Rob.  (La.) 
226;  Piercy  v.  Young,  14  Ch.  D.  200, 
42  L.  T.  (N.  S.)  710;  Cook  v.  Catch- 
pole,  10  Jur.  (N.  S.)  1068,  34  L.  J. 
Ch.  60;  Joplin  v.  Postlethwaite,  61 
L.  T.  Rep.  (N.  S.)  629. 

"Hoyt  V.  Sprague,  103  U.  S.  613, 
26  L.  ed.  585  (aflfg.  Fed.  Cas.  No. 
6810)  ;  Foster  v.  Carr,  135  Cal.  83,  67 
Pac.  43 ;  Tucker  v.  Page,  69  111.  179 ; 
Anderson  v.  Beebe,  22  Kans.  768; 
Adams  v.  Ringo,  79  Ky.  211,  1  Ky. 
L.  251 ;  Hayes  v.  Forskoll,  31  Maine 
112;  Richards  v.  Todd,  127  Mass.  167; 
Shearer  v.  Handy,  22  Pick.  (Mass.) 
417;  Locke  v.  Filley,  14  Hun  (N.  Y.) 
139;  Duxbury  v.  Isherwood,  12 
Wkly.  Rep.  821.  See  Haley  v.  Bel- 
lamy, 137  Mass.  357. 

58  Ives  V.  Ashelby,  26  111.  App.  244 ; 
Adams  v.  Ringo,  79  Ky.  211,  1  Ky.  L. 
251;  Witz  V.  Tregallas,  82  Md.  351, 
33  Atl.  718;  Masury  v.  Whiton,  111 
N.  Y.  679,  18  N.  E.  638,  2  Silv.  Ct. 
App.  123 ;  Masters  v.  Gardner,  50  N. 
Car.  298;  Mitchell  &c.  Furniture  Co. 
V.  Runk,  7  Ohio  Dec.  (Reprint)  491, 
3  Cine.  L.  Bui.  538;  Graham  v.  Gra- 


ham, 9  Pa.  St.  254,  49  Am.  Dec.  557 ; 
Brown  v.  Harklerode,  7  Humph, 
(Tenn.)  19;  Thomson  v.  Anderson, 
L.  R.  9  Eq.  523,  39  L.  J.  Ch.  468. 

59  Haley  v.  Bellamy,  137  Mass.  357, 
359;  Wilson  v.  Balcarres  Brook 
Steamship  Co.  [1893],  1  Q.  B.  422,  7 
Aspin  321,  62  L.  J.  Q.  B.  245. 

59a  Elliott  Contracts,  §  2947,  and 
cases  cited :  Williams  v.  Branning 
Mfg.  Co.,  153  N.  Car.  7,  68  S.  E.  902. 
31  L.  R.  A.  (N.  S.)  679n,  138  Am.  St. 
637n,  21  Ann.  Cas.  954n. 

60  Beam  v.  Macomber,  33  Mich.  127. 
ci  Norton  v.  Hayden,  129  Mich.  374, 

8  N.  W.  876. 

02  McCormick  v.  Gray,  13  How.  26 
(N.  S.),  14  L.  ed.  36;  Johnston  v. 
Dulin,  10  Ky.  L.  (abstract)  403;  Den- 
eufbourg  v.  Gaiennie,  14  La.  53 ; 
Paine  v.  Paine,  15  Gray  (Mass.)  299; 
Masury  v.  Whiton,  111  N.  Y.  679,  18 
N.  E.  638,  2  Silv.  Ct.  App.  123 ;  Waugh 
V.  Mitchell,  21  N.  Car.  510;  Wilkin- 
son V.  Page,  1  Hare  276,  6  Jur.  567, 
11  L.  J.  Ch.  193;  Thirkell  v.  Strachan, 
4  U.  C.  Q.  B.  136. 

•53  Carsley  v.  Lindsay,  14  Cal.  390 ; 
Henrickson  v.  Reinback,  33  111.  299; 


§  (^77 


"LKyM    OF    PARTNERSHIP 


928 


be  used  as  a  defense  in  an  action  on  matters  embraced  in  it,®* 
or  will  be  enforced  by  the  courts  if  of  proper  character.*'^  The 
award  is  not  binding  as  to  matters  not  included  in  the  submis- 
sion,^® or  as  to  matters  which  the  arbitrators  omitted  through 
mistake.®'"  The  arbitrator,  after  making  his  award,  can  not,  it  is 
held,  change  it  to  correct  a  mistake  without  consent  of  both  part- 
ners.®^ 


Russell  V.  Smith,  87  Ind.  457;  Abell 
V.  Phillips,  13  S.  W.  109,  11  Ky.  L. 
913;  Witz  V.  Tragallas,  82  Md.  351, 
Z2,  Atl.  718 ;  Cochran  v.  Bartle,  91  Mo. 
636,  3  S.  W.  854;  Parker  v.  Dorsey, 
68  N.  H.  181,  38  Atl.  785;  Bell  v. 
Price,  22  N.  J.  L.  578;  Herbst  v. 
Hagenaers,  137  N.  Y.  290,  ZZ  N.  E. 
315  (aflfg.  62  Hun  568,  17  N.  Y.  S. 
58)  ;  Osborne  v.  Calvert,  83  N.  Car, 
365;  Lamphire  v.  Cowan,  39  Vt.  420; 
Harrison  v.  Mader,  47  Nova  Scotia  1. 

64  Yates  V.  Petty,  1  Har.  &  J.  (Md.) 
58;  Eddy  v.  Fogg,  192  Mass.  543,  78 
N.  E.  549;  Richardson  v.  Huggins, 
23  N.  H.  106;  Tittenson  v.  Peat,  3 
Atk.  529,  26  Eng.  Reprint  1105. 

65  Witz  V.  Tregallas,  82  Md.  351, 
ZZ  Atl.  718 ;  Cochran  v.  Bartle,  91  Mo. 
tZd,  3  S.  W.  854 ;  Byers  v.  Van  Deu- 
sen,  5  Wend.  (N.  Y.)  268;  Redick  v. 


Skelton,  18  Ont.  100.  See  also  Ehr- 
lich  V.  Pike,  53  Misc.  (N.  Y.)  328, 
104  N.  Y.  S.  818 ;  Needham  v.  Bythe- 
wood  (Tex.  Civ.  App.),  61  S.  W.  426; 
Redick  V.  Skelton,  18  Ont.  100. 

66  Thornton  v.  McNeill,  23  Misc. 
369;  Masury  v.  Whiton,  43  Hun  638, 
6  N.  Y.  St.  697  (affd.  Ill  N.  Y.  679, 
18  N.  E.  638,  2  Silv.  Ct.  App.  123)  ; 
Garrow  v.  Nicolai,  24  Ore.  76,  32  Pac. 
1036;  Doupe  v.  Stewart,  28  U.  C.  Q. 
B.  192. 

67  Deneufbourg  v.  Gaiennie,  14  La. 
^Z;  Paine  v.  Paine,  15  Gray  (Mass.) 
299;  Reily  v.  Russell,  34  Mo.  524; 
Teacher  v.  Calder  [1899],  A.  C.  451; 
Spencer  v.  Spencer,  2  Y.  &  J.  249,  31 
Rev.  Rep.  583.  See  also  Ehrlich  v. 
Pike,  53  Misc.  328,  104  N.  Y.  S.  818. 

6s  Hartley  v.  Henderson,  189  Pa.  St. 
277,  42  Atl.  198. 


CHAPTER  XXII 


BANKRUPTCY    OF    PARTNERSHIP 


SECTION 

685.  Generally — Entity. 

686.  Test  of   solvency  of  a  partner- 

ship. 

687.  Administration  of  unadjudicated 

partner's  individual  estate. 

688.  Partnership  and  individual  inter- 

ests. 

689.  Particular   instances   of  partner- 

ship or  individual  ownership 
or  indebtedness. 

690.  Authority    to    adjudge    partner- 

ships bankrupt. 

691.  Commencement  of  proceedings. 

692.  Result     of     proceedings     where 

only  part  of  partners  join. 

693.  Preferences. 

694.  Order  of  proof  of  debts. 

695.  Exception     to     general     rule — 

Where  no  partnership  estate 
and  partners  are  all  insolvent. 

696.  Cases  not  recognizing  exception 

to  general  rule  where  no  part- 
nership estate  and  partners  are 
all  insolvent. 


SECTION 

697.  Proof  against  both  estates. 

698.  Proof  between  estates. 

699.  Costs  of  partnership  petition. 

700.  Time  within  which  firm  may  be 

adjudged. 

701.  Acts  of  bankruptcy. 

702.  Particular  cases  involving  acts  of 

bankruptcy  by  partnerships. 

703.  Place    of    commencing    proceed- 

ings. 

704.  Exemptions   in   partnership   pro- 

ceedings. 

705.  Appointment     and     powers     of 

trustee  in  partnership  cases. 

706.  Discharge  in  partnership  cases. 

707.  Misconduct    of    one    partner    as 

affecting      innocent      partner's 
right  to  discharge. 

708.  Bankruptcy     as     dissolution     of 

partnership. 


§  685.  Generally^ — Entity. — Bankruptcy  of  a  partnership 
is  one  of  the  causes  of  dissokition  of  partnership,  and  is  so  classi- 
fied in  a  preceding  chapter.  Because  of  its  importance  in  partner- 
ship relations,  a  full  chapter  is  here  given  to  a  discussion  of  its 


^As  the  subject  of  bankruptcy  of 
a  partnership  is  almost  entirely  gov- 
erned by  the  federal  statute  and  gen- 
eral orders,  section  5  of  the  Bank- 
ruptcy Act  of  1898,  relating  specially 


to  partnerships,  and  General  Order 
No.  VIII,  relating  to  partnership 
proceedings,  are  here  inserted  for 
convenience  of  reference.  Section 
Five    of     Bankruptcy    Act — Sec.     5. 


929 


685 


LAW    OF    PARTNERSHIP 


930 


various  phases.  Owing  to  the  pecuHar  status  of  a  partnership,  that 
part  of  the  law  of  bankruptcy  which  deals  with  partnership  is  very 
generally  conceded  to  be  the  most  difficult,  and  the  least  satisfac- 
torily settled,  of  any  department  of  bankruptcy  law.  The  reason 
is  that  the  interests  of  each  of  the  partners  personally  is  so  closely 
interwoven  with  the  affairs  of  the  firm,  that  grave  difficulties 
arise,  especially  as  bankruptcy  is  purely  a  Federal  institution 
whenever  the  Federal  government  chooses  to  exercise  its  rights, 
and  is  administered  by  Federal  courts  alone,  and,  further,  as  the 


Partners — (a)  A  partnership,  during 
the  continuation  of  the  partnership 
business,  or  after  its  dissolution  and 
before  the  final  settlement  thereof, 
may  be  adjudged  a  bankrupt,  (b) 
The  creditors  of  the  partnership 
shall  appoint  the  trustee ;  in  other  re- 
spects, so  far  as  possible,  the  estate 
shall  be  administered  as  herein  pro- 
vided for  other  estates,  (c)  The 
court  of  bankruptcy  which  has  juris- 
diction of  one  of  the  partners  may 
have  jurisdiction  of  all  of  the  part- 
ners and  of  the  administration  of  the 
partnership  and  individual  property, 
(d)  The  trustee  shall  keep  separate 
accounts  of  the  partnership  property 
and  of  the  property  belonging  to  the 
individual  partners,  (e)  The  ex- 
penses shall  be  paid  from  the  part- 
nership property  and  the  individual 
property  in  such  proportions  as  the 
court  shall  determine,  (f)  The  net 
proceeds  of  the  partnership  property 
shall  be  appropriated  to  the  payment 
of  the  partnership  debts,  and  the  net 
proceeds  of  the  individual  estate  of 
each  partner  to  the  payment  of  his 
individual  debts.  Should  any  sur- 
plus remain  of  the  property  of  any 
partner  after  paying  his  individual 
debts,  such  surplus  shall  be  added 
to  the  partnership  assets  and  be  ap- 
plied to  the  payment  of  the  partner- 


ship debts.  Should  any  surplus  of 
the  partnership  property  remain  after 
paying  the  partnership  debts,  such 
surplus  shall  be  added  to  the  assets 
of  the  individual  partners  in  the  pro- 
portion of  their  respective  interests 
in  the  partnership,  (g)  The  court 
may  permit  the  proof  of  the  claim 
of  the  partnership  estate  against  the 
individual  estates,  and  vice  versa,  and 
may  marshal  the  assets  of  the  part- 
nership estate  and  individual  estates 
so  as  to  prevent  preferences  and  se- 
cure the  equitable  distribution  of  the 
property  of  the  several  estates,  (h) 
In  the  event  of  one  or  more  but  not 
all  of  the  members  of  a  partnership 
being  adjudged  bankrupt,  the  part- 
nership property  shall  not  be  admin- 
istered in  bankruptcy,  imless  by  con- 
sent of  the  partner  or  partners  not 
adjudged  bankrupt ;.  but  such  partner 
or  partners  not  adjudged  bankrupt 
shall  settle  the  partnership  business 
as  expeditiously  as  its  nature  will 
permit,  and  account  for  the  interest 
of  the  partner  or  partners  adjudged 
bankrupt.  General  Order  No.  VIII. 
Proceedings  in  Partnership  Cases. 
— Any  member  of  a  partnership,  who 
refuses  to  join  in  a  petition  to  have 
the  partnership  declared  bankrupt, 
shall  be  entitled  to  resist  the  prayer 
of  the  petition   in  the  same  manner 


931  BANKRUPTCY  §    685 

Federal  courts  aim,  whenever  possible,  in  deciding  cases  in  any 
state  to  follow  the  law  of  that  particular  state.  When  it  is  con- 
sidered that  some  states  look  upon  a  partnership  as  an  entity,  in 
most  matters  separate  and  apart  from  the  individuals  composing 
it,  while  other  states  take  the  opposite  view,  looking  upon  it  as 
but  little  more  than  a  convenient  manner  of  dealing  with  the 
members  of  it,  it  is  easy  to  see  the  difficulties  which  beset  a  Fed- 
eral court  in  handling  the  question  in  a  consistent  manner.  As 
to  certain  matters,  however,  the  Bankruptcy  Act  itself  recognizes 
the  firm  as  an  entity.  The  present  Bankruptcy  Act  expressly 
recognizes  a  partnership  as  a  "person"  for  the  purpose  of  adjudi- 
cation, providing  that  it  may  be  adjudicated,  and  by  implication 
recognizes  that  as  an  entity  it  may  own  property  and  owe  debts. 
However,  it  can  not  be  said  that  a  partnership  is  either  wholly 
an  entity  or  the  contrary,  under  the  bankruptcy  laws.  It  has  cer- 
tain aspects  in  which  it  is  treated  as  an  entity,  others  where  it  is 
not  so  treated.  Section  5a,  the  provision  treating  this  question, 
is:  "A  partnership,  during  the  continuation  of  the  partner- 
ship business,  or  after  its  dissolution  and  before  final  settlement 
thereof,  may  be  adjudged  a  bankrupt."  Thus  the  firm,  for  some 
of  the  purposes  of  bankruptcy,  may  be  an  entity.^^    And  it  seems 

as  if  the  petition  had  been  filed  by  a  tory  of  his  property  in  the  same  man- 
creditor  of  the  partnership,  and  notice  ner  as  is  required  by  the  act  in  cases 
of  the  fiUng  of  the  petition  shall  be  of  debtors  against  whom  adjudica- 
given  to  him  in  the  same  manner  as  tion  of  bankruptcy  shall  be  made, 
provided  by  law  and  by  these  rules  [General  Order  XVIII,  1867,  with  no 
in  the  case  of  a  debtor  petitioned  substantial  change.] 
against;  and  he  shall  have  the  right  ^a  Francis  v.  McNeal,  186  Fed.  481, 
to  appear  at  the  time  fixed  by  the  26  Am.  Bkr.  R.  555 ;  In  re  Union 
court  for  the  hearing  of  the  petition,  Bank,  184  Fed.  224,  25  Am.  Bkr.  R. 
and  to  make  proof,  if  he  can,  that  the  148 ;  In  re  Ullman,  180  Fed.  944,  24 
partnership  is  not  insolvent  or  has  Am.  Bkr.  R.  755;  In  re  Junck,  169 
not  committed  an  act  of  bankruptcy,  Fed.  481,  22  Am.  Bkr.  R.  298;  In  re 
and  to  make  all  defenses  which  any  Solomon  &  Carvel,  163  Fed.  140,  20 
debtor  proceeded  against  is  entitled  Am.  Bkr.  R.  488;  In  re  Ceballos,  161 
to  take  by  the  provisions  of  the  act;  Fed.  445,  20  Am.  Bkr.  R.  459;  In  re 
and  in  case  an  adjudication  of  bank-  Evans,  161  Fed.  590,  20  Am.  Bkr.  R. 
ruptcy  is  made  upon  the  petition,  such  406 ;  In  re  Stovall  Grocery  Co.,  161 
partner  shall  be  required  to  file  a  Fed.  882.  20  Am.  Bkr.  R.  537 ;  Mills  v. 
schedule  of  his  debts  and  an  inven-  Fisher,  159  Fed.  897,  20  Am.  Bkr,  R. 


S  686 


LAW    OF    PARTNERSHIP 


932 


settled  by  the  holdings  under  the  Bankruptcy  Act  that  a  partner- 
ship as  an  entity  may  be  adjudged  a  bankrupt." 

§  686.  Test  o£  solvency  of  a  partnership. — There  are  two 
lines  of  cases  bearing  upon  the  insolvency  of  a  partnership.  The 
one  applies  the  principle  of  firm  entity,  and  holds  that  the  firm 
is  solvent  only  when  the  firm  property  is  sufficient  to  pay  all  firm 
debts.^  Most  cases  do  not  apply  the  doctrine  of  firm  entity  to 
this  phase  of  the  subject,  but  hold  that,  in  order  to  make  a  part- 
nership insolvent  the  debts  of  the  partnership  must  exceed  the 
combined  assets  of  the  firm  and  of  the  individual  partners,  inso- 
far as  the  assets  of  the  individual  partners  are  available  to  the 
payment  of  partnership  debts.^    The  former  view  is  perhaps  the 


237;  In  re  Bertenshaw,  157  Fed.  363, 
19  Am.  Bkr.  R.  577 ;  Mauson  v.  Will- 
iams, 153  Fed.  525,  18  Am.  Bkr.  R. 
674;  In  re  Perley,  138  Fed.  927,  15 
Am.  Bkr.  R.  54;  In  re  Stein  &  Co., 

127  Fed.  547,  62  C.  C.  A.  272,  11  Am. 
Bkr.  R.  536 ;  In  re  McLaren,  125  Fed. 
835,  11  Am.  Bkr.  R.  141 ;  In  re  Mer- 
cur,  122  Fed.  384,  58  C.  C.  A.  472,  10 
Am.  Bkr.  R.  505;  In  re  Farley,  115 
Fed.  359,  8  Am.  Bkr.  R.  267;  In  re 
Hale,  107  Fed.  432,  6  Am.  Bkr.  R.  35 ; 
Strause  v.  Hooper,  105  Fed.  590,  5 
Am.  Bkr.  R.  225 ;  Vaccaro  v.  Security 
Bank,  103  Fed.  436,  43  C.  C.  A.  279, 
4  Am.  Bkr.  R.  474 ;  In  re  Barden,  101 
Fed.  553,  4  Am.  Bkr.  R.  31 ;  In  re 
Sanderlin,  100  Fed.  857,  6  Am.  Bkr. 
R.  384;  In  re  Meyer,  98  Fed.  976,  39 
C.  C.  A.  368,  3  Am.  Bkr.  R.  559; 
American  Steel  &c.  Co.  v.  Coover, 
25  Am.  Bkr.  R.  58;  In  re  Pincus,  147 
Fed.  621,  17  Am.  Bkr.  R.  331,  ZZ7 ; 
McMurtrey  v.  Smith,  15  Am.  Bkr.  R, 
427;  In  re  Corcoran,  12  Am.  Bkr.  R. 
283.  But  see  In  re  Carleton,  115  Fed. 
246,  8  Am.  Bkr.  R.  270 ;  In  re  Forbes, 

128  Fed.  137,  11  Am.  Bkr.  R.  787. 

2  In  re  Meyer,  98  Fed.  976,  39  C. 
C.  A.  368.  See  cases  cited  in  preced- 
ing note. 


3  In  re  Everybody's  Grocery  & 
Meat  Market,  173  Fed.  492,  21  Am. 
Bkr.  R.  925;  In  re  Bertenshaw,  157 
Fed.  363,  19  Am.  Bkr.  R.  577;  In  re 
McMurtrey,  142  Fed.  853,  15  Am.  Bkr. 
R.  427. 

4  Francis  v.  AicNesl,  228  U.  S.  695, 
57  L.  ed.  1029,  22>  Sup.  Ct.  505,  L.  R. 
A.  1915  E,  706.  Compare  Tumlin  v. 
Bryan,  165  Fed.  166,  21  Am.  Bkr.  R. 
319;  In  re  Samuels,  215  Fed.  845;  In 
re  Duke,  199  Fed.  199,  28  Am.  Bkr. 
R.  195 ;  Washington  Cotton  Co.  v. 
Morgan,  192  Fed.  310,  27  Am.  Bkr. 
R.  638 ;  Francis  v.  McNeal,  186  Fed. 
481,  26  Am.  Bkr.  R.  555 ;  Worrell  v. 
Whitney,  185  Fed.  1002,  24  Am.  Bkr. 
R.  749;  In  re  Perlhefter,  177  Fed. 
299,  25  Am.  Bkr.  R.  576;  Tumlin  v. 
Bryan,  165  Fed.  166,  21  L.  R.  A.  (N. 
S.)  960n;  Dicka."  v.  Barnes,  140  Fed. 
849,  72  C.  C.  A.  261,  5  L.  R.  A.  (N. 
S.)  654;  In  re  Perley,  138  Fed.  927, 
15  Am.  Bkr.  R.  154;  In  re  Forbes, 
128  Fed.  137,  11  Am.  Bkr.  R.  787; 
Davis  V.  Stevens,  104  Fed.  235 ;  Vac- 
caro V.  Security  Bank,  103  Fed.  436, 
43  C.  C.  A.  279,  4  Am.  Bkr.  R.  474; 
In  re  Blair,  99  Fed.  76,  3  Am.  Bkr. 
R.  588.     See  cases  cited  in  §  685. 


933  BANKRUPTCY  §    686 

more  logical  of  the  two,  especially  when  the  decisions  lean  toward 
the  viewpoint  of  firm  entity,  but  the  latter  view  seems  now  to  be 
the  settled  rule  and  there  is  but  little  question  that,  in  actual  prac- 
tice, the  latter  view  is  found  the  more  just  and  beneficial.  When 
the  latter  view  prevails,  and  a  petition  on  behalf  of  the  firm  is 
filed  by  less  than  all  the  partners,  those  not  joining  may  defend 
on  the  ground  that  they  are  solvent,  and  that  hence  the  firm  can 
not  be  insolvent.^  It  has  been  held  that  the  inability  of  a  partner- 
ship to  meet  its  matured  obligations,  together  with  its  dissolu- 
tion, and  the  transfer  of  practically  all  of  its  property  to  cred- 
itors, either  by  way  of  payment  or  security,  leaving  other  debts 
unpaid,  are  facts  sufficient  to  establish  its  insolvency.*^  This 
question  as  to  when  a  partnership  is  insolvent  was  for  some  time 
a  debatable  one  because  of  a  few  Federal  decisions  holding  that 
the  firm  w^as  insolvent  when  its  assets  w^ere  insufficient  to  meet  its 
liabilities,  but  the  leading  case  so  holding,^  was  overruled,  and 
the  doctrine  settled  by  the  leading  case  of  Francis  v.  McNeal,®  in 
which  the  court  said :  "Since  Cory  on  Accounts  was  made  more 
famous  by  Lindley  on  Partnership,  the  notation  that  the  firm  is 
an  entity  distinct  from  its  members  has  grown  in  popularity,  and 
the  notion  has  been  confirmed  by  recent  speculations  as  to  the 
nature  of  corporations  and  the  oneness  of  any  somewhat  perma- 
nently combined  group  without  the  aid  of  law.  But  the  fact  re- 
mains as  true  as  ever  that  partnership  debts  are  debts  of  the  mem- 
bers of  the  firm,  and  that  the  individual  liability  of  the  members 
is  not  collateral  like  that  of  a  surety,  but  primary  and  direct, 
whatever  priorities  there  may  be  in  the  marshaling  of  assets. 
The  nature  of  the  liability  is  determined  by  the  common  law,  not 
by  the  possible  intervention  of  the  bankruptcy  act.  Therefore 
ordinarily  it  would  be  impossible  that  a  firm  should  be  insolvent 
while  the  members  of  it  remained  able  to  pay  its  debts  with 
money  available  for  that  end.    A  judgment  could  be  got  and  the 

5  In  re  Forbes,  128  Fed.  137,  11  Am.  L.  R.  A.   (N.  S.)   886,   13  Ann.  Cas. 

Bkr.  R.  787.  986. 

^In  re  Miller,  104  Fed.  764.  s  228  U.  S.  695,  57  L.  ed.  1029,  33 

7  In  re  Bertenshaw,  157  Fed.  363,  17  Sup.  Ct.  701,  L.  R.  A.  1915  E,  706. 


§    686  LAW    OF    TARTNERSHIP  934 

partnership  debt  satisfied  on  execution  out  of  the  individual  es- 
tates.   The  question  is  whether  the  bankruptcy  act  has  estabhshed 
principles  inconsistent  with  these  fundamental  rules,  although  the 
business  of  such  an  act  is,  so  far  as  may  be,  to  preserve,  not  to 
upset,  existing  relations.     It  is  true  that  by  section  1,  the  word 
'person,'  as  used  in  the  act,  includes  partnerships;  that  by  the 
same  section,  a  person  shall  be  deemed  insolvent  when  his  prop- 
erty, exclusive,  etc.,  shall  not  be  sufficient  to  pay  his  debts;  that 
by  section  5a,  a  partnership  may  be  adjudged  a  bankrupt,  and 
that  by  section  14a,  any  persons  may  file  an  application  for  dis- 
charge.    No  doubt  these  clauses,  taken  together,  recognize  the 
firm  as  an  entity  for  certain  purposes,  the  most  important  of 
which,  after  all,  is  the  old  rule  as  to  the  prior  claim  of  partner- 
ship debts  on  partnership  assets,  and  that  of  individual  debts 
upon  the  individual  estate.     Section  5g.     But  we  see  no  reason 
for  supposing  that  it  was  intended  to  erect  a  commercial  device 
for  expressing  special  relations  into  an  absolute  and  universal 
formula — a  guillotine  for  cutting  off  all  the  consequences  admit- 
ted to  attach  to  partnerships  elsewhere  than  in  the  bankruptcy 
courts.    On  the  contrary,  we  should  infer  from  section  5,  clauses 
c  through  g,  that  the  assumption  of  the  bankruptcy  act  was  that 
the  partnership  and  individual  estates  both  were  to  be  adminis- 
tered, and  that  the  only  exception  was  that  in  h,  'in  the  event  of 
one  or  more,  but  not  all,  of  the  members  of  a  partnership  being 
adjudged  bankrupt.'     In  that  case,   naturally,   the  partnership 
property  may  be  administered  by  the  partners  not  adjudged  bank- 
rupt, and  does  not  come  into  bankruptcy  at  all  except  by  consent. 
But  we  do  not  perceive  that  the  clause  imports  that  the  partner- 
ship could  be  in  bankruptcy,  and  the  partners  not.    The  hypoth- 
esis is  that  some  of  the  partners  are  in,  but  that  the  firm  has 
remained  out,  and  provision  is  made  for  its  continuing  out.   The 
necessary  and  natural  meaning  goes  no  further  than  that.     On 
the  other  hand,  it  would  be  an  anomaly  to  allow  proceedings  in 
bankruptcy  against  joint  debtors   from  some  of  whom  at  any 
time  before,  pending,  or  after  the  proceeding,  the  debt  could  be 
collected  in  full.    If  such  proceedings  were  allowed,  it  would  be 


935  BANKRUPTCY  §    687 

a  further  anomaly  not  to  distribute  all  the  partnership  assets. 
Yet  the  individual  estate,  after  paying  private  debts,  is  part  of 
those  assets,  so  far  as  needed.  Section  5f.  Finally,  it  would  be 
a  third  incongruity  to  grant  a  discharge  in  such  a  case  from  the 
debt  considered  as  joint,  but  to  leave  the  same  persons  liable  for 
it  considered  as  several.  We  say  the  same  persons,  for  however 
much  the  difference  between  firm  and  member  under  the  statute 
be  dwelt  upon,  the  firm  remains  at  common  law  a  group  of  men, 
and  will  be  dealt  with  as  such  in  the  ordinary  courts  for  use  in 
which  the  discharge  is  granted.  If,  as  in  the  present  case,  the 
partnership  and  individual  estates  together  are  not  enough  to  pay 
the  partnership  debts,  the  rational  thing  to  do,  and  one  certainly 
not  forbidden  by  the  act,  is  to  administer  both  in  bankruptcy.  If 
such  a  case  is  within  section  5h,  it  is  enough  that  Francis  never 
has  objected  to  the  firm  property  being  administered  by  the 
trustee."  "We  must  therefore  accept  it  as  established  law  that 
a  partnership  is  not  bankrupt  so  long  as  any  of  the  members  who 
compose  it  is  individually  solvent."^  Only  an  actual  partner- 
ship is  subjected  to  adjudication  as  a  bankrupt,  and  the  act  does 
not  apply  to  cases  where  partnership  liability  has  arisen  by  estop- 
pel.^*' A  partnership  can  not  be  adjudged  bankrupt  after  disso- 
lution, so  long  as  there  is  a  solvent  partner,  or  former  partner." 

§  687.  Administration  of  unadjudicated  partner's  individ- 
ual estate. — The  partnership  may  be  adjudicated  bankrupt, 
although  the  partners  individually  are  not  so  adjudicated,  and 
there  is  no  proceeding  against  the  partners  individually,^"  and 
proceeding  against  the  partners  as  individuals  does  not  neces- 
sarily involve  the  firm.^^     But  the  proceeding  against  the  part- 

9  In  re  Samuels,  215  Fed.  845.  "  Matter  of  Young,  223  Fed.  659, 

10  In   re   Pinson,    180   Fed.   787,  24    35  Am.  Bkr.  R.  200. 

Am.  Bkr.   R.  804;   In  re  Evans,   161  12  Matter  of  Union  Bank,  184  Fed. 

Fed.  590,  20  Am.  Bkr.  R.  406;  In  re  224,   25   Am.    Bkr.   R.    148;    Mills   v. 

Beckwith,  130  Fed.  475,  12  Am.  Bkr.  Lisher  Co.,  159  Fed.  897,  20  Am.  Bkr. 

R.  453 ;  Lott  v.  Young,  109  Fed.  798,  R.  237 ;  Matter  of  Hensley  &  Adams, 

6  Am.   Bkr.   R.  436 ;   In   re  Kenney,  36  Am.  Bkr.  R.  1. 

97  Fed.  554,  3  Am.  Bkr.  R.  353 :  Buf-  "  American   Steel   &   Wire   Co.   v. 

falo  Milling  Co.  v.  Lewisburg  Dairy  Coover,  25  Am.  Bkr.  R.  58. 
Co.,  20  Am.  Bkr.  R.  279. 

9 — Row.  ON  Partn. — Vol.  2 


§    687  LAW    OF    PARTNERSHIP  936 

nersliip  compels  the  partners  to  bring  their  individual  assets  into 
the  bankruptcy  proceedings  for  administration  even  though  pro- 
ceedings would  not  lie  against  them,  because  they  were  of  an 
exempt  class  or  had  committed  no  act  of  bankruptcy."  The 
reasons  for  such  holding  are  in  substance  the  following  :^^  "One 
who  combines  with  others  in  a  partnership  enterprise  becomes 
bound  for  the  payment  of  partnership  debts.  As  partner  he 
shares  the  fortunes  of  the  partnership.  In  certain  circumstances 
it  may  become  subject  to  the  exercise  of  the  powers  of  a  court 
of  bankruptcy,  where  its  resources  will  be  gathered  in  to  satisfy 
the  claims  of  creditors.  One  of  these  resources  is  the  liability 
of  the  partner,  for  which  his  individual  property  stands  charged. 
It  is  true  that,  by  virtue  of  the  rule  in  equity,  as  well  as  in  bank- 
ruptcy, for  the  marshaling  and  distribution  of  assets,  his  indi- 
vidual property  is  first  applicable  to  the  payment  of  his  private 
debts,  if  there  be  any.  The  surplus  then  becomes  assets  for  the 
payment  of  the  partnership  creditors.  These  consequences  of 
partnership  are  not  derived  from  the  bankrupt  act,  but  from  the 
general  law ;  and  a  partner  is  not  relieved  from  them  by  his  ex- 
emption from  an  adjudication  of  bankruptcy.  If  bankruptcy 
does  not  supervene,  they  would  be  worked  out  by  a  court  of  gen- 
eral jurisdiction,  and  the  partner  would  be  a  party,  a  necessary 
party,  to  the  record,  so  that  his  liability  for  the  firm  debts  could 
be  enforced.  In  the  bankruptcy  court  the  partner  may  be  brought 
before  the  court  for  tlie  same  purposes.  In  order  to  reach  his 
property  for  the  payment  of  firm  debts,  it  must  be  ascertained 
what  surplus  there  will  be  after  paying  his  private  debts.  It  is 
said,  however,  that  this  must  be  done  in  a  state  court.  But, 
however  this  might  be,  if  he  were  a  stranger,  the  partner  is  not 
to  be  regarded  as  a  stranger,  but  as  a  party  to  the  bankruptcy 
proceedings  ;^^  and  the  court  had  authority  to  take  such  proceed- 

14  Francis  v.  McNeal,  228  U.  S.  695,  is  Dickas  v.  Barnes,   140  Fed.  849, 

57  L.  ed.  1029,  33  Sup.  Ct.  701,  L.  R.  72  C.  C.  A.  261,  5  L.  R.  A.   (N.  S.) 

A.  1915  E,  706;  In  re  Duke,  199  Fed.  654. 

199 ;  Dickas  v.  Barnes,  140  Fed.  849,  i^  Citing    Loveland    Bankruptcy,    2 

72  C.  C.  A.  261,  5  L.  R.  A.  (N.  S.)  ed.,  p.  251,  and  cases  in  note  42. 
654. 


937  BANKRUPTCY  §    687 

ings  as  were  necessary  to  ascertain  what  assets  were  available, 
and  to  subject  them  to  the  requirements  of  the  case  before  it."" 
The  case  of  Francis  v.  McNeal  settled  the  law  as  to  when  a 
partnership  is  insolvent,  but  the  later  cases  are  not  in  entire 
accord  as  to  the  effect  of  that  holding  on  the  right  to  admin- 
ister the  estate  of  a  partner  who  is  not  adjudicated  a  bankrupt. 
In  one  later  case,^^  the  court,  admitting  that  in  several  cases 
it  has  been  held  that  the  bankruptcy  court  can  administer 
on  the  estate  of  nonbankrupt  partners.^^  said  that  these  cases 
proceeded  on  the  theory  that  a  firm  may  be  bankrupt  although 
some  of  its  members  remain  solvent,  and  that  such  theory 
is  contrary  to  the  rule,  established  by  Francis  v.  McNeal,  and 
that  a  court  has  no  right  to  administer  upon  an  alleged  secret 
partner's  estate  without  declaring  him  a  bankrupt  or  finding  him 
insolvent.  This  holding  was  followed  in  a  later  case,^°  the  judge 
saying :  *T  think  it  may  be  regarded  as  definitely  settled  that  a 
court  of  bankruptcy  in  proceedings  against  a  partnership  has  no 
jurisdiction  to  administer  upon  the  estate  of  an  alleged  secret 
partner  without  declaring  him  a  bankrupt  or  finding  him  in- 
solvent." In  a  later  case  it  was  said  concerning  a  partner  who 
did  not  join  in  a  voluntary  petition  and  as  to  whom  there  was 
no  allegation  of  an  act  of  bankruptcy  authorizing  an  adjudica- 
tion as  to  him,  that  "upon  an  adjudication  of  bankruptcy  against 
a  firm  the  nonjoining  partner  may  be  required  to  file  a  schedule 
of  his  debts  and  an  inventory  of  his  property,  in  accordance  with 
the  concluding  clause  of  the  Eighth  General  Order  in  Bank- 
ruptcy.""^ In  another  case  it  was  said :  "No  firm  can  be  com- 
pulsorily  adjudicated  a  bankrupt  in  which  any  partner  appears 
to  be  solvent  to  the  extent  of  having  a  surplus  of  property  over 
the  debts  for  which  he  is  personally  liable  and  the  debts  for  which 

17  Francis  V.  McNeal,  228  U.  S.  695,  824;  In  re  Junck,  169  Fed.  481;  In 
57  L.  ed.  1029,  33  Sup.  Ct.  701,  L.  R.  re  Ceballos,  161  Fed.  445 ;  In  re 
A.  1915  E,  706.  Stokes,  106  Fed.  312. 

18  In  re  Samuels,  215  Fed.  845.  20  Matter  of  Kramer,  33  Am.  Bkr. 

19  Citing  Dickas  v.  Barnes,  140  Fed.  R.  223. 

849,  72  C.  C.  A.  261,  5  L.  R.  A.  (N.  21  Matter  of  Lenoir-Cross  &  Co., 
S.)  654;  Matter  of  Lattimer,  174  Fed.     226  Fed.  227,  35  Am.  Bkr.  R.  774. 


§    687  LAW    OF    PARTNERSHIP  938 

he  is  liable  as  a  member  of  the  firm."^"  Section  5h  of  the  Bank- 
ruptcy Act  provides :  "In  the  event  of  one  or  more,  but  not  all 
of  the  members  of  a  partnership  being  adjudged  bankrupt,  the 
partnership  property  shall  not  be  administered  in  bankruptcy,  un- 
less by  consent  of  the  partner  or  partners  not  adjudged  bankrupt; 
but  such  partner  or  partners  not  adjudged  bankrupt  shall  settle 
the  partnership  business  as  expeditiously  as  its  nature  will  per- 
mit, and  account  for  the  interest  of  the  partner  or  partners  ad- 
judged bankrupt."  In  another  case  it  is  said  as  to  section  5h: 
"The  plain  language  of  this  provision  negatives  the  existence 
of  a  right  of  the  court  as  a  court  of  bankruptcy  to  draw  to  itself 
the  administration  of  the  partnership  estate  when  only  one  of 
the  partners  has  been  adjudged  bankrupt  except  in  the  event  of 
the  partner  or  partners  not  adjudged  bankrupt  consenting  to  its 
doing  so.  The  right  in  such  a  case  of  a  solvent  partner  to  have 
the  partnership  business  administered  elsewhere  than  in  bank- 
ruptcy is  absolute  unless  waived  by  him."-^  "If  the  firm  is 
insolvent  and  a  solvent  partner  consents  to  the  administration  of 
the  firm  and  individual  assets,  it  would  seem  that  section  5h  would 
apply  and  that  an  adjudication  against  the  insolvent  partners 
and  against  the  firm  would  be  legally  possible.  The  administra- 
tion of  all  the  assets  in  the  bankruptcy  court  would  follow,  and 
the  solvent  partner  would  be  entitled  to  guide  or  share  in  that 
administration  under  the  jurisdiction  of  the  court.""*  As  to  the 
case  of  In  re  Samuels,^^  above  referred  to,  the  court  said  that 
it,  "insofar  as  it  decides  that  a  partnership  can  not  be  insolvent 
provided  one  partner  is  solvent,  does  not  cover  the  case  presented 
herein  under  subdivision  *h,'  where  the  partner  not  adjudged 
a  bankrupt  consents  to  the  adjudication  of  the  partnership  or 
acquiesces  in  the  finding  of  insolvency  of  the  partnership  and 
consents  to  the  administration  in  bankruptcy."  In  another  case^*^ 
it  was  said  that  section  5h  does  not  prevent  a  court  which  has 

22  In  re  Kobre,  224  Fed.  106,  35  Am.        24  in   re   Kobre,   224   Fed.    106,    35 
Bkr.  R.  389,  413.  Am.  Bkr.  R.  389,  415. 

23Marnet  Oil  &  Gas  Co.  v.  Staley,         25315  Fed.  845. 
33  Am.  Bkr.  R.  270.  20  Armstrong  v.  Fisher,  34  Am.  Bkr. 

R.  701. 


939  BANKRUPTCY  §    688 

I 

adjudged  a  partnership  composed  of  two  members,  and  one  of 
its  members  bankrupt,  from  drawing  to  itself  and  administering 
the  property  of  the  other  member,  that  section  5h  "is  Hmited  in 
I  its  effect  to  those  cases  in  which  one  or  more  but  not  all  of  the 
partners  have  been,  and  the  partnership  has  not  been  adjudged 
bankrupt,"  and  that  even  if  it  did  apply,  "the  failure  of  the  pe- 
titioner to  object  to  the  administration  of  the  partnership  prop- 
erty in  bankruptcy,  and  himself  to  settle  the  partnership  business, 
would  estop  him  from  successfully  claiming  that  his  individual 
estate  could  not  be  drawn  into  and  administered  by  the  bankruptcy 
court."  The  amendment  of  1910  to  the  Bankruptcy  Act  gives  to 
the  trustee  in  bankruptcy  of  a  partnership  the  rights  of  creditors 
as  against  a  firm  and  its  members.  Before  that  time  he  had 
merely  the  rights  of  the  firm.  Several  of  the  decisions,  however, 
w^hich  authorize  the  administration  of  a  nonbankrupt  partner's 
assets  were  made  in  cases  which  arose  before  the  amendment  of 
the  law.  The  question  has  been  asked  as  to  whether  the  estate 
of  a  solvent  partner  can  be  drawn  in  without  his  consent.  The 
recent  holdings  seem  to  settle  this  in  the  negative.  There  can 
be  no  solvent  partner  so  long  as  the  firm  assets  and  the  assets 
of  all  the  partners  are  insufficient  to  pay  all  firm  and  individual 
debts.  If  a  partner's  individual  property  is  sufficient  to  pay  all 
firm  debts  for  which  he  is  liable  and  all  his  individual  debts,  then 
he  is  solvent,  and  the  partnership  is  solvent.  He  may,  how'ever, 
consent  to  the  adjudication.  A  nonconsenting  partner  can  not 
be  adjudged  a  bankrupt  on  a  voluntary  petition  filed  by  another 
partner,  as  in  only  one  way  can  a  person  be  adjudged  an  invol- 
untary bankrupt  under  the  law,  that  is  on  the  petition  of  a  cred- 
itor or  creditors. ^^ 

§  688.  Partnership  and  individual  interests. — The  Bank- 
ruptcy Act  provides  that  "The  creditors  of  the  partnership  shall 
appoint  the  trustee ;  in  other  respects,  so  far  as  possible,  the  estate 
shall  be  administered  as  herein  provided  for  other  estates."'®  The 

27  Matter  of  Hansley,  36  Am.  Bkr.         2s  5^^.  5,  b. 
R.  1. 


§    688  LAW    OF    PARTNERSHIP  940 

provision  above,  that  "the  creditors  of  the  partnership  shall  ap- 
point the  trustee,"  has  Ijeen  construed  to  apply  only  in  the  case 
of  a  joint  petition.  In  case  of  the  separate  bankruptcy  of  one  of 
the  members,  separate  creditors  may  vote,  although  all  assets 
are  partnership  assets.""  In  case  the  partners  desire  discharge 
from  individual  liabilities,  they  should  file  separate  and  individual 
petitions.^"  Section  5c  of  the  Act  of  Bankruptcy  provides  that, 
"The  court  of  bankruptcy  which  has  jurisdiction  of  one  of  the 
partners  may  have  jurisdiction  of  all  of  the  partners  and  of  the 
administration  of  the  partnership  and  individual  property."  It 
has  been  held  under  this  provision  that  where  a  firm  is  brought 
before  a  court  for  adjudication  in  bankruptcy,  the  individual 
estates  of  the  partners  are  also  drawn  to  the  court  for  adminis- 
tration,^^ and  a  summary  order  may  be  issued  to  the  assignee  for 
the  benefit  of  creditors  to  surrender  the  property  held  by  him ;  yet 
it  is  held^^  that  no  jurisdiction  is  conferred  on  the  court  to  ad- 
judicate a  partner  in  a  proceeding  in  involuntary  bankruptcy 
brought  against  his  copartner.  Likewise,  no  individual  member 
of  a  firm  which  is  being  adjudicated,  can  himself  be  adjudicated, 
unless  he  has  committed  an  act  of  bankruptcy.^^  Sec.  5d  provides 
that,  "The  trustee  shall  keep  separate  accounts  of  the  partnership 
property  and  of  the  property  belonging  to  the  individual  part- 
ners," and  in  Sec.  5e  it  is  provided  that,  "The  expenses  shall  be 
paid  from  the  partnership  property  and  the  individual  property 
in  such  proportion  as  the  court  shall  determine."  Sec.  5f :  "The 
net  proceeds  of  the  partnership  property  shall  be  appropriated 
to  the  payment  of  the  partnership  debts  and  the  net  proceeds  of 
the  individual  estate  of  each  partner  to  the  payment  of  his  indi- 
vidual debts.  Should  any  surplus  remain  of  the  property  of 
any  partner  after  paying  his  individual  debts,  such  surplus  shall 
be  added  to  the  partnership  assets  and  be  applied  to  the  payment 
of  the  partnership  debts.     Should  any  surplus  of  the  partnership 

29  In  re  Beck,  110  Fed.  140.  32  Mahoney  v.  Ward,  100  Fed.  278. 

30  In  re  Farley,  115  Fed.  359.  33  Jn  re  Meyer,  98  Fed.  976,  39  C.  C. 

31  In   re   Stokes.    106  Fed.  312 ;  In     A.  368. 
re  Meyer,  98  Fed.  976,  36  C.  C.  A. 

368. 


941  BANKRUPTCY  §    689 

property  remain  after  paying  the  partnership  debts,  such  surplus 
shall  be  added  to  the  assets  of  the  individual  partners  in  the  pro- 
portion of  their  respective  interests  in  the  partnership."  Sec,  5g: 
"The  court  may  permit  the  proof  of  the  claim  of  the  partnership 
estate  against  the  individual  estates,  and  vice  versa,  and  may 
marshal  the  assets  of  the  partnership  estate  and  the  individual 
estates  so  as  to  prevent  preferences  and  secure  the  equitable  dis- 
tribution of  the  property  of  the  several  estates."  A  bankruptcy 
suit  involving  a  partnership  is  much  more  complicated,  as  seen 
by  the  above  provisions  of  the  Act,  than  where  simply  an  indi- 
vidual is  involved,  as  the  partnership  suit  involves  other  interests 
as  well.  Sec.  5f,  above  quoted,  provides  for  the  method  of  sep- 
aration of  estates,  and  it  has  been  interpreted  and  applied  in  very 
many  cases.  The  property  of  all  estates  included  in  the  case  are 
administered  by  one  trustee  (or  joint  trustees),^*  but  each  estate 
must  be  accounted  for  separate  and  apart  from  the  others.  Bank- 
ruptcy of  partnerships  is  further  complicated  by  the  fact  that  all 
the  partners  may  be  joined  in  a  partnership,  which  is  known  by 
different  names  in  different  places,  but  it  is  held  that,  in  such 
case,  the  whole  combination  will  be  treated  as  one,  and  adminis- 
tered as  such.^^  It  may  also  happen  that  a  bankrupt  is  a  partner 
in  several  firms,  which  are  also  bankrupt.  This  would,  of  course, 
bring  all  of  the  firms  under  the  jurisdiction' of  the  court.^''  As  a 
general  rule,  the  rights  of  creditors  to  participate  in  a  certain 
estate  is  governed  by  the  question  of  whether  it  is  individual  or 
partnership  property,  or  debts,  and,  while  often  very  simple  of 
solution,  it  is  also  at  times  very  difficult,  and  a  few  cases  will  be 
given  on  this  proposition. 

§  689.  Particular  instances  of  partnership  or  individual 
ownership  or  indebtedness. — There  is  a  presumption  at  law, 
which  may  be  rebutted,  that  property  standing  in  the  name  of  the 
firm  belongs  to  the  firm,  and,  if  the  property  is  in  the  name  of 

34  In  re  Coe,  154  Fed.  162,  18  Am.     re  Williams,   Fed   Cas.   No.    17707,   3 
Bkr.  R.  715.  Woods  (U.  S.)  493. 

35  In  re  Vetterlein,  44  Fed.  57 ;  In        ^e  Loveland  on  Bankruptcy,  4th  ed., 

Vol.  1,  p.  549. 


§    689  LAW    OF    PARTNERSHIP  942 

a  partner,  that  it  is  his  individually,  and  the  same  rule  applies 
as  to  indebtedness.  If,  however,  it  is  shown  that  property  was 
purchased  with  the  funds  belonging  to  the  firm,  and  the  title 
placed  in  a  partner,  then  the  presumption  changes,  and  it  is 
presumed  that  the  firm  is  the  real  owner.^^  Generally,  partner- 
ship property  consists  of  its  money,  stock  in  trade,  outstanding 
claims  and  accounts,  and  any  other  property  purchased  with  part- 
nership funds,"^  while  a  partner's  individual  property  consists  of 
chattels,  rights,  or  real  estate  owned  solely  by  an  individual  part- 
ner.^^  An  insurance  policy  on  the  life  of  one  partner,  which  he 
has  at  times  pledged  for  firm  debt,  does  not  thereby  become  firm 
property /°  Property  used  by  a  partnership  for  partnership  pur- 
poses is  presumptively  partnership  property,^^  but  if  the  property 
used  by  the  firm  belongs  to  one  partner  and  the  others  have  no 
interest  therein,  such  property  is  the  individual  property  of  that 
partner/"  Where  property  owned  by  one  partner  originally, 
was  later  used  for  firm  purposes,  the  agreement  of  the  partners 
controls  as  to  whether  it  is  joint  or  separate  property/^  It  might 
be  said  that  many  of  the  rules,  as  to  ownership  of  property  or 
the  liability  for  debts,  as  given  in  this  chapter,  at  first  glance  seem 
to  be  contrary  to  the  general  principles  of  partnership  law,  but 
it  must  be  remembered  that  in  bankruptcy  the  rule  may  vary 
much  from  ordinary  cases.  As  between  a  member  of  a  firm  and 
partnership  creditors,  he  is  often  estopped  from  setting  up  de- 
fenses, by  reason  of  his  own  fault,  where  the  same  estoppel  will 
not  apply  to  the  trustee  in  bankruptcy  of  his  estate.  The  reason 
is  plain.  In  the  one  case,  it  is  the  person  who  should  be  estopped 
from  setting  up  his  own  fault.  In  the  other  it  is  simply  two  sets 
of  creditors,  both  of  whom  m.ay  be  innocent  of  any  fault  and 

3- In  re  Swift,  114  Fed.  947,  9  Am.  4o  Hiscock  v.  Varick  Bank,  206  U. 

Bkr.    R.    237;    Ex    parte    Cornell,    3  S.  28,  18  Am.  Bkr.  R.  1;  In  re  Day, 

Deac.  Eng.  Bkr.  201,  3  M.  &  A.  581.  176  Fed.  Zll,  23  Am.  Bkr.  R.  56. 

2^  Osborn    v.    McBride,    Fed.    Cas.  *i  Featherstonhaugh  v.  Fenwick,  17 

10593,  3  Sawy.  590 ;  Hiscock  v.  Jay-  Ves.  298. 

cox,  Fed.  Cas.  6531.  *2  Loveland  on  Bankruptcy,  4th  ed., 

39  In  re  Lowe,  Fed.  Cas.  8564;   In  Vol.  1,  p.  555. 

re    Clark,     Fed.    Cas.     No.    2798,    4  « In  re  Swift,  114  Fed.  947,  9  Am. 

Ben.  88.  Bkr.  R.  237. 


943  BANKRUPTCY  §    689 

the  court  would  hardly,  in  many  cases,  apply  the  same  rigid  rule 
to  the  trustee  for  the  creditors  as  it  would  to  the  bankrupt  him- 
self. Very  much  the  same  rule  applies  to  debts  as  to  the  owner- 
ship of  property,  as  stated  above.  A  note  given  by  the  firm,  and 
indorsed  by  one  partner,  has  been  held  to  be  a  firm  debt,**  and  the 
real  transaction,  and  the  question  whether  the  debt  is  by  the  firm 
or  individual  may  be  shown,  even  by  parol  evidence.*^  Where  the 
firm  name  appears  on  commercial  paper,  the  presumption  is  that 
it  is  bound  and  the  burden  is  on  the  firm  to  show  nonliability.*'^' 
This  rule  is  applied  where  a  note  has  been  indorsed  in  the  firm 
name,  though  for  accommodation  of  the  maker,  if  the  holder  is 
an  innocent  third  person.*''  The  note  of  an  individual  partner, 
given  for  the  firm's  sole  benefit,  is  a  partnership  debt.**  If  credit 
was  extended  to  the  partner  on  a  note  signed  by  him  for  a  loan 
used  by  the  firm,  the  debt  is  an  individual  debt;  if  credit  was 
given  to  the  firm,  a  firm  debt.*°  If  one  partner  has  fairly  bought 
out  the  other,  without  fraud,  and  assumed  the  partnership  debts, 
they  become  his  Individual  debts,^°  though  the  partnership  cred- 
itors are  not  bound  by  the  assumption  unless  they  impliedly  or 
expressly  consent  to  it.^^  The  firm,  by  assumption  on  sufficient 
consideration  may  make  individual  debts  into  firm  debts, ^-  except 
where  the  creditor  had  no  knowledge  of  the  assumption  and  did 
not  acquiesce  in  it.^^ 

4*  In  re  Speer  Bros.,  144  Fed.  910,  ^9  Strause  v.  Hooper,  105  Fed.  590. 

10  Am.  Bkr.  R.  524.  so  in  re  Rice,  Fed.  Cas.   11750';   In 

45  In  re  Stoddard  Bros.  Lumber  Co.,  re    Pease,    Fed.    Cas.    10881 ;    In    re 

169  Fed.  190,  22  Am.  Bkr.  R.  435.  Downing,  Fed.  Cas.  4044,  1  Dill.  33 ; 

46Winship     v.     Bank     of     United  In  re  Collier,  Fed.  Cas.  3002. 

States,  5  Pet.   (U.  S.)   529,  8  L.  ed.  ^^  In  re  Keller,  109  Fed.  118.    See  in 

216.  re  Denning,  114  Fed.  219. 

47  Union  Nat.  Bank  v.  Neill,  149  ^2  in  re  Dresser,  135  Fed.  495,  68 
Fed.  720,  17  Am.  Bkr.  R.  841 ;  Mer-  C.  C.  A.  207  (afifd.  200  U.  S.  532,  50 
chants'  Bank  v.  Thomas,  121  Fed.  L.  ed.  584,  26  Sup.  Ct.  316)  ;  In  re 
306,  10  Am.  Bkr.  R.  299.  Speer  Bros,  144  Fed.  910 ;  Merchants' 

48  In    re    Warren,    Fed.    Cas.    No.  Bank  v.  Thomas.  121  Fed.  306. 
17191,  2  Ware  322;  In  re  Culver,  176  53  Hibberd  v.  AIcGill,  129  Fed.  590, 
Fed.  450 ;  Davis  v.  Turner,  120  Fed.  64  C.  C.  A.  158. 

605,  56  C.  C.  A.  669,  9  Am.  Bkr.  R. 
704. 


§    690  LAW    OF    PARTNERSHIP  944 

§  690.  Authority  to  adjudge  partnership  bankrupt. — Sec- 
tion 4a  provides  that,  "Any  person  who  owes  debts,  except  a  cor- 
poration, shall  be  entitled  to  the  benefits  of  this  act  as  a  volun- 
tary bankrupt,"  and  the  following  subdivision  makes  "any  natural 
person,  except  a  wage-earner,  or  a  person  engaged  chiefly  in 
farming  or  the  tillage  of  the  soil,  any  unincorporated  company, 
and  any  corporation  engaged  principally  in  manufacturing,  trad- 
ing, printing,  publishing,  mining,  or  mercantile  pursuits,  owing 
debts  to  the  amount  of  one  thousand  dollars  or  over,  may  be  ad- 
judged an  involuntary  bankrupt  upon  default  or  an  impartial 
trial,  and  shall  be  subject  to  the  provisions  and  entitled  to  the 
benefits  of  this  act.  Private  bankers,  but  not  national  banks  or 
banks  incorporated  under  state  or  territorial  laws,  may  be  ad- 
judged involuntary  bankrupts."  Sec.  5a,  as  we  have  seen  herein, 
expressly  provides  for  bankruptcy  of  partnerships,  so,  unless  a 
partnership  should  come  within  the  general  exceptions  in  Sec.  4, 
it  becomes  liable  to  either  voluntary  or  involuntary  bankruptcy. 
It  is  very  plain,  and  is  never  questioned,  but  that  a  partnership  may 
be  adjudicated  under  the  present  act  ( 1898) ,  although  the  former 
act  of  1867  only  allowed  the  adjudication  of  "partners  in  trade." 
but  not  to  the  firm  itself.^* 

§  691.  Commencement  of  proceedings. — An  action  in 
bankruptcy  may  be  either  voluntary  or  involuntary,  or  both  vol- 
untary and  involuntary,  in  part.  It  is  voluntary  when  the  petition 
is  filed  by  the  party  to  be  adjudicated.  It  is  involuntary  when 
the  petition  is  filed  by  another  party.  It  is  both  voluntary  and  in- 
voluntary when  some  of  the  parties  ask  for  the  hearing,  and  some 
oppose  it.  For  example,  if  all  the  partners  in  a  firm  join  in  the 
petition,  it  is  wholly  voluntary.  If  creditors  alone  file  the  petition, 
it  is  wholly  involuntary.  If,  however,  there  is  a  firm  of  several 
members,  some  of  whom  join  in  a  petition  and  the  others  do  not 
join,  the  proceeding  is  voluntary  as  to  those  joining  and  invol- 

54  Mills  V.  Fisher  Co.,  159  Fed.  897,     131,  111  Pac.  217,  30  L.  R.  A.  (N.  S.) 
16  L.  R.  A.  (N.  S.)  656n.     American     787. 
Steel  &  Wire  Co.  v.  Coover,  27  Okla. 


945  BANKRUPTCY  §    691 

untary  as  to  those  not  joining.^^  In  involuntary  proceedings  no- 
tice to  the  alleged  bankrupt  is  necessary ;  hence  where  some  part- 
ners join  and  others  do  not,  those  not  joining  must  be  served  with 
notice.  After  such  notice,  if  the  persons  not  originally  joining, 
shall  join,  then  the  proceeding  becomes  entirely  voluntary.^"  Fil- 
ing a  voluntary  petition  by  one  or  all  of  the  partners,  for  the  firm 
is,  in  itself,  an  act  of  bankruptcy,'''  and  no  act  of  bankruptcy 
need  be  alleged,  either  by  the  firm  or  the  petitioning  creditors, 
other  than  their  inability  to  pay  debts  and  willingness  to  be  ad- 
judged bankrupts  on  that  ground.  The  firm  and  the  petitioning 
creditors  commit  an  act  of  bankruptcy  by  the  filing  of  the  peti- 
tion."® There  may  be  a  joinder  of  the  applications  of  the  firm 
and  of  all  or  part  of  the  members  thereof,  in  the  same  petition, 
but  there  should  be  separate  schedules  filed  for  the  firm  and  for 
each  partner  seeking  adjudication.^^  It  will  be  observed  that  this 
is,  in  practice,  often  a  difficult  operation,  owing  to  the  interwoven 
liabilities  and  rights  existing  between  the  firm  and  the  members 
thereof,  and  the  difficulty,  in  actual  practice  in  many  instances 
of  determining  what  are  partnership  debts,  primarily,  and  what 
are  the  debts  of  individual  partners,  and  the  same  rule  applies 
to  assets.  It  has  been  held'^*'  that  a  note  signed  by  members  of 
a  firm  as  individuals,  with  no  indication  on  its  face  that  it  was 
given  for  partnership  debt,  is  presumptively  the  debt  of  the  indi- 
viduals and  not  provable  against  the  partnership  assets.  This 
is,  however,  simply  presumptive,  and  can  undoubtedly,  like  other 
presumptions  of  law,  be  overturned  and  the  real  facts  shown, 
unless  such  real  facts  were  unknown  to  the  creditor,  and  he  gave 
the  credit  upon  the  individuals,  as  distinguished  from  the  firm. 

55  Medsker  v.  Bonebrake,  108  U.  S.        bs  in  re  Ceballos,  161  Fed.  445,  20 
66,  2  Sup.  Ct.  351;  In  re  Junck,  169    Am.  Bkr.  R.  467. 

Fed.  481,  22  Am.  Bkr.  R.  298;  In  re        59  !„  re  Forbes,  128  Fed.  137.     See 

Carleton,    115   Fed.  246,  8   Am.   Bkr.  In  re  Grant  Bros.,  106  Fed.  496;  In 

R.  270 ;  In  re  Murray,  96  Fed.  600.  re  Meyer,  98  Fed.  976,  39  C.   C.  A. 

56  In  re  Murray,  96  Fed.  600,  3  Am.  368 ;    Green    River    Deposit    Bank    v. 
Bkr.  R.  601.  Craig  Bros.,  6  Am.  Bkr.  R.  381 ;  Love- 

57  In  re  Junck,  169  Fed.  481,  22  Am.  land  on  Bankruptcy,  4th  ed.,  Vol.   1, 
Bkr.  R.  298.  p.  543. 

63  In  re  Jones,  116  Fed.  431. 


§    692  LAW    OF    TARTNERSHIP  946 

This  is,  however,  as  a  general  thing,  an  immaterial  distinction 
in  general  partnerships,  inasmuch  as  each  partner  is  individually 
responsible  for  all  the  debts  of  the  firm,  and  if  the  firm  assets 
should  not  meet  its  liabilities,  its  creditors  would  have  recourse 
to  the  assets  of  the  individual  partners.  It  can  be  seen,  however, 
how  such  a  rule  might  change  results  materially.  For  example, 
when  individual  members  and  the  firm  are  both  adjudicated,  the 
law  provides  that  the  estates  of  each  are  respectively  liable  for 
their  own  liabilities.  In  case  individual  partners  should  sign  a 
note,  and  later  both  the  firm  and  all  the  partners  signing  the 
note  should  become  bankrupt,  the  partnership  assets  being  twenty- 
five  per  cent,  of  the  amount  of  its  assets,  while  the  combined 
assets  of  the  partners  individually  amount  to  fifty  per  cent,  of 
the  assets  of  the  individuals  signing  the  note,  in  such  case  it 
would  manifestly  be  to  the  interest  of  the  holder  of  the  note  to 
be  allowed  to  prove  as  against  the  partners  individually.  On  the 
other  hand,  in  case  only  a  part  of  the  partners  should  sign  the 
note,  it  might  so  happen  that  it  would  be  most  desirable  to  prove 
against  the  partnership,  and,  if  necessary,  fall  back  upon  certain 
nonbankrupt  partners'  partnership  liability  who  did  not  join  in 
the  execution  of  the  note.  It  is  said  to  be  the  better  practice  to 
file  a  separate  petition  for  the  partnership  and  for  each  individual 
partner  who  desires  to  come  under  the  act.^'^ 

§  692.  Result  of  proceedings  where  only  part  of  partners 
join. — It  has  hereinbefore  been  stated  that  less  than  all  of  the 
partners  may  file  a  voluntary  petition,  and  that  each  must  file  a 
separate  schedule.  Any  partner  refusing  to  join  in  the  petition, 
an  adjudication  being  made,  must  file  such  a  schedule  of  his  delfts 
and  inventory  of  his  property  as  is  required  in  cases  of  debtors 
against  whom  adjudication  shall  be  made,''"  but  can  not  be  per- 
sonally adjudicated  a  bankrupt  unless  he  has  personally  com- 
mitted an  act  of  bankruptcy.''^     It  is  not  to  be  understood  from 

^'i  Matter  of  Hansley,  36  Am,  Bkr.  Fed.  922.    Compare  In  re  Forbes,  128 

R.  1.  Fed.  137;  In  re  Meyer,  98  Fed.  976,  39 

C2  Gen.  Ord.,  8.  C  C.  A.  368. 
^^  Holmes  v.  Baker  &  Hamilton,  160 


947  BANKRUPTCY  §    692 

this,  however,  that  the  individual  estate  of  a  nonbankrupt  can 
not  be  drawn  into  bankruptcy,  even  though  there  be  no  adjudica- 
tion of  the  nonbankrupt."*  Sec.  5h,  above  quoted,  makes  pro- 
vision for  the  solvent  partners,  if  any  there  be,  and  if  they  so 
desire,  settling  up  the  partnership  business,  and  accounting  for 
the  interest  of  the  bankrupt  partner  therein,  and  in  such  a  case 
the  partnership  property  shall  not  be  administered  in  bankruptcy, 
but  by  the  solvent  partner,  who  shall  report  to  the  court,  and  the 
court  shall  make  proper  distribution  of  the  assets  to  the  cred- 
itors.^^ In  case  the  solvent  partner  does  not  desire  to  so  close 
up  the  partnership  business,  then  it  should  be  administered  by  the 
bankruptcy  court.  The  rule  that  the  estate  of  nonbankrupt  part- 
ners, even  those  who  are  not  proper  subjects  of  adjudication,  can 
be  brought  in  through  the  adjudication  of  the  firm,  might  seem 
illogical,  in  that  it  may  bring  in  the  estate  of  a  partner,  such  as 
a  wage-earner,  or  a  farmer,  when  they  would  not,  under  the  act, 
be  subject  to  bankruptcy  proceedings  if  it  were  directed  at  them 
alone.  This,  moreover,  is  not  changed,  by  the  clause  above  cited 
giving  the  solvent  partner  not  joining  the  privilege  of  settling  up 
the  partnership  himself,  if  he  so  desires,  as  the  wage-earner  or 
farmer  might  himself  be  insolvent.  The  rule  is,  however,  un- 
doubtedly just,  and  it  is  perhaps  better  to  be  right  than  to  be 
logical.  The  court,  it  should  be  remembered,  when  once  it  se- 
cures jurisdiction  over  one  partner,  has  jurisdiction  over  the 
firm  and  individual  partners  who  are  bankrupt.''*^  But  under 
General  Order  VT,  the  court  in  which  a  petition  is  first  filed  may, 
for  convenience  of  the  parties,  transfer  jurisdiction  to  another 
district,  in  which  a  petition  has  also  been  filed. ''^ 

64  In  re  Duke,  199  Fed.  199 ;  In  re  Fed.  655,  8  Am.  Bkr.  R.  275.  See  ante, 
Junck,  169  Fed.  481.  22  Am.  Bkr.  R.     §  687. 

298 ;  Dickas  v.  Barnes,  140  Fed.  849,  ee  Bankruptcy  Act,  §  5c.     Loveland 

72  C.  C.  A.  261,  5  L.  R.  A.  (N.  S.)  on  Bankruptcy,  4th  ed..  Vol.  1,  p.  549. 

654.    See  ante,  §  687.  "  in  re  Sears,  117  Fed.  294,  54  C. 

65  In  re  Junck,  169  Fed.  481,  22  Am.  C.  A.  532.  See  In  re  Blair,  99  Fed. 
Bkr.  R.  298;  In  re  Solomon  &  Car-  76;  In  re  Waxelbaum,  98  Fed.  589. 
vel.  163  Fed..  140;  In  re  Mercur.  116 


§    693  LAW    OF    PARTNERSHIP  948 

§  693.     Preferences. — If  a  firm  is  insolvent,  and  the  part- 
ners therein  then  divide  the  assets  among  themselves  and  dis- 
solve the  firm,  the  question  arises  as  to  whether,  in  case  a  bank- 
ruptcy suit  is  filed  within  four  months  thereafter,  such  assets  be- 
long to  the  partners.    It  has  been  held'^^  that  such  action  is  void, 
and  the  assets  are  still  the  property  of  the  firm.    The  good  faith 
payment  of  individual  debts  from  partnership  funds,  with  no 
intention  to  defraud,  has  been  held  not  to  be  a  voidable  prefer- 
ence.*^^   The  court  in  one  case  said  :^°    "Any  other  interpretation 
would  produce  intolerable  vexation  and  confusion,   for  in  the 
daily  conduct  of  business  partners  are  necessarily  and  constantly 
applying  partnership  property  to  the  payment  not  only  of  large 
individual  obligations,  but  to  the  payment  of  their  petty  indi- 
vidual debts  for  living  expenses,  and  are  often  devoting  their 
individual  property  to  the  promotion  of  the  partnership  business 
and  the  discharge  of  the  partnership  debts.     It  never  could  have 
been,  it  never  was,  the  intention  of  Congress  that  these  transac- 
tions— these  transformations  of  partnership  into  individual  and 
of  individual  into  partnership  property  within  four  months,  or 
within  any  other  time  preceding  the  commencement  of  bank- 
ruptcy proceedings — should  either  be  rescinded  or  avoided  by 
subsequent  adjudication  in  bankruptcy  unless  they  were  actually 
fraudulent   or  voidably  preferential.      It   did  not   make   them 
fraudulent  in  themselves.    The  terms  of  section  5f  and  the  natural 
and  rational  interpretation  of  them  in  the  light  of  the  general 
rules  of  law  and  of  the  entire  act  in  which  they  appear,  limit  their 
application  to  partnership  and  individual  property  at  the  com- 
mencement of  bankruptcy  proceedings,  and  to  property  the  trans- 
fer of  which  is  fraudulent  for  other  reasons  than  that  partner- 
ship property  was  applied  to  the  payment  of  individual  debts,  or 
individual  property  to  the  payment  of  partnership  debts.     This 

68  In  re  Head,  114  Fed.  489.  ter  of  McConnell,  32  Am.  Bkr.  R.  589. 

69  Sargent  v.  Blake,  160  Fed.  57,  15     Contra :  In  re  Floyd  &  Co.,  156  Fed. 
Ann.   Cas.   58,   17  L.  R.  A.    (N.   S.)     206. 

1040,   and  note;   Merchants'  Bank  v.         '^o  Crawford   v,   Sternberg,   33  Am. 
Thomas,   121   Fed.  306;   Crawford  v.     Bkr.  R.  679. 
Sternberg,  33  Am.  Bkr.  R.  677 ;  Mat- 


949  BANKRUPTCY  §    693 

conclusion  is  in  accord  with  the  general  principles  applicable  to 
the  management  and  disposition  of  partnership  property.  There 
are  two  rules  of  law  which  at  different  times  apply  to  the  man- 
agement and  disposition  of  the  property  of  a  partnership,  first, 
partners  own,  and  with  the  consent  of  each,  have  the  right  and 
power  to  sell  and  dispose  of  the  partnership  property,  to  trans- 
form it  into  individual  property  of  one  or  more  of  the  partners, 
to  apply  it  or  its  proceeds  to  the  payment  of  their  individual  debts 
in  preference  to  those  of  the  partnership,  and  to  make  such  other 
honest  disposition  of  it  as  they  deem  fit;  second,  in  the  adminis- 
tration of  the  property  of  a  partnership  in  the  courts  the  cred- 
itors of  the  partnership  have  the  right  to  the  application  of  the 
partnership  property  to  the  payment  of  the  partnership  debts  in 
preference  to  the  individual  debts  of  the  respective  partners. 
The  first  is  a  rule  of  operation,  the  second  a  rule  of  administra- 
tion. The  first  governs  during  the  operation  of  the  partnership 
business  and  the  disposition  of  the  partnership  property  by  the 
partners,  the  second  operates  during  the  administration  of  the 
partnership  property  after  it  is  brought  into  the  custody  of  the 
court.  The  first  rule  prevails  until  by  some  suit  or  act  the  in- 
terposition of  some  court  is  invoked  to  administer  the  partnership 
property,  and  until  that  time  the  second  rule  is  ineffective.  Before 
the  partnership  property  is  placed  in  custodia  legis  for  adminis- 
tration, it  is  not  held  in  trust  for  the  payment  of  the  partnership 
creditors  in  preference  to  the  creditors  of  the  individual  part- 
ners. The  partnership  creditors  have  no  lien  upon  it,  and  no 
independent  right  to  its  application  to  the  payment  of  their  claims 
in  preference  to  the  claims  of  the  creditors  of  the  individual 
partners.  Each  partner,  however,  has  the  right  to  require  the 
partnership  property  to  be  applied  to  the  payment  of  the  partner- 
ship debts  in  preference  to  the  debts  of  the  individual  partners, 
to  the  end  that  he  may  not  be  required  to  pay  the  former  out  of 
his  individual  estate.  The  right  of  the  creditors  of  the  partner- 
ship to  payment  out  of  the  partnership  property  in  preference  to 
the  individual  creditors  is  the  mere  right  by  subrogation  or 
derivation  to  enforce  their  right  of  one  of  the  partners  after 


§    694  LAW    OF    PARTNERSHIP  950 

the  partnership  property  has  been  placed  in  the  custody  of  the 
law.  Until  it  has  been  so  placed  each  partner  has  plenary  power 
at  any  time  to  release  or  waive  this  right,  and  if  each  partner  has 
done  so  and  at  the  time  the  property  comes  within  the  jurisdiction 
of  a  court  no  partner  has  this  right,  then  no  creditor  of  the  part- 
nership has  it,  for  a  stream  can  not  rise  higher  than  its  source." 
But  there  is  always  the  question  whether  the  transfer  was  made 
in  due  course  of  business,''^  or  whether  a  fraudulent  preference 
was  in  fact  intended.'^"  It  has  been  held  that  the  indorsement 
to  a  creditor  of  firm  notes  by  a  solvent  individual  partner,  is  a 
transfer  and  a  preference,  and  that  it  would  be  a  preference  to 
allow  the  payment  of  such  notes  from  that  partner's  individual 
assets.^"  However,  it  is  held  that  unless  he  had  knowledge  of 
insolvency  of  some  of  the  partners,  a  firm  creditor  who  takes 
notes  of  an  individual  partner  for  his  debt  does  not  obtain  a 
voidable  preference.^*  It  is  also  held  that  "as  it  is  not  fraudulent 
for  an  individual  debtor  to  convert  property  which  is  not  exempt 
into  that  which  is,  it  is  not  fraudulent  for  individuals  constituting 
a  partnership  to  sever  the  joint  interest  in  partnership  property 
which  is  not  yet  in  the  custody  of  the  law,  and  thereafter  to  hold 
their  exemptions  out  of  such  property.""^ 

§  694.  Order  of  proof  of  debts. — In  general,  the  rules  dis- 
cussed in  the  chapter  on  application  of  partnership  assets  apply 
to  the  proof  of  debts  in  bankruptcy  of  a  partnership.  The  Uni- 
form Partnership  Act  provides  that,  "where  a  partner  has  be- 
come bankrupt  or  his  estate  is  insolvent,  the  claims  against  his 

71  In  re  Kahley,  Fed.  Cas.  No.  Callender,  3  Dak.  256,  16  N.  W.  506; 
7593,  2  Biss.  383.  Lee  v.  Bradley  Fertilizer  Co.,  44  Fla. 

72  Vetterlein  v.  Barnes,  124  U.  S.  787,  33  So.  456 ;  Fairfield  Shoe  Co.  v. 
169,  31  L.  ed.  400,  8  Sup.  Ct.  441 ;  In  Olds,  176  Ind.  526,  96  N.  E.  593;  Craw- 
re  Jones,  100  Fed.  781.  ford  v.  Sternberg,  33  Am.  Bkr.  R.  677. 

73  Matter  of  Frazer,  34  Am.  Bkr.  Citing:  Goody  v.  Werbe,  117  Ind.  154, 
R.  467.  19  N.    E.  764 ;  Worman  v.  Giddey,  30 

74  Matter  of  Hull,  34  Am.  Bkr.  R.  Mich.  151;  Mortley  v.  Flanagan,  38 
447.  Ohio  401 ;  2  Freeman  Execution   (3d 

75  In  re  Phillips  (D.  C),  209  Fed.  ed.),  §  221.  See  matter  of  McCon- 
400,   31   Am.   Bkr.   R.   597;   Bates  v.  nell,  32  Am.  Bkr.  R.  589. 


951  "  BANKRUPTCY  §    695 

separate  property  shall  rank  in  the  following  order :  I,  Those 
owing  to  separate  creditors.  II.  Those  owing  to  partnership 
creditor.  III.  Those  owing  to  partners  by  way  of  contribution.'^'^ 
Section  5f  of  the  Bankruptcy  Act  provides  that,  "the  net  pro- 
ceeds of  the  partnership  property  shall  be  appropriated  to  the 
payment  of  the  partnership  debts,  and  the  net  proceeds  of  the  in- 
dividual estate  of  each  partner  to  the  payment  of  his  individual 
debts.  Should  any  surplus  remain  of  the  property  of  any  part- 
ner after  paying  his  individual  debts,  such  surplus  shall  be  added 
to  the  partnership  assets  and  be  applied  to  the  payment  of  the 
partnership  debts.  Should  any  surplus  of  the  partnership  prop- 
erty remain  after  paying  the  partnership  debts,  such  surplus  shall 
be  added  to  the  assets  of  the  individual  partners,  in  the  propor- 
tion of  their  respective  interests  in  the  partnership."  Firm  debts 
are  to  be  proved  primarily  against  the  firm,  and  secondarily 
against  the  individual  partners,  while  the  individual  debts  of  a 
partner  should  be  proved  primarily  against  the  partners  estate, 
and  secondarily  against  the  partnership,  to  the  extent  of  the 
debtor  partner's  share,  and  the  primary  debts  must  be  satisfied  in 
each  case  before  the  secondary  debts  can  participate."^ 

§  695.  Exception  to  general  rule — Where  no  partnership 
estate  and  partners  are  all  insolvent. — An  exception  to  the 
general  rule  above  given  has  been  applied  when  there  is  no  firm 
estate  wdiatsoever  and  the  partnership  and  individual  partners 
are  all  insolvent  and  all  in  bankruptcy,  and  in  such  case  both  the 
firm  and  the  individual  creditors  share  alike  ratably  in  the  indi- 
es Uniform  Partnership  Act,  §  R.  680 ;  In  re  Blanchard,  161  Fed.  793, 
40  (i).  20  Am.  Bkr.  R.  417;  In  re  Janes,  133 

"'^  Adams  v.  Deckers  Lumber  Co.,  Fed.  912,  67  C.  C.  A.  216 ;  Bucking- 
202  Fed.  48;  Johnson  v.  Norris,  190  ham  v.  First  Nat.  Bank,  131  Fed.  192, 
Fed.  459 ;  In  re  Chandler,  185  Fed.  65  C.  C.  A.  498,  12  Am.  Bkr.  R.  465 ; 
1006;  In  re  Union  Bank,  184  Fed.  In  re  Denning,  114  Fed.  219;  In  re 
224,  25  Am.  Bkr.  R.  148;  In  re  Ef-  Hosier,  112  Fed.  138;  Jarecki  Mfg. 
finger,  184  Fed.  728;  In  re  Filmar,  Co.  v.  McElwaine,  107  Fed.  249;  In 
177  Fed.  170,  24  Am.  Bkr.  R.  194 ;  In  re  Wilcox,  94  Fed.  84. 
re  Terens,  175  Fed.  495,  23  Am.  Bkr. 


10 — Row.  ON  Partn. — Vol.  2 


§    695  LAW    OF    PARTNERSHIP  952 

vidual  estate.'^^  In  one  of  these  cases  the  court  said  :'^  "In  view 
of  this  authoritative  declaration  that  the  equities  of  the  partner- 
ship creditors  are  derived  from  the  equity  of  the  partners,  and 
that  it  is  within  the  power  of  the  partners  to  put  an  end  to  the 
equities  of  the  firm  creditors,  by  a  bona-fide  transfer  of  the  firm 
assets  to  one  partner  or  to  a  third  party,  wherein  is  the  equity  in 
the  ruling  that,  in  cases  wherein  the  equity  of  the  firm  creditors 
has  been  terminated,  not  through  their  act  nor  with  their  con- 
sent, but  by  the  act  of  the  partners  in  selling  the  firm  assets  to 
one  of  their  number  or  to  a  third  party,  and  subsequently  mem- 
bers of  the  firm  are  put  into  bankruptcy  as  individuals,  the  indi- 
vidual creditors  are  entitled  to  exclude  the  firm  creditors  from 
sharing  in  the  assets  until  the  individual  debts  are  paid  in  full. 
In  such  cases  there  is  no  other  fund  to  which  the  firm  creditors 
can  resort  for  payment,  and  the  practical  result  of  the  rule  laid 
down  in  the  Wilcox  Case  is  that,  in  all  cases  wherein  the  equity 
of  the  firm  creditors  have  been  destroyed  by  the  action  of  the 
partners,  in  converting  the  firm  property  into  individual  assets 
by  action  of  the  partners,  in  converting  the  firm  property  into 
individual  assets  by  a  sale  thereof  to  one  of  the  partners,  the  in- 
dividual creditors  are  entitled  to  be  preferred,  and  are  entitled 
to  exclude  the  firm  creditors  from  sharing  in  these  assets,  even 
though  they  were  originally  the  property  of  the  firm.  A  very 
large  proportion  of  the  cases  brought  in  bankruptcy  under  the 
provisions  of  the  present  act  are  cases  wherein  the  bankrupts 
have  been  members  of  one  or  more  partnerships  which  have  been 
dissolved  long  since,  and  in  which  the  only  assets  are  those  be- 
longing to  the  individual  bankrupt;  and,  if  it  be  the  rule  that  the 
individual  creditor  is  always  entitled  to  be  first  paid  from  the 
individual  assets,  it  follows  that  in  all  these  cases  the  debts  due 
the  firm  creditors  are  discharged,  yet  these  creditors  are  barred 
from  any  share  in  the  assets  of  the  bankrupt.    The  variant  views 

78  In  re  Rice,  Fed.  Cas.  No.  11750,  R.  619;   In  re  Green,   116  Fed.   118; 

9  Nat.  Bkr.  R.  2,7Z ;  In  re  Gray,  208  In  re  West,  39  Fed.  203. 

Fed.    959;    Conrader    v.    Cohen,    121  "  in  re  Green,  116  Fed.  118,  8  Am. 

Fed.  801,  58  C  C.  A.  249,  9  Am.  Bkr.  Bkr.  R.  553. 


953  BANKRUPTCY  §    696 

set  forth  in  the  numerous  decisions  cited  in  the  Wilcox  Case 
serve  to  show  that  it  is  practically  impossible  to  formulate  a  single 
general  rule  that  will  meet  the  equities  of  every  case,  but  the 
adoption  of  the  rule  that  in  every  instance  wherein  there  are  firm 
and  individual  creditors,  but  the  assets  are  individual  only,  the 
latter  class  of  creditors  are  to  be  paid  in  full  to  the  exclusion 
of  the  firm  creditors,  will  certainly  work  injustice  in  so  many 
cases  that  I  should  hesitate  long  before  accepting  it  in  the  ab- 
sence of  a  controlling  decision  by  an  appellate  court.  The  Su- 
preme Court  having  decided  that  the  firm  assets  may  be  con- 
verted into  individual  assets  by  the  action  of  the  partners,  I  can 
not  see  the  equity  in  the  view  that  holds,  in  effect,  that  it  is  within 
the  power  of  the  partners  to  determine  the  equity  of  the  firm 
creditors  in  the  firm  assets,  and  that  the  same  act  which  terminates 
the  equity  of  the  firm  creditors  creates  a  preference  in  favor  of 
the  individual  creditors,  enabling  them  to  secure  payment  in  full 
of  their  claims  out  of  funds  which  in  many  cases  are  wholly  or 
largely  the  proceeds  of  the  property  which  was  originally  firm 
assets." 

§  696.     Cases  not  recognizing  exception  to  general  rule 
where  no  partnership  estate  and  partners  are  all  insolvent. — 

There  are  cases  which  hold  the  contrary  doctrine,  and  do  not 
recognize  the  exception  above  given,  on  the  ground  that,  although 
there  was,  for  a  long  period,  such  a  rule  in  equity  and  bankruptcy 
courts,  the  fact  that  the  exception  was  not  expressly  embodied 
in  the  present  Bankruptcy  Act,  in  itself  would  preclude  the  ex- 
ception,^" The  reasoning  of  this  class  of  cases  is  illustrated  in 
the  following  extract  f^  "The  first  question  before  the  court  is 
whether  the  petitioner,  the  Canton  Buggy  Company,  as  a  creditor 
of  the  late  partnership,  is  entitled  to  share  ratably  with  Hull's 

80  McNabb  v.  Bank  of  Le  Roy,  198  Am.   Bkr.  R.  341 ;   In  re  Janes,    128 

U.   S.   583,  25   Sup.   Ct.  802 ;   Euclid  Fed.  527 ;  In  -re  Wilcox,  94  Fed.  84 ; 

Nat.  Bank  v.  Union  Trust  &  Deposit  Matter  of  Hull,  34  Am.  Bkr.  R.  447 ; 

Co.,    149   Fed.   975,    17   Am.    Bkr.    R.  In  re  Corcoran,  12  Am.  Bkr.  R.  283. 
834 ;  In  re  Henderson,  142  Fed.  588 ;        si  Matter  of  Hull,  34  Am.  Bkr.  R. 

In   re  Janes,    133   Fed.   Rep.   912,    13  447. 


§    696  LAW    OF    PARTNERSHIP  954 

creditors  in  the  settlement  of  his  estate.  The  question  is  whether 
because  of  the  fact  that  there  were  no  partnership  assets  avail- 
able for  distribution  to  partnership  creditors,  the  rule  of  distri- 
bution in  paragraph  (f)  of  section  5  of  the  Bankruptcy  Act  is 
subject  to  the  exception  recognized  in  some  states,  Ohio  for  one, 
as  applicable  in  such  cases.^"  Under  section  36  of  the  old  Bank- 
ruptcy Act,  section  5121  R.  S.  (1878),  the  current  of  opinion  was 
somewhat  strongly  to  the  point  that  where  there  is  no  partnership 
estate,  and  no  solvent  partner,  partnership  creditors  are  entitled 
to  share  ratably  with  individual  creditors  in  the  individual  assets 
of  the  bankrupt  partner.®^  But  upon  the  present  law  the  greater 
authority  is  to  the  point  that  no  such  exception  should  be  recog- 
nized, but  that  the  distribution  should  follow  strictly  the  language 
of  the  act.  *  *  =;=  j^  the  Wilcox  Case,  Judge  Lowell,  in  an 
elaborate  review  of  the  development  and  practice  of  the  excep- 
tion in  equity  procedure,  points  out  the  difficulties  in  the  applica- 
tion, while  in  the  Henderson  Case,  Judge  Dayton  discusses  the 
frequent  inequity  resultant  from  its  employment,  and  the  ab- 
surdities involved  in  giving  it  any  force  whatever,  as  in  Mar- 
wick's  Case  (Federal  Cases  9181),  where  the  partnership  estate 
not  otherwise  yielding  anything  for  distribution,  a  creditor  of 
one  of  the  partners  purchased  a  perfectly  worthless  partnership 
asset  for  $40.00  that  he  might  put  a  fund  into  the  hands  of  the 
assignee  of  the  partnership  and  thereby  prevent  its  creditors  from 
sharing  pari  passu  with  individual  creditors  in  individual  assets. 
It  is  well  observed  by  Judge  Dayton  that  the  present  law  received 
such  careful  consideration  in  its  passage  b}^  a  committee  entirely 
familiar  with  the  act  of  1867,  that  it  is  impossible  not  to  assume 
that  its  draft,  which  passed  without  amendment,  was  so  worded 
as  to  exclude  the  possibility  of  any  other  distribution  than  that 
pointed  out  by  the  section.  Reviewing  the  Janes  Case,^*  Judge 
Lacombe  uses  this  language  :  'It  was  within  the  discretion  of  con- 
s' Citing  Grosvenor  v.  Austins,  6  No.  7304 ;  In  re  Knight,  Fed.  Cas. 
Ohio  103,  25  Am.  Dec.  743;  Brock  v.  No.  7880,  2  Biss.  518. 
Bateman,  25  Ohio  St.  609;  Rodgers  s^In  re  Janes,  133  Fed.  912,  67  C. 
V.  Meranda,  7  Ohio  St.  179.  C.  A.  216,  13  Am.  Bkr.  R.  341. 


S3 


Citing    In    re   Jewett,    Fed.    Cas. 


955  BANKRUPTCY  §    696 

gress  to  leave  this  subject  of  the  marshahng  of  assets  to  the  courts, 
to  be  disposed  of  in  accordance  with  equity  principles  and  prac- 
tice, or  to  provide  that  the  general  rule  should  be  modified  in 
particular  cases.  It  has  done  neither.  On  the  contrary,  it  has 
itself  directed  how  the  assets  shall  be  marshaled,  and  it  has  done 
so  in  language  broadly  covering  this  case  as  well  as  all  the  others. 
The  language  is  plain,  explicit  and  unambiguous;  it  names  no 
"exception" ;  its  phraseology  conveys  no  intimation  that  any  "ex- 
ception" is  contemplated.  To  inject  into  the  act  an  excepting 
clause  where  none  has  been  enacted  would  seem  to  be  judicial 
legislation.'  An  able  opinion  by  a  referee  of  the  southern  dis- 
trict of  this  state,  denying  the  application  of  the  exception,  and 
reported  in  12  American  Bankruptcy  Reports,  283,  calls  atten- 
tion to  the  'material  change  effected  by  the  present  law'  from  the 
act  of  1867,  'in  the  manner  in  which  a  partnership  is  now  re- 
garded as  a  separate  entity  instead  of  a  joint  enterprise,'  citing, 
to  show  'that  other  courts  have  recognized  material  changes 
made  by  the  present  bankruptcy  law'^^ — all  to  the  point  that,  as 
distinguished  trom  the  law  of  1867  the  present  act,  'deals  with 
the  copartnership  as  a  person  for  the  purpose  of  subjecting  the 
partnership  property  to  the  satisfaction  of  the  copartnership  lia- 
bilities.' This  significant  change  in  phraseology  from  that  of 
the  former  act  may  be  sufficient  to  deprive  the  cases  decided  under 
the  act  of  1867  of  persuasiveness.  Indeed,  it  is  difficult  to  see 
wherein  the  language  of  paragraph  (f)  of  section  5  permits  the 
grafting  of  an  exception.  The  first  sentence  so  definitely  pro- 
vides how  various  classes  of  debts  shall  be  paid  as  to  seem  to  leave 
no  room  for  any  variation.  It  reads :  'The  net  proceeds  of  the 
partnership  property  shall  be  appropriated  for  the  payment  of  the 
partnership  debts,  and  the  net  proceeds  of  the  individual  estate 
of  each  partner  to  the  payment  of  his  individual  debts.'  This 
language,  read  literally,  excludes  opportunity  for  the  partnership 

»'^Vaccaro    v.    Security    Bank,    103  Am.    Bkr.    R.   559;    In    re    Stein,    127 

Fed.  436.  43  C.  C.  A.  279,  4  Am.  Bkr.  Fed.  547,  62  C.  C.  A.  272,  11  Am.  Bkr. 

R.  474;   In  re  Meyer    (C.  C.  A..  2d  R.  536. 
Cir.^    Q8  Fed.  976.  39  C.  C.  A.  368,  3 


§    696  LAW    OF    PARTNERSHIP  956 

debts  to  participate  in  the  fund  derived  from  the  individual  estate 
of  a  partner,  except  as  provided  in  the  subsequent  sentence  of 
the  paragraph,  that  is,  only  when  the  individual  estate  yields  a 
surplus  above  the  individual  liabilities."  The  rule  which  does 
not  recognize  the  exception  is  probably  followed  in  the  greater 
number  of  cases  involving  the  question  under  the  present  act. 
If  there  are  firm  assets,  but  only  enough  to  pay  costs,  with  nothing 
left  for  distribution  to  firm  creditors,  it  comes  within  the  excep- 
tion, it  having  been  held  that  the  term  net  proceeds,  as  used  in  the 
act,  means  proceeds  distributed  to  creditors  after  costs  of  ad- 
ministration are  paid.^®  Firm  creditors  may  pay  off  separate 
creditors,  and  when  this  is  done,  or  when  there  are  no  separate 
creditors,  the  firm  creditors  may  then  at  once  prove  their  claims 
against  the  separate  estate.^'  Firm  creditors  may  prove  their 
claims  against  a  bankrupt  partner  at  once,  but  have  only  the  right 
to  vote  until  separate  creditors  are  paid  in  full  (subject  to  the 
exception  above  given). ^^  The  manner  in  which  a  separate  part- 
ner secures  his  claim  against  his  debtor's  interest  is  not  by  prov- 
ing against  the  firm,  but  by  having  his  debtor's  share  in  the  part- 
nership, if  any,  after  payment  of  the  partnership  debts,  turned 
over  to  the  trustee  of  his  debtors  estate,  in  order  that  it  may 
be  distributed  in  the  same  manner  as  any  other  assets,  by  that 
trustee.^^  The  creditor  of  the  individual  estate  has  not  the  same 
interest  in  the  firm  estate  that  the  firm  creditor  has  in  the  indi- 
vidual estate,  and  can  not  vote  in  the  election  of  a  trustee  for 
the  firm.''**  Thus  the  peculiar  situation  may  arise,  where  both 
the  firm  and  the  individual  partner  are  declared  bankrupt, 
that  the  firm  creditors  may  join  with  the  individual  creditors  in 
the  election  of  a  trustee  of  the  property  of  the  partner,  while 
the  partner's  creditors  may  not  join  with  the  firm  creditors  in 
the  selection  of  the  firm  trustee.     This  does  not  appear  to  be 

86  In  re  Litchfield,  5  Fed.  47.  Fed.  140,  6  Am.  Bkr.  R.  554 ;  In  re 

87  In  re  Day,  176  Fed.  Ill,  23  Am.     Diamond,  149  Fed.  407,  17  Am.  Bkr. 
Bkr.  R.  785 ;  Ex  parte  Tait,  16  Ves.     R.  563. 

193.  ^^  B.  A.  1898,  sec.  58. 

88  In  re  Webb.  4  Saw.  (U.  S.)  326.        ""In  re  Coe,  154  Fed.  162,  18  Am. 
Fed.  Cas.  No.  17317;  In  re  Beck,  110    Bkr.  R.  715. 


957  BANKRUPTCY  §    697 

wholly  just,  as  the  firm  creditors  might  elect  the  trustees  of  both 
estates,  and  it  would  seem  as  important  for  the  individual  cred- 
itors as  for  the  firm  creditors  to  have  a  voice  in  the  selection 
of  a  trustee  of  property  in  which  they  have  a  secondary  interest, 
and  it  can  even  be  seen  that  the  trustees  of  the  firm  might  elect 
a  trustee  of  the  property  in  which  they  have  a  secondary  interest, 
who  might  not  be  the  choice  of  the  primary  creditors.  The  au- 
thorities on  this  question  are  not  unanimous,  and  it  has  been 
held  that  where  a  partner  is  adjudicated  bankrupt,  his  individual 
creditors  have  priority  over  those  of  the  firm,  notwithstanding 
there  are  no  firm  assets.''^  Debts  owing  from  a  bankrupt  partner- 
ship to  a  creditor  and  one  owing  from  the  creditor  to  an  indi- 
vidual partner  are  not  "mutual  debts"  which  under  section  68a 
may  be  set  off  against  each  other.®" 

§  697.  Proof  against  both  estates. — There  are  many  in- 
stances in  which  a  debt  may  be  proved  against  both  estates.  For 
instance,  one  of  the  partners  succeeds  to  all  the  firm  assets,  and 
agrees  to  assume  personally  the  firm  liabilities.  In  such  case, 
the  remaining  partner  and  the  old  firm  are  both  liable  primarily 
as  far  as  the  creditor  is  concerned  (unless  the  creditor  expressly 
release  the  retiring  partner) ,  and  the  creditor  can  prove  against 
both  estates  at  the  same  time,^^  but  he  can,  of  course,  only  secure 
the  full  amount  of  the  debt,  and  no  more,  from  one  or  both 
estates.  There  may  be  double  proof  on  any  obligation  which  is 
the  joint  and  several  obligation  of  the  firm  and  of  an  individual 
partner,®*  as  where  a  partnership  signs  notes,  which  are  also 
signed  or  assumed  by  a  partner  individually,®^  or  a  judgment 

91  In  re  Wilcox,  94  Fed.  84.  Fed.  611,  39  L.  R.  A.  (N.  S.)  391n  ; 

92  In  re  Neaderthal,  225  Fed.  38.  In  re  Coe,  169  Fed.  1002 ;  In  re  Bige- 

93  In  re  Pease,  Fed.  Cas.  No.  10881,  low,  Fed.  Cas.  No.  1397 ;  In  re  Mc- 
13  N.  Bkr.  R.  168.  Galium,  11  Am.  Bkr.  R.  447.     Com- 

9*  Mead  v.  Bank,  6  Blatchf.  (U.  S.)  pare  In  re  Coe,  183  Fed.  745.   Contra : 

180,  Fed.  Cas.  No.  9366 ;  In  re  Thom-  In  re  Hosier,  7  Am.  Bkr.  R.  268. 

as,  8  Biss.  (U.  S.)  139,  Fed  Cas.  No.  95  Buckingham  v.  First  Nat.  Bank, 

13886;  Emery  v.  Canal  Nat.  Bank,  3  131  Fed.  192,  65  C.  C.  A.  498.    See  In 

Cliff.  (U.  S.)  507,  Fed.  Cas.  No.  4446;  re  McCoy,  150  Fed.  106. 
Reynolds  v.  New  York  Trust  Co.,  188 


§    698  LAW    OF    PARTNERSHIP  958 

on  a  tort."®    A  partnership  debt  may  be  proved  against  the  indi- 
vidual estate  of  a  partner."^ 

§  698.  Proof  between  estates. — As  a  general  rule,  the 
separate  estate  of  one  partner  can  not  claim  against  the  joint 
estate  of  the  partnership  in  competition  with  the  joint  creditors, 
nor  shall  the  joint  estate,  claim  against  the  separate  estate  in  com- 
petition with  the  separate  creditors. °^  However,  section  5g  of  the 
Bankruptcy  Act  provides  that  "the  court  may  permit  proof  of 
the  claim  of  the  partnership  estate  against  the  individual  estate 
and  vice  versa,  and  may  marshal  the  assets  of  the  partnership  and 
individual  estates  so  as  to  prevent  preferences,  and  secure  the 
equitable  distribution  of  the  property  of  the  several  estates." 
This  is,  however,  discretionary  with  the  court,  and  is  had  only 
by  leave  of  court,^^  and  does  not  affect  the  rights  of  firm  cred- 
itors to  be  paid  first  out  of  firm  assets,  and  of  individual  cred- 
itors to  be  paid  first  out  of  individual  assets.^  This  clause  is  un- 
doubtedly provided  for  the  purpose  of  making  plain  the  equity 
powers  of  the  court  to  deal  with  fraudulent  transfers  and  pref- 
erences between  the  firm  and  the  members  thereof,"  but  extends 
no  further,  and  a  partner  who  has  advanced  property  to  the  firm 
is  not  entitled  to  participate  in  the  firm  assets  in  competition  with 
creditors  who  are  not  partners,  and  vice  versa. ^  The  question 
arises  as  to  the  right  of  a  partner  to  prove  his  separate  claim 
against  the  estate  of  a  bankrupt  partner,  in  competition  with 
nonpartner  creditors.     This,  as  a  rule,   is  not  allowed.*     ]\Ir. 

96  In  re  Coe,  183  Fed.  745,  26  Am.  i  In  re  Union  Bank,  184  Fed.  224. 

Bkr.  R.  353;  In  re  Peck,  206  N.  Y.  55,  See  also  in  re  Denning,  114  Fed.  219; 

41  L.  R.  A.  (N.  S.)   1223.  In   re   Filmar,   177   Fed.   170;   In   re 

s^Loomis    V.   Wallblom,    94    Minn.  Terens,    175   Fed.  495;   In   re   Ervin, 

392,  102  N.  W.  1114,  3  Ann.  Cas.  798,  109  Fed.  135   (aflfd.  112  Fed.  124,  50 

69  L.  R.  A.  771,  note.  C  C  A.  129). 

9sAmsinck  v.   Bean,  22  Wall.    (U.  2  in  re  Union  Bank,   184  Fed.  244, 

S.)  395,  22  L.  ed.  801 ;  MurriU  v.  Neil,  25  Am.   Bkr.  R.   148 ;   In   re  Terens, 

8  How.   (U.  S.)  414,  12  L.  ed.  1135;  175  Fed.  495,  23  Am.  Bkr.  R.  680. 

Loveland  on  Bankruptcy,  4th  ed.,  Vol.  3  in  j-g  Union  Bank,  184  Fed.  244, 

1,  p.  567.  25  Am.  Bkr.  R.  148. 

99  In  re  Union  Bank,  184  Fed.  244,  ^Amsinck   v.    Bean,   22   Wall.    (U. 

25  Am.  Bkr.  R.  148.  S.)  395,  22  L.  ed.  801. 


959  BANKRUPTCY  §    699 

Loveland  gives  as  a  reason  therefor,  "that  he  is  himself  hable  to 
t'lll  of  the  firm  creditors,  \vliich  is  sufficient  to  show  that  in  equity 
he  can  not  be  permitted  to  claim  any  part  of  the  funds  of  the 
bankrupt  before  all  the  creditors  to  whom  he  is  liable  are  paid."^ 
Under  this  same  reasoning,  it  is  very  probable  that  a  special 
partner  in  a  limited  partnership  would  be  permitted  to  compete 
with  nonpartner  creditors,  inasmuch  as  he  is  under  no  liability 
for  the  payment  of  firm  del)ts,  except  as  to  the  amount  he  sub- 
scribes to  the  partnership.  One  or  more  solvent  partners  may 
wish  to  retain  the  credit  of  the  firm,  and  may  pay  off  the  firm 
creditors.  In  such  case  they  may  prove  against  the  bankrupt 
partner's  estate  for  the  amount  the  bankrupt  partner  should  have 
paid,  or  may  require  of  his  solvent  partners  contribution,  and 
all  those  so  contributing  may  prove  against  the  estate  of  the 
bankrupt  partner  or  partners,  for  such  amount  as  they  may  be 
entitled  to  from  him  thereby." 

§  699.  Costs  of  partnership  petition. — Section  5e  provides 
that  the  expenses  shall  be  paid  from  the  partnership  property 
and  the  individual  property  in  such  proportions  as  the  court 
shall  determine.  The  cjuestion  has  arisen,  as  to  whether  a  peti- 
tion which  involves  the  estates  of  individual  partners  as  well  as 
of  the  firm,  should  be  considered,  as  to  fees,  one  case  or  several. 
It  is  held  that  a  voluntary  petition  of  a  firm  in  which  individual 
partners  join  requires  but  one  filing  fee,'^  also  that  where  partners 
file  a  partnership  petition,  it  constitutes  but  one  proceeding,  and 
they  can  not  each  be  required  to  pay  separate  filing  fees,  etc.^ 

§  700.  Time  within  which  firm  may  be  adjudged. — By  the 
provisions  of  section  5a  of  the  Bankruptcy  Act,  the  adjudication 
may  be  either  during  the  continuation  of  the  partnership  business, 
or  after  its  dissolution  and  before  the  final  settlement  thereof. 
It  is  held^  that  there  is  no  final  settlement  of  a  firm's  business, 

5  Loveland  Bankruptcy,  page  568.  ®  In  re  Langslow,  98  Fed.  869. 

6  In  re  Dillon,  100  Fed.  627,  4  Am.  ^  In  re  Meyers,  96  Fed.  408 ;  In  re 
Bkr.  R.  63;  Ex  parte  Smith,  Buck.  Levy,  95  Fed.  812.  See  Holmes  v. 
492.  Baker  &  Hamilton,  160  Fed.  922. 

7  In  re  Gay,  98  Fed.  870. 


§    701  LAW    OF    rARTNERSHIP  960 

SO  long  as  any  of  its  debts  remain  unpaid,  even  though  its  assets 
have  been  absorbed  by  executions,  and  it  has  ceased  to  do  busi- 
ness. This  decision  would  practically  make  it  possible  to  adjudge 
a  partnership  at  any  time  after  it  commits  an  act  of  bankruptcy, 
and  so  long  as  there  are  any  creditors  of  the  firm.  This  state- 
ment should  perhaps  be  qualified  by  the  fact  that  the  statute  of 
limitations  might  be  an  effective  bar,  insomuch  that,  operating 
upon  the  claims  of  the  creditors,  it  might  make  them  unen- 
forcible  and  uncollectible.  The  term  creditors,  at  least  insofar 
as  it  applies  to  involuntary  proceedings,  should  undoubtedly 
be  construed  to  mean  all  persons  having  en  forcible  claims  against 
the  alleged  bankrupt.  It  should  furthermore  be  considered  that, 
by  the  provisions  of  section  5b,  the  petition  against  the  alleged 
bankrupt  must  be  filed  within  four  months  after  the  commission 
of  the  alleged  act  of  bankruptcy.^*^ 

§  701.  Acts  of  bankruptcy. — A  discussion  of  the  matters 
which  are  designated  as  acts  of  bankruptcy  belongs  more  properly 
to  a  work  on  bankruptcy  than  to  one  on  partnership,  inasmuch 
as  they  are  general,  and  apply  not  only  to  partnerships  but  to 
others  as  well.  However,  in  view  of  their  importance  and  of  the 
fact  that  they  include  partnerships,  it  may  not  be  amiss  to  touch 
upon  them  in  this  connection.  In  the  Bankruptcy  Acts  of  1898, 
the  following  pertinent  provisions  are  found :  Section  3a.  "Acts 
of  bankruptcy  by  a  person  shall  consist  of  his  having:  (1)  Con- 
veyed, transferred,  concealed,  or  removed,  or  permitted  to  be 
concealed  or  removed,  any  part  of  his  property  with  intent  to 
hinder,  delay,  or  defraud  his  creditors,  or  any  of  them;  or  (2) 
transferred,  while  insolvent,  any  portion  of  his  property  to  one 
or  more  of  his  creditors  with  intent  to  prefer  such  creditors  over 
his  other  creditors;  or  (3)  suffered  or  permitted,  while  insolvent, 
any  creditor  to  obtain  a  preference  through  legal  proceedings, 
and  not  having  at  least  five  days  before  a  sale  or  final  disposition 
of  any  propert}''  affected  by  such  preference  vacated  or  discharged 

10  See  in  re  Pinson,  180  Fed.  787 ;     C.  A.  638 ;  In  re  Hersch,  97  Fed.  571. 
Royston  v.  Wies,  112  Fed.  962,  50  C. 


961  BANKRUPTCY  §    702 

such  preference ;  or  (4)  made  a  general  assignment  for  the  benefit 
of  his  creditors,  or,  being  insolvent,  applied  for  a  receiver  or 
trustee  for  his  property  or  because  of  insolvency  a  receiver  or 
trustee  has  been  put  in  charge  of  his  property  under  the  laws  of 
a  state,  of  a  territory,  or  of  the  United  States;"  or  (5)  admitted 
in  writing  his  inability  to  pay  his  debts  and  his  willingness  to  be 
adjudged  a  bankrupt  on  that  ground.""^ 

§  702.  Particular  cases  involving  acts  of  bankruptcy  by 
partnerships. — The  written  admission  of  one  of  two  partners 
on  behalf  of  both  as  a  firm,  that  they  are  unable  to  pay  their 
debts,  and  are  willing  to  be  adjudged  bankrupt,  constitutes  an  act 
of  bankruptcy  upon  which  they  may  be  adjudicated  as  copartners 
individually  and  collectively.^-  Where  a  partner  assigns  the 
firm's  assets,  without  objection  on  the  part  of  his  copartners,  it 
is  an  act  of  bankruptcy  as  to  such  firm,  and  as  to  such  individual 
assignor."  The  question  as  to  the  meaning  of  the  term  "general 
assignment"  in  section  3a  (4)  of  the  Bankruptcy  Act  has  been 
raised,  and  in  one  case^*  it  has  been  held  that  a  partnership's  as- 
signment is  deemed  "general"  (and  an  act  of  bankruptcy),  even 
though  it  does  not  cover  the  property  of  individual  partners. 
Where  the  firm  and  each  of  its  members  make  an  assignment,  the 
act  of  bankruptcy  is  committed  by  all;  adjudication  should  em- 
brace all."  It  has  been  held  that,  under  the  provisions  of  section 
3a  (1 )  above,  that  the  mere  failure  of  surviving  partners  to  con- 
test the  appointment  of  a  partnership  receiver  is  not  equivalent  to 
"concealment"  or  "removal"  of  property."  The  preference  of 
a  firm  creditor  by  a  partner  out  of  his  own  property,  though  his 
credit  is  the  sole  asset  of  the  partnership,  is  held  not  to  be  an  act 
of  bankruptcy.^' 

11  The  above  (No.  4)  is  not  as  orig-  i*  In  re  Meyer,  98  Fed.  976,  39  C. 

inally  passed  in  the  Act  of  1898,  but  C.  A.  368. 

as  amended  February  5th,  1903.  i^  Green  River  Bank  v.  Craig,   110 

iiaBankr.  Act  1898,  §  3a.  Fed.  137;  In  re  Grant,  106  Fed.  496. 

i2in  re  Kerstin,  110  Fed.  929.  ig  Vaccaro    v.    Security    Bank,    103 

13  Chemical  Nat.  Bank  v.  Meyer,  92  Fed.  436,  43  C.  C.  A.  279. 

Fed  896.  i^  Mills  v.  Fisher,  159  Fed.  897,  16 


§    703  LAW    OF    PARTNERSHIP  962 

§  703.  Place  of  commencing  proceedings. — Section  2, 
clause  1,  of  the  Act  of  1898  provides  that  adjudication  may  be 
had  of  persons  who  have  had  their  principal  place  of  business, 
resided,  or  had  their  domicil  within  their  respective  territorial 
jurisdictions  for  the  preceding  six  months,  or  the  greater  portion 
thereof,  etc.  A  partnership,  according  to  the  rules  hereinbefore 
discussed,  would  come  within  the  above  provision  as  would  an 
individual.  In  case  it  should  have  its  principal  place  of  business 
for  the  six  months  preceding  the  commencing  of  the  action  in 
a  certain  judicial  district,  no  question  could  arise  but  that  the 
action  is  rightly  commenced,  as  far  as  relates  to  place  and  if  the 
firm  has  no  place  of  business  within  a  certain  district,  but  one  of 
the  partners  has  his  residence  therein,  the  firm  may  be  adjudicated 
by  the  court  of  that  district  under  a  proper  showing,  this  being 
expressly  provided  for  in  section  5,  clause  c  of  the  act.  All  the 
facts,  however,  necessary  to  confer  jurisdiction  must  appear 
affirmatively  and  distinctly.^^  A  question  may  be  raised  under 
section  5,  clause  c.  Under  the  provision  that  jurisdiction  of  one 
partner  gives  jurisdiction  of  all  partners  and  of  the  administra- 
tion of  the  partnership  and  individual  property,  what  jurisdiction 
does  the  court  secure  over  the  other  partners  and  of  their  indi- 
vidual estates?  The  provision  seems  quite  plain.  It  seems  there 
is  no  extra-territorial  jurisdiction  as  to  persons  who  do  not  con- 
sent and  submit  to  the  court's  jurisdiction,  but  a  nonresident 
partner  may  be  brought  in  by  procedure  under  section  2,  subdi- 
vision 6,  of  the  Bankruptcy  Act.^^  It  is  held  that  an  involun- 
tary petition  against  one  partner  confers  no  jurisdiction  to  ad- 
judicate other  partners  in  the  same  proceeding.  This  might  seem 
to  be  in  opposition  to  the  plain  provisions  of  the  statute,  but  the 
statute  refers  to  jurisdiction  of  the  partners  and  the  adminis- 
tration of  the  property  both  of  the  individual  partners  and  of  the 
firm.     This,   however,  may  be  done  without  adjudicating  the 

L.  R.   A.    (N.   S.)   656,  note;   Hart-        ^^In  re  Plotke,  104  Fed.  964,  43  C. 

man   v.    Peters.    146   Fed.    82 ;    In   re  C.  A.  282. 

Stovall  Grocery  Co.,  20  Am.  Bkr.  R.        i9  Mahoney  v.  Ward,  100  Fed.  278 ; 

537 ;   In  re  Redmond,  Fed.   Cas.  No.  In  re  Schwartz,  30  Am.  Bkr.  R.  344. 

11632. 


963  BANKRUPTCY  §    704 

other  partners  bankrupt,  which  they  may  not  be,  although  their 
firm  and  the  resident  partner  may  be,  nevertheless  their  indi- 
vidual property  is  liable  for  the  debts  of  the  firm,  if  it  does  not 
pay  out  in  full,  and  the  court  may  enforce  such  liability,  under 
the  statute.  This  is  further  shown  in  a  case^°  which  holds  that 
adjudication  of  a  firm  draws  to  the  court  for  administration,  the 
individual  estates  of  the  partners,  and  that  the  assignee  for  cred- 
itors of  a  partner  may  be  compelled  by  summary  order  to  sur- 
render the  property.  It  would  appear  that  the  court,  in  such 
a  case  would  acquire  jurisdiction  to  administer  the  individual 
property  of  the  partner  not  directly  brought  in,  so  far  as  neces- 
sary for  partnership  purposes,  but  would  not  have  jurisdiction  to 
adjudge  such  partner  a  bankrupt  alone  upon  the  petition  involving 
the  other  partner.  Section  32  of  the  act  of  1898  provides  for  the 
transfer  of  partnership  and  other  cases,  as  follows :  "In  the  event 
petitions  are  filed  against  the  same  person,  or  against  different 
members  of  a  partnership,  each  of  which  has  jurisdiction,  the  cases 
shall  be  transferred,  by  order  of  the  courts  relinquishing  jurisdic- 
tion, to  and  be  consolidated  by  the  one  of  such  courts  which  can 
proceed  with  the  same  for  the  greatest  convenience  of  parties  in 
interest."  This  section  authorizes  transfer  and  consolidation  in 
cases  where  different  petitions  are  filed  against  a  partnership,"^ 
and  together  with  General  Order  VI,  it  applies  where  there  is  a 
voluntary  petition  in  one  district,  and  an  involuntary  petition  in 
another.^- 

§  704.  Exemptions  in  partnership  proceedings. — It  has 
been  held  that  a  partnership  engaged  in  farming  is  exempt  from 
voluntary  bankruptcy."^  Section  6  provides  that  "this  act  shall 
not  affect  the  allowance  to  bankrupts  of  the  exemptions  which 
are  prescribed  by  the  state  laws  in  force  at  the  time  of  the  filing 
of  the  petition  in  the  state  wherein  they  have  had  their  domicil 
for  the  six  months  or  the  greater  portion  thereof  immediately 

20  In  re  Stokes,  106  Fed.  312.  23  SiiUs  v.  American  Nat.  Bank,  209 

21  In  re  Sears,  112  Fed.  58.  Fed.  749. 

22  In  re  Waxelbaum,  98  Fed.  589. 


§    704  LAW    OF    PARTNERSHIP  964 

preceding  the  filing  of  the  petition."  This  section  recognizes  the 
exemption  laws  of  each  state  in  actions  brought  therein,  and 
neither  enlarges  nor  diminishes  such  state's  exemption  laws.^* 
Consequently,  in  such  states  as  allow  a  waiver  of  exemptions  by 
the  debtor,  such  a  waiver  will  be  adhered  to  by  the  bankruptcy 
court,  and  no  exemptions  allowed,  while  the  contrary  rule  ap- 
plies where  such  waivers  are  not  allowed.'^  As  a  general  rule, 
partners  are  not  entitled  to  exemptions  in  firm  property  and  the 
federal  courts  so  hold  in  states  where  this  is  the  rule,^®  while 
they  permit  such  exemptions  in  states  where  they  are  allowed."^ 
Where  the  Uniform  Partnership  Act  has  been  adopted  there  can 
be  no  right  to  exemptions  in  firm  property.'^  It  has  been  held 
that  it  is  not  a  fraud  on  creditors  where  partners,  though  the  firm 
is  insolvent,  but  before  action  is  brought,  change  the  firm  prop- 
erty into  separate  property  by  division  among  themselves  in  order 
to  claim  individual  exemptions,  and  in  such  case  exemptions  are 
allowed.^^  The  exemptions  should  be  claimed,  when  the  bank- 
rupt's petition  is  filed,^°  but  it  may  be  done  at  any  time  while 
there  are  sufficient  assets  unadministered.^^  The  specific  property 
demanded  should  be  set  forth  in  the  original  or  an  amended 
schedule.^^  Some  states  give  partners  exemptions  out  of  firm 
assets  if  the  other  partners  consent.  In  the  bankruptcy  courts 
located  within  such  states,  these  exemptions  are  recognized  and 
applied,  and  the  consent  of  each  partner  is  shown  if  all  the  part- 

24  In  re  Woodard,  95  Fed.  260.  Co.,    173   Fed.    153;    In   re   Friedrich, 

25  In  re  Tune,  115  Fed.  906;  In  re  100  Fed.  284,  40  C.  C.  A.  378;  In  re 
Durham,  104  Fed.  231;  In  re  Black,  Stevenson,  93  Fed.  789;  In  re  Camp, 
104  Fed.  289 ;  In  re  Garden,  93  Fed.  91  Fed.  745 ;  In  re  Andrews,  27  Am. 
423.  Bkr.  R.  116. 

2G  In  re  McCrary,  169  Fed.  485 ;  In  28  Matter  of  Safady  Bros.,  36  Am. 

re  Novak,  150  Fed.  602 ;  In  re  Prince,  Bkr.  R.  6.    Uniform  Partnership  Act, 

131  Fed.  546;  In  re  Meriwether,  107  §  25   (Wisconsin  Act,  §  21). 

Fed.  102;  In  re  Beauchamp,  101  Fed.  29  ^-awford   v.    Sternberg,   33   Am. 

106;  In  re  Mosier,  112  Fed.  138;  In  Bkr.   R.  677;    Matter  of    McConnell, 

re  Vickerman  &  Co.,  29  Am.  Bkr.  R.  32  Am.  Bkr.  R.  589. 

298 ;  Jennings  v.  Stannus,  27  Am.  Bkr.  so  !„  re  Friedrich,  100  Fed.  284,  40 

R.  384;  Matter  of  Golden  Rule  Mer-  C.  C.  A.  378. 

cantile  Co.,  21  Am.  Bkr.  R.  397.  3i  In  re  White,  103  Fed.  774. 

2'' In  re  Gartner  Hancock  Lumber  ^^In  re  Duffy,  118  Fed.  926. 


965  BANKRUPTCY  §    705 

ners  join  in  the  petition,  and  ask  for  exemptions.^^  It  has  been 
held  in  a  case  decided  in  the  bankruptcy  courts  of  Georgia,  that 
each  partner  having  no  individual  property  is  entitled,  in  ad- 
judicating the  bankrupt  firm,  in  accordance  with  the  exemption 
laws  of  Georgia,  to  exemptions  out  of  the  firm  assets,  provided 
his  partnership  interest  equals  such  exemptions.^*  Much  the 
same  rule  is  applied  in  North  Carolina  and  was  applied  in  Wis- 
consin before  adoption  of  the  Uniform  Partnership  Act.^^  No 
general  rule  can  be  given  in  a  general  work  as  to  what  exemptions 
are  allowed,  owing  to  the  various  rules  in  different  states,  except 
that  above  given,  that  the  bankruptcy  courts  will  follow  the  ex- 
emption laws  of  the  particular  state  in  which  the  decision  is  given. 

§  705.  Appointment  and  powers  of  trustee  in  partnership 
cases. — Trustees  in  partnership  cases  are  appointed,  or 
elected  by  the  creditors  entitled  to  vote.^'^  However,  this  rule 
has  been  construed  to  the  effect  that  the  provision  of  the  act 
that  the  "creditors  of  the  partnership  shall  appoint  the  trustee," 
applies  only  in  the  case  of  a  joint  petition,  and  that  in  case  of 
the  separate  bankruptcy  of  one  of  the  members,  separate  creditors 
may  vote,  although  all  assets  are  partnership  assets.^^  When 
the  firm  creditors  have  elected  a  trustee,  he  should  administer 
both  the  property  of  the  partnership  and  of  each  partner  indi- 
vidually,^* but  each  estate  must  be  accounted  for  separately,  in- 
asmuch as  each  has  its  primary  and  its  secondary  creditors,  and 
each  requires  a  different  distribution.^''  Every  firm  creditor  is  also 
a  creditor  of  each  separate  partner,  owing  to  the  partner's  liability 
for  firm  debts,  hence  the  firm  creditors  are  entitled  to  vote  for 
a  trustee  of  any  individual  partner,  equally  with  the  individual 

33  In  re  Mosier,  112  Fed.  138;  In  3?  in  re  Beck,  110  Fed.  140,  6  Am. 
re    Demarest,    110   Fed.   638;    In    re     Bkr.  R.  554. 

Steed,  107  Fed.  682.  ss  in  re  Coe,  154  Fed.  162,  18  Am. 

34  In  re  Camp,  91  Fed.  745.  Bkr.  R.  715.     See  Dickas  v.  Barnes, 

35  In  re  Duguid,  100  Fed.  274;  In  140  Fed.  849,  72  C  C.  A.  261,  5  L. 
re  Friedrich,  100  Fed.  284,  40  C.  C.  R.  A.  (N.  S.)  654.  Bankruptcy  Act, 
A.  378.     Contra:     Matter  of  Safady,  §§  5d  &  5f. 

36  Am.  Bkr.  R.  6.  39  !„  re  Denning,  114  Fed.  219. 

36  Bankruptcy  Act,  §  5b. 


§    706  LAW    OF    PARTNERSHIP  9^6 

creditors/"  but  such  trustee  has  no  authority  over  the  property 
of  the  firm,  taking  only  such  property  therein  as  may  be  turned 
over  to  him,  upon  settlement,  as  the  partner  whose  estate  he  rep- 
resents was  entitled  to  from  the  partnership."  The  court  shall 
determine  the  relative  proportion  of  the  expenses  of  administer- 
ing the  various  estates  administered  by  the  trustee  in  the  same 
proceeding,^^  but  where  several  partners  file  a  partnership  peti- 
tion, it  is  but  one  proceeding,  and  separate  filing  fees  can  not  be 
charged  against  each  estate,  and  when  the  petition  is  filed  for 
the  firm  and  the  individual  partners  join  therein,  the  same  rule 
applies/*  Since  the  individual  assets  of  each  partner  are  sub- 
ject to  the  payment  of  partnership  liabilities,  an  order  may  be 
made  for  the  trustee  of  the  partnership  to  take  possession  of 
such  assets,  and  administer  them,  unless  by  following  regular 
procedure  such  partner  is  adjudicated  a  bankrupt,  and  his  cred- 
itors elect  a  trustee.  This  is  contemplated  by  section  5,  and 
General  Order  VIII  provides  for  it.*^ 

§  706.  Discharge  in  partnership  cases. — It  is  provided 
that  "any  person  may,  after  the  expiration  of  one  month  and 
within  the  next  twelve  months  subsequent  to  being  adjudged  a 
bankrupt,  file  an  application  for  a  discharge  in  the  court  of  bank- 
ruptcy in  which  the  proceedings  are  pending;  if  it  shall  be  made 
to  appear  to  the  judge  that  the  bankrupt  was  unavoidably  pre- 
vented from  filing  it  within  such  time  it  may  be  filed  within  but 
not  after  the  expiration  of  the  next  six  months."**'  It  has  been 
repeatedly  held  that  this  provision  applies  to  a  partnership  as 
well  as  individuals,  and  this  though  discharges  are  not  granted 
the  members  of  the  firm.*^    This  discharge  does  not,  however,  in 

40  In  re  Coe,  154  Fed.  162,  18  Am.        ^5  Matter  of  Hansley,  26  Am.  Bkr. 
Bkr.  R.  715.  R.  1. 

41  Ex  parte  Tait,  16  Ves.  193.  Bank-        4c  Bankrutcy  Act,    §    14. 

ruptcy  Act,   §   5e;   In  re  Blumer,   12        47  jn  j-g  Bertenshaw,  157  Fed.  363, 

Fed.  489.     As  to  expenses  generally,  19  Am.  Bkr.  R.  577,  17  L.  R.  A.   (N. 

see  in  re  City  Contracting  &  Bldg.  Co.,  S.)   886;  In  re  Pincus,  147  Fed.  621, 

30  Am.  Bkr.  R.  133.  17  Am.  Bkr.  R.  331 ;  Strause  v.  Hoop- 

42  In  re  Langslow,  98  Fed.  869.  er,  105  Fed.  590,  5  Am.  Bkr.  R.  225. 
44  In  re  Gay,  98  Fed.  870. 


967  BANKRUPTCY  §    706 

itself  release  the  partners  from  their  secondary  liability  for  the 
partnership  debts  not  paid,  where  the  partners  are  not  discharged 
individually.^^  The  justice  of  this  rule  is  manifest.  As  an  ex- 
ample, there  might  be  three  persons  engaged  in  a  partnership, 
and  both  the  firm  and  each  partner  become  insolvent.  The  firm 
and  two  of  the  partners  might  be  entitled  to  a  discharge  under 
the  bankruptcy  acts,  while  the  third  partner,  in  regard  to  his 
individual  estate,  may  have  done  some  act  which  would  dis- 
entitle him  to  a  discharge.  He  would,  therefore,  still  be  liable 
for  firm  debts  (although  possibly  not  collectible),  while  his  co- 
partners, and  the  firm  itself  may  be  discharged  from  liability. 
But  the  law  seems  to  be  that  a  court  can  not  discharge  the  part- 
nership without  administering  on  the  partner's  separate  estate.^^ 
Each  individual  member  of  a  bankrupt  partnership  may  sepa- 
rately apply  for  his  discharge,^"  but  must  first  be  declared  a  bank- 
rupt in  that  proceeding."  We  have  heretofore  seen  that  each 
individual  partner  is  individually  liable  for  all  the  debts  of  the 
firm.  If,  therefore,  one  partner  comes  into  the  bankruptcy  court 
individually,  will  his  discharge  operate  to  release  him  for  his 
liability  upon  the  firm  obligations?  Upon  this  point  the  decisions 
differ.  The  English  rule,  which  is  adopted  by  many  American 
courts,  and  which  is  styled  by  Loveland  in  his  work  on  Bank- 
ruptcy as  "the  true  rule,""  and  by  Remington  as  the  "true  doc- 
trine,"^^  holds  that  if  a  partner  schedules  the  firm  debts  as  w^ell 
as  individual  debts  and  prays  for  a  release  therefrom,  his  dis- 
charge Avill  release  him  from  both  such  firm  and  individual 
debts.^*     "A  full  discharge  of  individual  liability  of  one  partner 

48  Abendroth  v.  Van  Dolsen,  131  U.         ^"  Loveland's  Bankruptcy,  4th  ed.,  p. 
S.  66,  9  Sup.  Ct.  619,  ZZ  L.  ed.  57.     571. 

Compare  Abbott  v.  Anderson,  265  111.  ^3  Remington   Bankruptcy,   2   ed.,   § 

285,  106  N.  E.  782,  L.  R.  A.  1915  F,  2795. 

668.  5*  In  re  Kaufman,  136  Fed.  262,  14 

49  Francis  v.  McNeal,  228  U.  S.  695,  Am.    Bkr.    R.    393 ;    In    re    Brick,    4 
ZZ  S.  Ct.  701,  L.  R.  A.  1915  E,  706.  Fed.  804 ;  In  re  Webb,  Fed.  Cas.  No. 

50  In  re  Hale,  107  Fed.  432;  In  re  17317,  4  Saw.  (U.  S.)  326;  Loomis  v. 
Meyers,  97  Fed.  757.  Wallblom    (Minn.),   102  N.  W.   1114. 

51  In   re   Pincus,    147   Fed.  621,    17  69  L.  R.  A.  771 ;  Berry  v.  Sheehan,  115 
Am.  Bkr.  R.  331.  App.  Div.  (N.  Y.)  488,  17  Am.  Bkr. 


R.  322. 


11- -Row.  ON  P.\RTN. — Vol.  2 


§    706  LAW    OF    PARTNERSHIP  968 

on  a  firm  debt  may  be  had  in  bankruptcy  proceedings  concerning 
that  partner  only."^^  The  contrary  doctrine  has  been  adhered 
to  in  not  a  few  cases,  the  rule  there  being  that  in  order  to  entitle 
the  partner  discharged  to  a  release  from  the  firm  debts,  there 
must  have  been  an  adjudication  against  the  firm.^"  Mr,  Love- 
land,  in  his  work  on  Bankruptcy,^'^  lays  down  the  following  rule, 
which  perhaps  covers  the  question  as  well  as  any :  "In  order 
that  a  discharge  granted  a  partner  upon  his  individual  petition 
in  bankruptcy  may  operate  to  release  his  partnership  as  well  as 
his  individual  debts,  the  firm  debts  should  be  scheduled  as  part- 
nership obligations,  notice  should  be  sent  the  firm  creditors  as 
such,  the  petition  in  bankruptcy  and  the  application  for  dis- 
charge should  show  that  the  petitioner  sought  a  discharge  from 
firm  as  well  as  individual  obligations,  and  notice  of  the  pro- 
ceedings should  be  given  the  remaining  partners."^^  However, 
inasmuch  as  the  question,  when  raised,  has  received  different 
answers  in  our  courts,  it  is  perhaps  the  safer  way,  whenever 
practicable,  to  take  steps  to  have  the  firm  adjudicated  as 
well  as  the  individual  partner,  and  thus  to  avoid  any  possible 
conflict  of  decisions.  It  was  said  on  this  subject  in  one  case  :^^ 
"There  is  some  disagreement  in  the  authorities  as  to  whether  a 
discharge  of  an  individual  partner  releases  him  from  liability 
upon  partnership  debts.  The  great  weight  of  authority  is  in 
favor  of  the  doctrine  that  the  discharge  of  a  partner  on  his  indi- 
vidual petition  operates  as  a  release  alike  from  his  individual  and 
his  partnership  indebtedness.  The  cases  which  hold  to  the  con- 
trary seem  to  be  based  upon  a  misconception  of  the  extent  of 

55  In  re  Kaufman,  136  Fed.  262.  And  1392,  2  Nat.  Bkr.  Reg.  229;  Dodge  v. 
compare  In  re  McFaun,  96  Fed.  592;  Kaufman,  46  Alisc.  248,  91  N.  Y.  S. 
In  re  Laughlin,  96  Fed.  589 ;  Loomis     727,  15  Am.  Bkr.  R.  542. 

V.   Wallblom,   94   Minn.   392,    102    N.  57  Loveland  Bankruptcy,  4th  ed.,  p. 

W.  1114,  69  L.  R.  A.  771.     See  also  573. 

Jarecki  Mfg.  Co.  v.  McElwaine,   107  58  Jn  re  Morrison,  127  Fed.  186,  11 

Fed.    249;    Dodge    v.    Kaufman,    46  Am.   Bkr.  R.  498;   In  re  Russell,  97 

Misc.  248,  91  N.  Y.  S.  727.  Fed.  32,  3  Am.  Bkr.  R.  91 ;  In  re  Hart- 

56  In   re   Noonan,   3   Biss.    (U.    S.)  man,  96  Fed.  593,  3  Am.  Bkr.  R.  65. 
491,  Fed.  Cas.  No.  10292,  10  Nat.  Bkr.  so  jarecki  Mfg.  Co.  v.  McElwaine, 
R.  330;  In  re  Bidwell,  Fed.  Cas.  No.  107  Fed.  249,  5  Am.  Bkr.  R.  751. 


969  BANKRUPTCY  §    706 

the  rights  o£  a  trustee  over  the  bankrupt's  estate,  and  as  to  the 
effect  upon  the  firm  of  the  bankruptcy  of  one  of  its  members. 
The  cases  holding  that  discharge  granted  to  one  member  of  a 
firm  does  not  release  him  from  partnership  indebtedness,  where 
he  alone  is  adjudged  a  bankrupt,  proceed  on  the  principle  that 
the  trustee  could  not  acquire  possession  of  and  administer  the 
assets  of  the  firm.  In  so  holding  it  seems  to  have  been  over- 
looked that  the  bankruptcy  of  one  member  is  ipso  facto  a  disso- 
lution of  the  firm,  and  that,  while  the  solvent  partner  would  be 
allowed  to  administer  the  partnership  assets,  yet  the  trustee  in 
bankruptcy  is  entitled  to  the  bankrupt's  share  of  the  partnership 
assets  after  the  payment  of  the  partnership  debts.  The  separate 
estate  of  the  bankrupt  partner,  and  his  beneficial  interest  in  the 
firm  after  the  payment  of  firm  debts,  is  to  be  administered  by 
the  trustee  for  the  payment  of  the  bankrupt's  individual  debts. 
The  adjudication  of  one  partner  as  a  bankrupt  brings  within  the 
jurisdiction  of  the  court  his  entire  estate  for  administration, 
and  if,  after  the  payment  of  his  individual  debts  out  of  his  indi- 
vidual estate,  any  surplus  remains,  it  will  be  applicable  to  the 
payment  of  firm  indebtedness.  For  the  purpose  of  reaching  any 
such  surplus,  firm  creditors  may  prove  against  the  estate  of  the 
bankrupt  partner  *  *  *  and  the  discharge  of  one  partner  re- 
leases him  from  all  partnership  indebtedness.  The  provision  of 
section  5,  paragraph  'h'  of  the  Act  of  1898  that  where  one  mem- 
ber of  a  firm,  but  not  all,  becomes  bankrupt,  the  partners  not  ad- 
judged bankrupt  shall  wind  up  the  business  and  account  to  the 
trustee  for  the  bankrupt's  share  in  the  firm,  although  it  intro- 
duces no  new  rule  of  law,  does,  however,  clearly  show  that  all 
the  bankrupt's  property — his  individual  assets  as  well  as  his 
beneficial  interest  in  the  partnership  assets — passes  to  the  trus- 
tee. As  that  section  provides  a  means  for  reaching  this  benefi- 
cial interest,  there  would  seem  to  be  no  reason  for  refusing  a 
bankrupt  a  discharge  which  will  release  him  from  his  partnership 
liability  on  the  ground  that  his  partnership  assets  are  not  as- 
signed to  and  controlled  by  his  trustee,  to  be  used  for  the  benefit 
of  the  partnership  creditors,  because  the  trustee  having  a  right 


§    707  LAW    OF    PARTNERSHIP  970 

to  his  beneficial  interest  in  the  partnership  assets,  and  the  bankrupt 
law  providing  a  means  for  the  collection  of  that  interest,  every- 
thing in  which  the  partnership  creditors  might  have  a  pecuniary 
interest  passes  to  the  trustee  by  virtue  of  the  adjudication  of  the 
partner  as  a  bankrupt.  It  would  seem  to  be  impossible  to  con- 
sider the  provisions  of  section  5,  paragraph  'h,'  with  the  general 
intent  of  the  law  to  release  a  bankrupt  from  all  his  indebted- 
ness existing  at  the  time  of  the  commencement  of  the  proceed- 
ings in  bankruptcy,  and  especially  with  the  provisions  of  section 
16,  providing  that  the  release  of  the  bankrupt  by  a  discharge 
shall  not  alter  the  liability  of  a  partner  of  the  bankrupt,  without 
reaching  the  conclusion  that  one  member  of  a  firm  may  be  ad- 
judged a  bankrupt  that  the  partnership  creditors  may  prove 
their  claims  against  his  estate,  and  that  a  discharge  granted  to 
one  member  of  a  firm  releases  him  from  all  partnership  as  well 
as  individual  indebtedness.  And  this  result  seems  to  be  forti- 
fied by  section  5,  paragraph  *g'  providing  that  the  court  may 
permit  the  proof  of  the  claims  of  the  partnership  estate  against 
the  individual  estate,  and  the  individual  estates  so  as  to  prevent 
preferences  and  secure  an  equitable  distribution  of  the  property 
of  the  several  estates."  By  section  17  of  the  Bankruptcy  Act  a 
person  is  not  released  by  a  discharge,  from  debts  created  by  his 
"fraud,  embezzlement,  misappropriation,  or  defalcation  while 
acting  as  an  officer  or  in  any  fiduciary  capacity."  Regarding  the 
words  "fiduciary  capacity,"  it  has  been  declared  that  they  com- 
prehend technical  or  express  trusts  and  that  they  can  not  be 
extended  to  the  relationship  of  principal  and  agent,  broker  and 
principal,  or  partner  and  copartner.®*^ 

§  707.     Misconduct  of  one  partner  as  affecting  innocent 
partner's  right  to  discharge. — Section  14b  of  the  Bankruptcy 

60  In  re  Camelo,   195  Fed.  632 ;   In  28,  1^  Pac.  986 ;  Reeves  v.  McCracken, 

re  Gulick,  186  Fed.  350 ;  In  re  Basch,  11  N.  J.  729,  69  Atl.  247 ;  Clarke  v. 

97  Fed.  761;  Ehrhart  v.  Rork,  114  111.  Milliken,  70  Misc.    (N.  Y.)   492,  127 

App.  509;  Karger  v.  Orth,  116  Minn.  N.  Y.  S.  339;  Shipley  v.  Platts,  17  S. 

124,   133  N.  W.  471.     See  also  Boyd  Dak.  357,   97   N.   W.    1    (aflfd.   26   S. 

V.  Agricultural  Ins.  Co.,  20  Colo.  App.  Dak.  57,  127  N.  W.  470)  ;  Johnson's 


971  BANKRUPTCY  §    707 

Act  enumerates  several  acts  which  may  prevent  the  granting  of 
a  discharge  in  bankruptc}-,  such  as  concealing  books  of  account, 
or  obtaining  money  upon  a  false  statement  in  writing.  It  is 
generally  held  that  the  commission  of  such  an  act  by  one  part- 
ner, is  not  a  ground  for  refusing  a  discharge  to  the  other  partner 
who  had  no  knowledge  of  the  wrongdoing.''^  It  was  said  in  a 
leading  case  f''  "The  bankrupt  Riess  seems  to  have  had  no  share 
in  making  the  later  *short  statement'  relied  upon  by  the  objecting 
creditors;  and  they  do  not  claim  that  he  was  personally  con- 
cerned in  the  alleged  fraud  other  than  as  a  partner  of  Dresser. 
It  is  true  that  on  principles  of  agency,  Riess  is  liable  civiliter  for 
the  fraudulent  acts  of  Dresser  which  were  clearly  within  the 
scope  of  the  partnership  business  and  for  the  firm's  benefit. 
*  *  *  The  discharge  in  bankruptcy  w^ould  not,  therefore,  af- 
fect a  debt  so  created.  The  present  act  specifies,  among  non- 
dischargeable  debts,  'liabilities  for  obtaining  property  by  false 
pretenses  or  false  misrepresentations."'^  But  these  considera- 
tions do  not  affect  the  right  of  an  innocent  partner  to  a  dis- 
charge under  section  14b,  clause  3,  of  the  amended  Bankruptcy 
Act  of  February  5,  1903,  chapter  487,  section  4.  The  right  to  a 
discharge  is  distinct  from  the  effect  of  a  discharge.  ^  *  *  Jt 
was  held  under  the  Act  of  1867,  which  in  section  33  provided 
that  'no  debt  created  by  fraud  or  embezzlement  of  the  bankrupt 

Admr.  v.  Parmenter,  74  Vt.  58,  52  Atl.  means  of  which  property  was  obtained 
73.  And  compare  Field  v.  Howry,  by  the  partnership,  will  in  law  be  im- 
132  Mich.  687,  94  N.  W.  213.  puted  to  the  other  partners  to  the  ex- 
°i  Frank  v.  Michigan  Paper  Co.,  tent  of  holding  them  civilly  liable  for 
179  Fed.  776,  30  L.  R.  A.  (N.  S.)  623;  the  debt,  and  their  discharge  in  bank- 
In  re  Schachter,  170  Fed.  683 ;  Hardie  ruptcy  will  not  discharge  their  lia- 
V.  Swafford  Bros.  Dry  Goods  Co.,  165  bilitj^  as  to  such  debt."  Frank  v. 
Fed.  588,  20  L.  R.  A.  (N.  S.)  785n.  Michigan  Paper  Co.,  179  Fed.  776,  103 
See  also  In  re  Meyers,  105  Fed.  353 ;  C  C.  A.  268. 

In  re  Gilpin,  160  Fed.  171;  In  re  Gar-        «2  in   re  Dresser,   144  Fed.  318,    13 

rison,    149   Fed.    178;    In   re    Schultz,  Am.  Bkr.  R.  616,  637  (affd.  145  Fed. 

109  Fed.  264;  In  re  Hyman,  97  Fed.  1021,  74  C.  C.  A.  680,   146  Fed.  383, 

195;    In    re    Leavitt,    Fed.    Cas.    No.  76  C.  C.  A.  655). 
8169,  1  Hask.  (U.  S.)  194.  In  this  con-        c3  Act    July    1,    1898    (Bankruptcy 

nection  it  has  been  held  that  "a  false  Act),  ch.  541,  §  17a. 
representation    by    one    partner,    by 


§    708  LAW    OF    PARTNERSHIP  ^         972 

shall  be  discharged,'  that  fraud  as  used  in  that  section  meant 
'positive  fraud  in  fact  involving  moral  turpitude  or  intentional 
wrong,  as  does  emiDezzlement,  and  not  implied  fraud,  or  fraud 
in  law,  which  may  exist  without  the  imputations  of  bad  faith 
or  immorality.  Such  a  construction  of  the  statute  is  consonant 
with  equity,  and  consistent  with  the  object  and  intention  of  con- 
gress in  enacting  a  general  law  by  which  the  honest  citizen  may 
be  relieved  from  the  burden  of  hopeless  insolvency.  A  different 
construction  would  be  inconsistent  with  the  liberal  spirit  which 
pen'ades  the  entire  bankruptcy  system."'*  Therefore,  although 
on  principles  of  agency  and  partnership,  a  discharge  may  not 
relieve  Riess  from  'liabilities  for  obtaining  property  by  false  rep- 
resentations* (a  question  not  to  be  decided  here),  it  is  considered 
that,  not  having  himself  participated  in  the  making  of  the  short 
statement  relied  on  by  the  banks,  the  fraud  of  his  partner  can 
not,  under  these  circumstances,  be  imputed  to  him,  and  his  dis- 
charge can  not,  therefore,  be  refused."  An  individual  partner 
may  be  discharged,  although  the  partnership  and  remaining  part- 
ners are  not  discharged.*'^ 

§  708.  Bankruptcy  as  dissolution  of  partnership. — Bank- 
ruptcy has  been  heretofore  classified  as  one  of  the  causes  of  dis- 
solution of  partnership,^*'  but  a  brief  discussion  of  the  question 
may  not  be  amiss  at  this  place.  It  is  a  well  recognized  rule  of 
the  law  of  partnership,  that  a  partnership  is  dissolved  when  it 
becomes  bankrupt,  and  a  valid  assignment  by  a  partnership  of 
all  the  firm  assets,  except  property  exempt  from  execution,  oper- 
ates as  a  dissolution  of  the  partnership.^^  It  is  equally  true  that 
the  bankruptcy  of  one  of  the  members  of  a  partnership  works 
a  dissolution  of  the  firm."^  In  some  jurisdictions,  however,  the 
bankruptcy  of  one  partner  does  not  of  itself  necessarily  dissolve 
the  firm,  but  is  a  ground  of  dissolution  which  the  other  partners 

"I  Neal  V.  Clark,  95  U.  S.  704,  24        67  Wells  v.  EIHs,  68  Cal.  243,  9  Pac. 

L.  ed.  586.  80;  McKelvy's  Appeal,  72  Pa.  409. 

65  In  re  Meyers,  97  Fed.  757,  3  Am.        «»  Wells  v.  Ellis,  68  Cal.  243,  9  Pac. 
Bkr.  R.  260.  80;  Welles  v.  March,  30  N.  Y.  344. 

66  Ante  §  580 


973  BANKRUPTCY  §    708 

may  avail  themselves  of  or  not  at  their  option.*'''  There  is,  more- 
over, a  general  exception  to  the  rule  that  bankruptcy  of  a  part- 
ner dissolves  the  firm.  It  has  been  held  that  where  one  partner 
wishes  to  have  the  firm  dissolved  (possibly  against  the  will  of 
the  other  partners)  and  to  accomplish  this  end  has  his  partner 
adjudicated  a  bankrupt,  no  dissolution  of  the  firm  will  be  occa- 
sioned thereby,'^" 

csWilliston  v.   Camp,   9  Mont.  88,        - « Amsinck  v.  Bean,  22  Wall.    (U. 
22  Pac.  501.  S.)  395,  22  L.  ed.  801. 


CHAPTER  XXIII 


ACTION    FOR   ACCOUNTING   AND   DISSOLUTION 


SECTION 

715.  Action    for   accounting — In   gen- 

eral. 

716.  Form    of    remedy    and    jurisdic- 

tion. 

717.  Defenses. 

718.  Time   to    sue   and    limitation   of 

actions. 

719.  Parties. 

720.  Injunction. 

721.  Appointment  of  receiver. 

722.  Powers  and  duties  of  receiver. 

723.  Procedure  at  trial. 


SECTION 

724.  Burden  of  proof. 

725.  Reference. 

726.  Manner  of  drawing  account. 

727.  Partnership  books  and  accounts. 

728.  Conversion  of  assets  into  cash. 

729.  Charges  and  credits. 

730.  Decision. 

731.  Decree. 

732.  Costs. 

IZZ.  Appeal — Conclusiveness  of  judg- 
ment. 


§  715.  Action  for  accounting — In  general. — A  suit  to  dis- 
solve a  partnership  and  for  an  accounting  is  an  equitable  proceed- 
ing.^ As  a  general  rule,  one  partner  has  no  right  to  sue  another 
at  law  for  a  balance  claimed  to  be  due,  until  an  accounting  has 
been  had.^    The  right  to  bring  an  action  for  an  accounting  upon 

1  Reese  v.  McCurdy,  121  Ala.  425,    judgment  140  N.  Y.  S.  220,  79  Misc. 


25  So.  918;  Smith  v.  Smith,  135  Ga. 
582,  69  S.  E.  1110;  Huger  v.  Cunning- 
ham, 126  Ga.  684,  56  S.  E.  64 ;  May- 
nard  v.  Richards,  166  111.  466,  46  N. 
E.  1138,  57  Am.  St.  145  (afifg.  61  111. 
App.  336)  ;  Yergler  v.  Kaufman,  176 
III.  App.  563;  Kisling  v.  Barrett,  34 
Ind.  App.  304,  71  N.  E.  507;  Boi- 
mare  v.  St.  Geme,  113  La.  830,  Zl 
So.  770;  Bruns  v.  Heise,  101  Md. 
163,  60  Atl.  604;  Lovejoy  v.  Bailey, 
214  Alass.  134,  101  N.  E.  63 ;  Robinson 
V.  McGinty,  84  App.  Div.  639,  82  N. 
Y.  S.  736;  Hutchinson  v.  Sperry,  158 
App.  Div.  704,   143  N.  Y.  S.  876   (revg. 


523)  ;  Daniel  v.  Gillespie,  65  W.  Va. 
Z(£,  64  S.  E.  254;  Gates  v.  Paul, 
117  Wis.  170,  94  N.  W.  55;  Zim- 
merman V.  Chambers,  79  Wis.  20, 
47  N.  W.  947;  Eng.  Partn.  Act 
(1890),  §  39;  Airey  v.  Borham,  29 
Beav.  620,  4  L.  T.  Rep.  (N.  S.)  391 ; 
Tupper  V.  Annand,  16  Can.  Sup.  Ct. 
718. 

2  Newman  v.  Tichenor,  88  111.  App. 
1 ;  Bogardus  v.  Reed,  160  App.  Div. 
294,  145  N.  Y.  S.  597 ;  Head  v.  King, 
ZZ  Misc.  89,  67  N.  Y.  S.  141 ;  Barber 
v.  Morgan  (Tex.  Civ.  App.),  Id  S. 
W.  319;  Brierly  v.  Cripps,  7  C.  &  P. 


974 


975 


ACCOUNTING    AXD    DISSOLUTION    ACTIONS 


§  715 


dissolution  belongs  to  any  partner,  or  his  personal  representa- 
tive,^ though  it  has  been  held  it  may  be  lost  by  culpable  negli- 
gence,* and  as  a  general  rule  an  accounting  can  not  be  had  in 
other  litigation  between  partners, °  nor  without  a  dissolution.*' 
Fraudulent  misconduct  of  a  partner  or  breach  of  a  partnership 
agreement  or  duty  arising  from  the  relation,  are  grounds  for  a 
dissolution  and  accounting,^  as  where  one  partner  takes  a  re- 
newal of  a  lease  in  his  own  name;^  or  where  some  of  the  part- 
ners  organized   a  corporation   and   wrongfully  took   over  the 


709,  32  E.  C.  L.  833;  Richardson  v. 
Bank  of  England,  2  Jur.  911,  8  L. 
J.  Ch,  1.  See  Martin  v.  Seabaugh, 
128  La.  442,  54  So.  935. 

3  Pearce  v.  Sutherland,  164  Fed. 
609,  90  C.  C  A.  519;  Green  v.  Hart, 
87  S.  W.  315,  27  Ky.  L.  970;  Groth 
V.  Payment,  79  Mich.  290,  44  N.  W. 
611;  Sterling  v.  Chapin,  102  App. 
Div.  589,  92  N.  Y.  S.  904;  Betje- 
mann  v.  Betjemann  [1895],  2  Ch. 
474,  64  L.  J.  Ch.  641;  Doupe  v. 
Stewart,  13  Grant  Ch.  (U.  C.)  637; 
Eng.   Partnership  Act    (1890),   §   39. 

4Garnett  v.  Wills,  69  S.  W.  695, 
24  Ky.  L.  617;  Lamb  v.  Rowan,  83 
Miss.  45,  35  So.  427,  690;  Eyre  v. 
Lesher,  14  Montg.  Co.  Rep.  (Pa.) 
189;  Heffernan  v.  Sheridan,  11  Que- 
bec K.  B.  3. 

^  Beardslee  v.  Citizens'  Commer- 
cial &c.  Bank,  112  Mich.  ZTl ,  70 
N.  W.  1027;  Scott  v.  Buffum,  52  N. 
H.  345 ;  Santleben  v.  Froboese,  17 
Tex.  Civ.  App.  626,  43  S.  W.  571; 
Rommerdahl  v.  Jackson,  102  Wis. 
444,  78  N.  W.  742.  See  Hatch  v. 
Fritz,  48  Colo.  530,  111  Pac.  74; 
Yergler  v.  Kaufmann,  176  111.  App. 
563. 

6  Lord  V.  Hull,  178  N.  Y.  9,  70 
N.  E.  69,  102  Am.  St.  484.    See,  how- 


ever, Hudson  V.  Barrett,  1  Pars.  Eq. 
Cas.   (Pa.)  414. 

^Oteri  V.  Scalzo,  145  U.  S.  578, 
Ze  L.  ed.  824,  12  Sup.  Ct.  895 ;  Pearce 
V.  Sutherland,  164  Fed.  609,  90  C. 
C.  A.  519;  Cottle  v.  Leitch,  35  Cal. 
434;  Hanna  v.  McLaughlin,  158  Ind. 
292,  62>  N.  E.  475 ;  Smith  v.  Everett, 
126  Mass.  304 ;  Wachter  v.  Heman,  82 
Mo.  App.  243;  Wittingham  v.  Dar- 
rin,  45  Misc.  478,  92  N.  Y.  S.  752; 
Stibich  V.  Goenner,  8  Pa.  Dist.  227; 
Holder  v.  Shelby  (Tex.  Civ.  App.), 
118  S.  W.  590;  Newton  v.  Dor  an, 
1  Grant.  Ch.  (U.  C.)  590;  Whim- 
bey  v.  Clark,  22  Quebec  Super  Ct. 
453.  Where  a  husband  pledged  his 
wife's  jewelry  to  secure  a  loan,  and 
agreed  with  pledgee's  assignee  that 
profits  of  a  business  were  to  be  di- 
vided between  him  and  the  assignee, 
his  share  to  be  applied  on  the  loan, 
it  was  held  that  the  wife  and  the 
husband's  assignee  could  maintain  a 
bill  for  an  accounting;  the  right,  of 
action  not  being  one  of  simple  con- 
tract, which  should  be  brouglit  in  a 
court  of  law,  but  one  which  involved 
a  quasi  partnership  relation.  Camp- 
bell V.  Burnett,  120  Md.  214,  87  Atl. 
894. 

s  Lurie  v.  Pinanski,  215  Mass.  229, 
102  N.  E.  629. 


715 


LAW    OF    PARTNERSHIP 


976 


partnership  property ;°  or  where  a  partner  refuses  to  account  for 
firm  property;^''  or  defrauds  another  by  false  entries ;^^  or  the 
partnership  has  accomplished  its  purpose  and  one  partner  has 
the  entire  assets  in  his  possession  and  is  about  to  dispose  of 
them.^^  A  fiscal  agent  of  a  partnership  which  had  separated  into 
two  groups,  was  held  bound  to  account  at  the  suit  of  either 
group/^  Dissensions  between  partners  sufficient  to  prevent  suc- 
cessful and  harmonious  conduct  of  the  business  are  a  ground 
for  dissolution.^*  After  dissolution  any  partner  has  a  right  to 
an  accounting/^  and  such  a  suit  may  be  brought  when  a  partner 
fails  to  account/*^  wrongfully  withholds  firm  property/^  or  has 


^  Freeman  v.  Lowell  Specialty  Co., 
174  Mich.  59,  140  N.  W.  572. 

lOHanna  v.  McLaughlin,  158  Ind. 
292,  63  N.  E.  475. 

11  Cottle  V.  Leitch,  35  Cal.  434; 
Frankfort  Construction  Co.  v.  Men- 
eely,  —  Ind.  App.  —  (decided  Apr. 
20,   1916). 

1-  Thomas  v.  Hollingsworth,  181 
Ind.  411,   103  N.  E.  840. 

13  Forcheimer  v.  Foster  (Ala.),  68 
So.  879. 

i*Reid  V.  Freed,  100  Miss.  48,  56 
So.  278;  News-Register  Co.  v.  Rock- 
ingham Pub.  Co.  (Va.),  86  S.  E.  874. 

15  Brew  V.  Cochran,  141  Fed.  459 ; 
Spear  v.  Newell,  2  Paine  (N.  S.) 
267,  Fed.  Cas.  No.  13224;  Crouse  v. 
McCandless,  121  111.  App.  237;  Brad- 
ley V.  Webb,  53  Maine  462;  Stevens 
V.  Yeatman,  19  Md.  480;  Dye  v. 
Bowling,  82  Mo.  App.  587;  Schul- 
singer  v.  Blau,  84  App.  Div.  390,  82 
N.  Y.  S.  686;  Burkardt  v.  Walsh, 
49  App.  Div.  634,  64  N.  Y.  S.  779; 
Goodfellow  V.  Kelsey,  21  S.  Dak.  247, 
111  N.  W.  555;  Knapp  v.  Edwards,  57 
Wis.  191,  15  N.  W.  140;  Cruikshank 
v.  McVicar,  8  Beav.  106,  14  L.  J.  Ch. 
41,  50  Eng.  Reprint  42;  Habershon 
v.  Blurton,  1  DeG.  &  Sm.  121,  63 
Eng.    Reprint    998.      See    Adams    v. 


Carmony,  44  Ind.  App.  291,  87  N. 
E.  708,  89  N.  E.  327 ;  Webb  v.  But- 
ler (Ala.),  68  So.  369;  Moore  v. 
Rawson,  199  Mass.  493,  85  N.  E.  586 ; 
Hoffman  v.  Hauptner,  135  App.  Div. 
148,  119  N.  Y.  S.  1022;  Townsend 
v.  Meyers,  123  N.  Y.  S.  1075. 

16  Miller  v.  Jones,  39  111.  54;  Fred- 
erick v.  Cooper,  3  Iowa  171 ;  Ten- 
ney  v.  Simpson,  Z1  Kans.  579,  15  Pac. 
512;  Thompson  v.  Walker,  40  La. 
Ann.  676,  4  So.  881 ;  Tannenbaum 
v.  Armeny,  81  Hun  581,  31  N.  Y. 
S.  55,  63  N.  Y.  St.  348 ;  Kent  v.  Nor- 
cross,  9  Pa.  Dist.  754;  Hue  v.  Rich- 
ards, 2  Beav.  305,  17  Eng.  Ch.  305, 
.48  Eng.  Reprint  1198.  See  Fried  v. 
Burk,  125  Md.  500,  94  Atl.  86;  Orr 
V.  Cooledge,  117  Ga.  195,  43  S.  E. 
527;  Child  v.  O'Rourke,  122  App. 
Div.  325,  106  N.  Y.  S.  884. 

"Costley  V.  Towles,  46  Ala.  660; 
Tarabino  v.  Nicoli,  5  Colo.  App.  545, 
39  Pac.  362 ;  Hanna  v.  McLaughlin, 
158  Ind.  292,  63  N.  E.  475 ;  Simpson 
V.  Tennej',  41  Kans.  561,  21  Pac. 
634;  Reed  v.  Snell,  Z6  Nebr.  815,  55 
N.  W.  249;  Morrill  v.  Weeks,  70  N. 
H.  178,  46  Atl.  32 ;  Dignan  v.  Dignan 
(N.  J.  Eq.),  14  Atl.  887;  Holladay  v. 
Elliott,  3  Ore.  340;  McCartney  v. 
Boyd    (Wis.),    152   N.   W.   820;   Le- 


977  ACCOUNTING   AND   DISSOLUTION    ACTIONS  §    716 

wrongfully  excluded  the  others  from  the  business/^  If  no 
private  accounting  has  taken  place,  dissolution  always  gives 
any  partner  a  right  to  a  judicial  accounting.^'^  Demand  for  an 
accounting  is  not  necessary  before  suit.^'*  A  mother,  in  partner- 
ship with  her  son,  who  durin.g  a  certain  period  received  only 
five  thousand  dollars  from  the  business,  while  he  received  twenty- 
three  thousand  dollars,  and  to  whom,  on  purchase  of  her  inter- 
est by  him,  no  definite  account  of  the  business  was  furnished, 
was  entitled  to  an  accounting  of  the  partnership  affairs."^  A 
creditor  of  a  partner  has  no  right  to  an  accounting,  unless  he  has 
purchased  his  interest,  or  secured  a  lien  on  it.-"  If  there  has 
been  fraud  in  a  private  settlement,  it  is  not  necessary  to  rescind 
the  contract  before  the  defrauded  partner  brings  an  action  for 
judicial  accounting,^^  The  partnership  articles  may  mention 
grounds  entitling  one  partner  to  purchase  all  the  firm  assets,  as 
on  a  final  disagreement."* 

§  716.  Form  of  remedy  and  jurisdiction. — The  ordinary 
and  usual  method  of  bringing  about  a  judicial  accounting  is  by 
the  institution  of  a  suit  in  equity,  since  the  powers  of  a  court 
of  law  are  usually  held  inadequate  to  an  accounting.^^     Equity 

f  ebvre   v.   Aubry,   26   Can,    Sup.    Ct.  63  N.  E.  475 ;  McClung  v.  Capehart, 

602;   Aldecoa  v.   Warner,    16  Philip-  24  Minn.  17. 

pine  423.  21  Styles  v.   Shaver,   151   App.  Div. 

18  McCabe    v.    Sinclair,    66    N.    J.  903,  136  N.  Y.  S.  347. 

Eq.  24,  58  Atl.  412 ;  Wilcox  v.  Pratt,  22  Henderson  v.  Farley  Nat.  Bank, 

125  N.  Y.  688,  25  N.  E.  1091,  3  Silv.  123  Ala.  547,  26  So.  226,  82  Am.  St. 

Ct.    App.    199    (afifg.   52   Hun   340,   5  140;  Miller  v.  Brigham,  50  Cal.  615; 

N.    Y.    S.   361,   23    N.   Y.    St.   686)  ;  Lincoln  Sav.  Bank  v.  Gray,  12  Lea. 

Green  v.  Tuchner,  87  App.  Div.  314,  (Tenn.)  459. 

84    N.    Y.    S.    345.      See    Grafton    v.  23  Richards  v.  Eraser,  122  Cal.  456, 

Paine,  7  App.   (D.  C.)  255.  55    Pac.  246;   Wallace  v.    Sisson,   98 

i9Hanna  v.   McLaughlin,    158   Ind.  Cal.  xviii,  33  Pac.  496   (1893);   Cot- 

292,    63    N.    E.    475;    Woodman    v.  tie  v.  Leitch,  35   Cal.  434;   Oliver  v. 

Toye,  204  Mass.  265,  90  N.  E.  570;  House,    125   Ga.   637,   54   S.   E.   732; 

McClung  v.   Capehart,  24   Minn.   17;  Zimmerman    v.    Chambers,    79    Wis. 

Deveney  v.   Mahoney,   23   N.   J,   Eq.  20,  47  N.  W.  947.     Compare  Staiger 

247;  Stibich  v.  Goenner,  8  Pa.  Dist.  v.  Klitz,   129  App.   Div.  703,   114  N. 

227.  Y.  S.  486. 

20  Cottle    v.    Leitch,    35    Cal.    434;  24  phinipg  y,   Crownfield,    124   Md. 

Hanna  v.  McLaughlin,   158  Ind.  292,  App.  443,  92  Atl.  1030. 

25  0teri  v.   Scalzo,   145   U.   S.  578, 


§  716 


LAW    OF    PARTNERSHIP 


978 


will  force  an  accounting  though  the  accounts  are  not  compli- 
cated.^°  In  some  jurisdictions  the  common-law  action  of  ac- 
count has  been  used,  where  a  partnership  consisted  of  two  mem- 
bers,"^ the  jurisdiction  being  in  equity  where  there  are  more 
than  two  members,  for  the  reason  that  the  rights  and  liabilities 
of  the  partners  are  several,  not  joint,  and  two  or  more  part- 
ners could  not  be  joined  as  parties,-^  but  as  this  is  merely  a  dis- 
tinction as  to  a  remedy  and  not  as  to  a  right,  some  statutes  per- 
mit the  common-law  action  of  account  where  there  are  more 


36  L.  ed.  824,  12  Sup.  Ct.  895 ;  Ivin- 
son  V.  Hutton,  98  U.  S.  79,  25  L.  ed. 
66;  Monroe  v.  Hamilton,  47  Ala. 
217;  Barnstead  v.  Empire  Min.  Co.,  5 
Cal.  299;  Gillett  v.  Hall,  13  Conn. 
426;  Printup  v.  Fort,  40  Ga.  276; 
Bracken  v.  Kennedy,  4  111.  558;  Al- 
drich  V.  Mathias,  167  111.  App.  589; 
Horn  V.  Lupton,  182  Ind.  355,  105  N. 
E.  237,  106  N.  E.  708 ;  Lesh  v.  Bailey, 
49  Ind.  App.  254,  95  N.  E.  341 ;  Kis- 
Hng  V.  Barrett,  34  Ind.  App.  304,  71 
N.  E.  507;  Neal  v.  Keel,  4  T.  B.  Mon. 
(Ky.)  162;  Atkinson  v.  Rogers,  14 
La.  Ann.  633 ;  Corner  v.  Oilman,  53 
Md.  364;  Perrin  v.  Lepper,  72  Mich. 
454,  40  N.  W.  859 ;  Converse  v.  Hobbs, 
64  N.  H.  42,  5  Atl.  832;  Lilliendalil 
V.  Stegmair,  45  N.  J.  Eq.  648,  18 
Atl.  216;  Kirkwood  v.  Smith,  47 
Misc.  301,  95  N.  Y.  S.  926  (affd.  Ill 
App.  Div.  923,  96  N.  Y.  S.  1132)  ; 
Watts  V.  Adler,  47  Hun  634,  13  N. 
Y.  St.  553;  Rickey  v.  Bowne,  18 
Johns  (N.  Y.)  131;  Ainey's  Appeal,  2 
Penny.  (Pa.)  192;  Stevens  v.  Co- 
burn,  71  Vt.  261,  44  Atl.  354;  Spear 
V.  Newell,  13  Vt.  288;  Jones  v.  Mur- 
phy, 93  Va.  214,  24  S.  E.  825 ;  Foster 
V.  Donald,  1  Jac.  &  W.  252,  21  Rev. 
Rep.  157,  37  Eng.  Reprint  371 ;  Good 
V.  Blewitt,  19  Ves.  Jr.  336,  34  Eng. 
Reprint  542;  Toulmin  v.   Copland,  3 


Y.  &  C.  Exch.  625.  See  Northen 
v.  Tatum,  164  Ala.  368,  51  So.  17; 
Aldrich  v.  Mathias,  167  111.  App. 
589;  Heck  v.  Collins,  231  Pa.  357, 
80  Atl.  53;  Schmidt  v.  Aiertes,  145 
Wis.  468,  130  N.  W.  474. 

26  Webb  V.  Butler  (Ala.),  68  So. 
369. 

27  Porter  v.  Bichard,  1  Ariz.  87, 
25  Pac.  530;  Beach  v.  Hotchkiss,  2 
Conn.  425 ;  Clarke  v.  Mills,  36  Kans. 
393,  13  Pac.  569;  Wilhelm  v.  Caylor, 
32  Md.  151;  Fowle  v.  Kirkland,  18 
Pick.  (Mass.)  299;  Leslej'  v.  Rosson, 
39  Miss.  368,  77  Am.  Dec.  679;  Dor- 
wart  V.  Ball,  71  Nebr.  173,  98  N.  W. 
652 ;  Appleby  v.  Brown,  24  N.  Y.  143, 
23  How.  Pr.  207 ;  McMurray  v.  Raw- 
son,  3  Hill  (N.  Y.)  59;  Jacobs  v. 
Fountain,  19  Wend.  (N.  Y.)  121; 
Kutz  V.  Dreibelbis,  126  Pa.  St.  335, 
17  Atl.  609;  Stevens  v.  Coburn,  71 
Vt.  261,  44  Atl.  354;  Foster  v.  Ives, 
53  Vt.  458;  Newell  v.  Humphrey,  37 
Vt.  265;  Wiswell  v.  Wilkins,  4  Vt. 
137. 

28  Beach  v.  Hotchkiss,  2  Conn.  425  ; 
Horn  v.  Lupton,  182  Ind.  355,  105 
N.  E.  237,  106  N.  E.  708;  Farrar 
V.  Pearson,  59  Maine  561,  8  Am. 
Rep.  439;  Appleby  v.  Brown,  24  N. 
Y.  143,  23  How.  Pr.  207;  Stevens  v. 
Coburn,  71  Vt.  261,  44  Atl.  354. 


979 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


716 


than  two  partners,"^  and  the  action  of  assumpsit  will  occasion- 
ally lie  between  partners  upon  single  items  connected  with  the 
partnership.^"  Surviving  partners  have  been  compelled  to  ac- 
count on  the  theory  that  they  were  quasi-trustees  to  the  deceased 
partner's  personal  representative,  without  reference  to  the  ordi- 
nary doctrine  of  accounting."^  Where  the  partnership  has  been 
fully  dissolved  by  written  contract  and  the  rights  of  each  party 
definitely  established,  in  case  of  a  breach  of  such  contract  equity 
will  not  order  an  accounting,  as  the  remedy  is  at  law.^^  The 
general  rule  is  that  equity  has  exclusive  jurisdiction  of  suits  for 
dissolution  and  settlement  of  partnerships,^^  even  under  most 
codes  and  statutes,^*  though  a  few  states  confer  by  statute  juris- 


ts Stevens  V.  Coburn,  71  Vt.  261, 
44  Atl.  354;  Park  v.  McGowen,  64 
Vt.  173,  23  Atl.  855;  Foster  v.  Ives, 
53  Vt.  458;  Hydeville  Co.  v.  Barnes, 
Z1  Vt.  588;  Duryea  v.  Whitcomb, 
31  Vt.  395 ;  Green  v.  Chapman,  27 
Vt.  236. 

soRotramel  v.  Ford,  169  III.  App. 
7;  Pfeiffer  v.  Bauer,  122  III.  App. 
625 ;  Pettingill  v.  Jones,  28  Kans. 
749 ;  Pray  v.  Mitchell,  60  Maine  430 ; 
Fanning  v.  Chadwick,  3  Pick. 
(Mass.)  420,  15  Am.  Dec.  233;  Brew- 
er v.  Swartz,  83  Mo.  App.  451;  Gal- 
breath  v.  Moore,  2  Watts  (Pa.)  86; 
Way  v.  Milestone,  2  H.  &  H.  32,  3 
Jur.  727;  Rackstraw  v.  Imber,  Holt 
N.  P.  368,  3  E.  C.  L.  149;  Foster  v. 
Allanson,  2  T.  R.  479.  See  especially 
Holmes  v.  Hunt,  122  Mass.  505,  23 
Am.  Rep.  381. 

31  Fried  v.  Burk,  125  Md.  500,  94 
Atl.  86. 

32Rotramel  v.  Ford,  169  III. 
App.  7. 

33  Esterly  v.  Rua,  122  Fed.  609,  58 
C.  C.  A.  548 ;  Dugger  v.  Tutwiler, 
129  Ala.  258,  30  So.  91;  Luke  v. 
Rhodes  (Ark.),  176  S.  W.  Ill; 
Choate    v.    O'Neal,    57    Ark.    299,    21 


S.  W.  470;  Andrade  v.  San  Fran- 
cisco Superior  Court,  75  Cal.  459, 
17  Pac.  531 ;  Kayser  v.  Maugham,  8 
Colo.  232,  6  Pac.  803;  Niles  v.  Will- 
iams, 24  Conn.  279 ;  Allen  v.  Haw- 
ley,  6  Fla.  142,  63  Am.  Dec.  198; 
Epping  v.  Aiken,  71  Ga.  682 ;  Aram 
V.  Edwards,  9  Idaho  ZZ7>,  74  Pac. 
961;  Strong  v.  Clawson,  10  111.  346; 
Frederick  v.  Cooper,  3  Iowa  171 ; 
Carter  v.  Christie,  57  Kans.  492,  46 
Pac.  964;  Gordon  v.  Dick,  15  La. 
Z2>;  White  v.  White,  169  Mass.  52, 
47  N.  E.  499 ;  Torbert  v.  Jeffrey,  161 
Mo.  645,  61  S.  W.  823;  Lenahan  v. 
Casey,  46  Mont.  367,  128  Pac.  601; 
Kennett  v.  Hopkins,  175  N.  Y.  496, 
174  N.  Y.  545,  67  N.  E.  1084  (affg. 
58  App.  Div.  407,  69  N.  Y.  S.  18)  ; 
Simpson  v.  Simpson,  44  App.  Div. 
492,  60  N.  Y.  S.  879;  Gleason  v. 
Van  Aernam,  9  Ore.  343 ;  Wiley's 
Appeal,  84  Pa.  St.  270;  Taylor  v. 
Holman,  .1  Mill  Const.  (S.  Car.) 
172 ;  Daniel  v.  Gillespie,  65  W.  Va. 
366,  64  S.  E.  254;  Maunder  v.  Lloyd, 
2  Johns.  &  H.  718.  1  New  Rep.  123; 
Eng.  Jud.  Act  (1873),  §  34. 

34  Choate  v.   O'Neal,   57  Ark.   299, 
21  S.  W.  470;  King  v.  White,  63  Vt. 


§  717 


LAW    OF    TARTNERSHIP 


980 


diction  of  partnership  dissolutions  on  probate  courts.^^  The 
venue  of  actions  for  accounting  is  governed  by  the  rules  relative 
to  the  venue  of  other  actions  between  partners;  that  is,  the  action 
should  generally  be  brought  in  the  county  where  the  parties  re- 
side, withoiit  reference  to  the  location  of  the  assets.^*^ 

§  717.  Defenses. — The  right  to  an  accounting  may  be 
barred  by  a  full  and  complete  private  settlement  of  all  partner- 
ship matters,^^  especially  if  the  plaintiff  partner  afterward  rati- 
fied such  settlement  by  his  acts.^®  Such  right  may  be  lost  by  mis- 
conduct of  the  plaintiff  partner.^^  Settlement  by  arbitration  is 
also  a  good  defense  in  a  suit  for  a  partnership  accounting/*' 
but  neither  a  partial  settlement,^^  nor  a  failure  of  the  plaintiff 
partner  to  perform  his  partnership  obligations  under  the  agree- 
ment,'^" nor  the  fact  that  there  is  no  balance  due  the  plaintiff 


158,  21  Atl.  535,  25  Am.  St.  752; 
Foster  v.  Ives,  53  Vt.  458 ;  Kendrick 
V.  Tarbell,  27  Vt.  512. 

s^Harrah  v.  State,  38  Ind.  App. 
495,  76  N.  E.  443,  11  N.  E.  747;  Cald- 
well V.  Hawkins,  12i  Mo.  450;  Ens- 
worth  V.  Curd,  68  Mo.  282;  In  re 
Unruh's  Estate,  13  Phila.    (Pa.)   ZZl. 

3«  Clark  V.  Brown,  83  Cal.  181,  23 
Pac.  289  (applying  Code  Civ.  Proc, 
§  392)  ;  Cox  v.  Manning,  13  Ga.  App. 
518,  79  S.  E.  484;  Quinn  v.  McMahan, 
40  111.  App.  593;  Lobdell  v.  Bush- 
nell,  24  La.  Ann.  295;  Brinegar  v. 
Griffin,  2  La.  Ann.  154;  Godfrey  v. 
White,  43  Mich.  171,  5  N.  W.  243; 
Williams  v.  Williams,  83  Misc.  560, 
145  N.  Y.  S.  564;  Chappell  v.  Chap- 
pell,  125  App.  Div.  127,  109  N.  Y. 
S.  648;  Falls  of  Nense  Mfg.  Co.  v. 
Brower,  105  N.  Car.  440,  11  S.  E. 
313 ;  Morris  v.  Nunn,  79  Tex.  125,  15 
S.  W.  220. 

37  Burks  v.  Parker  (Ala.).  68  So. 
271 ;  Cayton  v.  Walker,  10  Cal.  450 ; 
Durham  v.  Edwards,  50  Fla.  495,  38 
So.  926;  Iredell's  Appeal,  10  Pa.  Cas. 


127,  13  Atl.  752;  Brenner  v.  Bren- 
ner, 9  Pa.  Dist.  511 ;  Chapman  v. 
Chapman,  13  R.  I.  680;  Burke  v. 
Parke,  5  W.  Va.  122.  See  Aldecoa  v. 
Warner,   16  Philippine  423. 

38  Spratt  V.  Dwyer  (Iowa),  151  N. 
W.  474. 

39  Gassie's  Succession,  42  La.  Ann. 
239,  7  So.  454 ;  Kinney  v.  Robinson, 
66  Mich.  113,  2>Z  N.  W.  172;  Hart 
V.  Deitrich,  69  Nebr.  685,  96  N.  W. 
144 ;  Quinn  v.  Quinn,  8  Del.  Co. 
(Pa.)  257;  Bradly  v.  Jennings,  201 
Pa.  473,  51  Atl.  343;  Ryman  v.  Ry- 
man,  100  Va.  20,  40  S.  E.  96. 

40  Yates  v.  Petty,  1  Harr.  &  J. 
(Md.)  58;  Richardson  v.  Huggins, 
23  N.  H.  106;  Tittenson  v.  Peat,  3 
Atk.  530. 

41  Harris  v.  Harris,  132  Ala.  208,  31 
So.  355 ;  Parsons  v.  Jennings,  71 
Conn.  494,  42  Atl.  630;  Raymond 
V.  Vaughan,  128  111.  256,  21  N.  E. 
566,  4  L.  R.  A.  440,  15  Am.  St.  112 
(affg.  17  111.  App.  144)  ;  Aldecoa  v. 
Warner,  16  Philippine  423. 

42  Boyd  V.  Mynatt,  4  Afe.  79 ;  Pal- 


981  ACCOUNTING   AND   DISSOLUTION    ACTIONS  §    718 

from  the  defendant,*^  are  defenses  to  a  suit  for  an  accounting. 
An  accounting  will  not  be  granted  if  the  party  asking  there- 
for has  no  real  cause  of  complaint,  and  no  good  purpose  would 
be  accomplished  by  it/*  or  where  the  court  has  no  satis- 
factory means  of  ascertaining  the  rights  of  the  partners.'**'' 
The  alleged  active  partner  who  asks  an  accounting,  but  who 
can  show  no  records  of  transactions,  has  been  held  not  entitled 
to  such  remedy.*^  The  fact  that  one  partner  invested  money 
in  the  partnership  to  defeat  his  creditors  does  not  prevent  a  par- 
tition and  accounting  from  the  other  partner.*"  If  a  partnership 
contract  was  not  entered  into  for  a  fraudulent,  wrongful,  or 
unlawful  purpose,  it  has  been  held  that  fraud  practiced  in  obtain- 
ing quitclaim  deeds  from  heirs  of  an  estate  is  not  a  defense  to 
an  action  for  an  accounting  between  the  partners.*^  And  it  has 
been  held  that  liability  to  an  account  for  profits  in  the  sale'  of 
property,  can  not  be  excused  because  made  by  breach  of  the 
defendant  partner's  fiduciary  relation  to  the  purchaser,*^  nor 
where  one  partner  was  intending  to  defraud  the  government.*^ 

§  718.  Time  fo  sue  and  limitation  of  actions. — The  gen- 
eral rule  is  that  an  action  for  accounting  may  be  brought  imme- 
diately after  dissolution  of  the  partnership.^"  The  statute  of 
limitations  applies  to  equitable  actions  between  partners  for  an 

mer  v.  Tyler,   15   Minn.   106;   Clarke  46  Preidenbloom  v.  McAfee  (Tex.), 

V.    Hart,    6   H.    L.    Cas.   633 ;    In    re  167  S.  W.  28. 

Shadwell     Water     Works     Co.,      18  47  Polsom    v.    Fernstrom,    43    Utah 

Wkly.  Rep.  160.  432,    134   Pac.    1021. 

43  Sharp  V.  Hibbins,  42   N.  J.   Eq.  48  Spencer  v.  Barnes,  25  Cal.  App. 
543,   9   Atl.    113;    Smith   v.    Fitchett,  139,  142  Pac.  1088. 

56    Hun    473,    10    N.    Y.    S.   459,    31  49  Blalock   v.    Copeland,   65    S.   W. 

N.  Y.  St.  606;   Martin  v.  Smith,  53  349,  23  Ky.  L.  1455. 

N.  Y.  Super.  Ct.  277.  so  Walsh  v.   McKeen,  75   Cal.  519, 

44  Warburton  v.  Davis,  123  Md.  225,  17    Pac.   673 ;    Bonney  v.    Stoughton, 
91  Atl.  163.  122   111.  536,   13  N.  E.  833;   Thomas 

44aHinkson    v.    Ervin,    40   W.    Va.  v.    HolHngsworth,    181    Ind.   411,    103 

111,  20  S.  E.  849.     Compare  Reis  v.  N.   E.   840;    Adams   v.    Carmony,   44 

Reis,  99  Minn.  446,  109  N.  W.  997.  Ind.  App.  291,  87  N.  E.  708;  Foster 

45  Ryman    v.    Ryman,    100    Va.    20,  v.  Rison,  17  Grat.    (Va.)   321. 
40  S.  E.  96. 


•18 


LAW    OF    PARTNERSHIP 


982 


accounting,^^  and  generally  speaking,  it  begins  to  run  at  the 
date  of  the  maturity  of  the,  cause  of  action  sued  on/^  and  does 
not  run  before  dissolution  upon  an  action  brought  after  disso- 
lution.^^    But  as  to  the  exact  time  after  dissolution  when  the 


SI  Campbell  v.  Clark,  101  Fed.  972, 
42  C.  C.  A.  123 ;  Bradford  v.  Spyker, 
32  Ala.  134;  Adams  v.  Taylor,  14 
Ark.  62 ;  Flynn  v.  Scale,  2  Cal.  App. 
665,  84  Pac.  263;  Reynolds  v.  Rey- 
nolds, 186  111.  App.  397;  McKaig  v. 
Hebb,  42  Md.  227;  Wilhelm  v.  Cay- 
lor,  32  Md.  151;  Currier  v.  Studley, 
159  Mass.  17,  33  N.  E.  709;  Farnam 
V.  Brooks,  9  Pick.  (Mass.)  212;  Bur- 
ditt  V.  Grew,  8  Pick.  (Alass.)  108; 
Dowse  V.  Gaynor,  155  Mich.  38,  118 
N.  W.  615;  Jenny  v.  Perkins,  17 
Mich.  28;  Prewett  v.  Buckingham, 
28  Miss.  92;  Coudrey  v.  Gilliam,  60 
Mo.  86;  Cowart  v.  Perrine,  18  N.  J. 
Eq.  454;  Atwater  v.  Fowler,  1  Edw. 
Ch.  (N.  Y.)  417;  Gray  v.  Kerr,  46 
Ohio  St.  652,  23  N.  E.  136;  Boyd  v. 
Munro,  32  S.  Car.  249,  10  S.  E.  963 ; 
Montgomery  v.  Montgomery,  Rich. 
Eq.  Cas.  (S.  Car.)  64;  Knox  v.  Gye, 
L.  R.  5  H.  L.  656,  42  L.  J.  Ch.  234; 
Bridges  v.  Mitchell,  Gilb.  224,  25 
Eng.  Reprint  156;  Kline  v.  Kline,  3 
Ch.  Chamb.  (U.  C.)  161;  Carroll  v. 
Eccles,  17  Grant  Ch.    (U.  C.)    529. 

^-  Cary  v.  Simmons,  87  Ala.  524,  6 
So.  416;  Flynn  v.  Scale,  2  Cal.  App. 
665,  84  Pac.  263;  Lendholm  v. 
Bailey,  16  Colo.  App.  190,  64  Pac. 
586;  Hellenbrand  v.  Bates,  56  S.  W. 
418,  21  Ky..  L.  1759;  Parker's  Suc- 
cession, 17  La.  Ann.  28;  King  v. 
Wartelle,  14  La.  Ann.  740;  McCkmg 
V.  Capehart,  24  Minn.  17;  Fellowes 
V.  Johnson,  91  App.  Div.  611,  86  N. 
Y.  S.  436;  Didier  v.  Davison,  2 
Barb.  Ch.  (N.  Y.)  477;  Gray  v.  Kerr, 
46  Ohio  St.  652,  23  N.  E.  136;  Jones 
V.   Jones,    10   Ohio    Cir.   Dec.   71  ;    18 


Ohio  Cir.  Ct.  260;  Brew  v.  Hast- 
ings, 206  Pa.  155,  55  Atl.  922;  Gar- 
retson  v.  Brown,  185  Pa.  St.  447,  40 
Atl.  293;  McPherson  v.  Swift,  22  S. 
Dak.  165,  116  N.  W.  76,  133  Am.  St. 
907;  Peel  v.  Giesen,  21  Tex.  Civ.  App. 
334,  51  S.  W.  44 ;  Knox  v.  Gye,  L.  R. 
5  H.  L.  656;  Noyes  v.  Crawley,  10 
Ch.  D.  31,  48  L.  J.  Ch.  112;  Watson 
V.  Woodman,  L.  R.  20  Eq.  721,  45 
L.  J.  Ch  57;  Whitley  v.  Lowe,  2  De 
G.  &  J.  704,  4  Jur.  (N.  S.)  815; 
Tatam  v.  Williams,  3  Hare  347,  25 
Eng.  Ch.  347;  Taylor  v.  Taylor,  28 
L.  T.  Rep.  (N.  S.)  188;  Eng.  Partn. 
Act   (1890),  §  43. 

53  Home  V.  Ingraham,  125  111.  198, 
16  N.  E.  868;  Askew  v.  Springer, 
111  111.  662;  Petty  v.  Haas,  122  Iowa 
257,  98  N.  W.  104;  Eddy  v.  Fogg, 
192  Mass.  543,  78  N.  E.  549.  See 
also  Farnam  v.  Brooks,  9  Pick. 
(Mass.)  212;  McMahon  v.  Brown, 
219  Mass.  23,  106  N.  E.  576;  Brod- 
erick  v.  Beaupre,  40  Minn.  379,  42 
N.  W.  83 ;  Vaiden  v.  Hawkins 
(A'liss.),  6  So.  227  (1889)  ;  Beller  v. 
Murphy,  139  Mo.  App.  663,  123  S. 
W.  1029;  Hutchinson  v.  Sperry,  158 
App.  Div.  704,  143  N.  Y.  S.  876; 
Clinton  Loan  Assoc,  v.  Ferrell,  114 
N.  Car.  301,  19  S.  E.  240;  Allen  v. 
Woonsocket  Co.,  11  R.  I.  288;  Mc- 
Brayer  v.  Mills,  62  S.  Car.  36,  39 
S.  E.  788;  Mills  v.  Carrier,  30  S. 
Car.  617,  9  S.  E.  350,  741;  Betje- 
mann  v.  Betjemann  (1895),  2  Ch. 
474,  64  L.  J.  Ch.  641;  Rawlins  v. 
Wickham,  3  DeG.  &  J.  304,  5  Jur. 
(N.  S.)  278. 


983 


ACCOUNTING   AND   DISSOLUTION    ACTIONS 


§  718 


Statute  begins  to  run,  there  is  little  uniformity  in  the  decisions, 
some  holding  that  time  to  be  immediately  on  dissolution  f*  others 
when  the  settlement  is  had  and  the  balance  struck;"  others  after 
a  reasonable  time  for  settlement;^''  others  at  the  time  of  the  last 
item  or  transaction  on  account  between  the  partners  f^  others, 
if  the  agreement  creates  a  continuing  trust,  at  the  time  of  the 


54  Stovall  V.  Clay,  108  Ala.  105,  20 
So.  387;  West  v.  Russell,  72  Cal. 
xxli,  74  Cal.  544,  16  Pac.  392;  Rich- 
ardson V,  Gregory,  126  111.  166,  18 
N.  E.  777  (afifg.  27  111.  App.  621); 
Blake  v.  Sweeting,  121  111.  67,  12  N. 
E.  67;  King  v.  Wartelle,  14  La.  Ann. 
740;  Currier  v.  Studley,  159  Mass. 
17,  33  N.  E.  709;  Hutchinson  v. 
Sperry,  158  App.  Div.  704,  143  N. 
Y.  S.  876  (revg.  judgment  79  Misc. 
523,  140  N.  Y.  S.  220);  Gray  v. 
Green,  125  N.  Y.  203,  26  N.  E.  253 
(revg.  41  Hun  524,  6  N.  Y.  S. 
451)  ;  Murray  v.  Coster,  20  Johns. 
(N.  Y.)  576,  11  Am.  Dec.  333; 
Weisman  v.  Smith,  59  N.  Car.  124; 
Gray  v.  Kerr,  46  Ohio  St.  652,  23  N. 
E.  136;  Jones  v.  Jones,  10  Ohio  Cir. 
Dec.  71,  18  Ohio  Cir.  Ct.  260;  Bor- 
land's Appeal  (Pa.),  83  Atl.  110; 
Guldin  V.  Lorah,  141  Pa.  St.  109,  21 
Atl.  504  (affg.  8  Pa.  Co.  Ct.  503)  ; 
McKelvy's  Appeal,  72  Pa.  St.  409; 
Allen  V.  Woonsocket  Co.,  11  R.  I. 
288 ;  Morris  v.  Nunn,  79  Tex.  125,  15 
S.  W.  220. 

55  Thomas  v.  Hurst,  73  Fed.  372; 
Prentice  v.  Elliott,  72  Ga.  154;  Ham- 
mond V.  Hammond,  20  Ga.  556; 
Weber  v.  Zacharias,  105  111.  App.  640 ; 
Benoist  v.  Markey,  25  La.  Ann.  59; 
Bauduc  V.  Laurent,  2  La.  449;  Mat- 
thews V.  Adams,  84  Md.  143,  35  Atl. 
60,  33  Atl.  645;  Tutt  v.  Cloney,  62 
Mo.  116;  Coudrey  v.  Gilliam,  60  Mo. 
86;  Bender  v.  Markle,  37  Mo.  App. 
234 ;  Atwater  v.  Fowler,  1  Edw.  Ch. 


(N.  Y.)  417;  Rencher  v.  Anderson, 
95  N.  Car.  208 ;  McDonald  v.  Holmes, 
22  Ore.  212,  29  Pac.  735;  Miller  v. 
Harris,  9  Baxt.  (Tenn.)  101;  Jor- 
dan V.  Miller,  75  Va.  442;  Foster  v. 
Rison,  17  Grat.  (Va.)  321  (applying 
Code  c.  149,  §  5)  ;  Marsteller  v. 
Weaver,  1  Grat.  (Va.)  391;  Smith 
V.  Zumbro,  41  W.  Va.  623,  24  S.  E. 
653 ;  Boggs  v.  Johnson,  26  W.  Va. 
821;  Sandy  v.  Randall,  20  W.  Va. 
244. 

56  Prentice  v.  Elliott,  72  Ga.  154; 
Gilmore  v.  Ham,  142  N.  Y.  1,  36  N. 
E.  826,  40  Am.  St.  554  (affg.  65 
Hun  623,  20  N.  Y.  S.  203,  48  N.  Y. 
St.  21). 

58  Gayle  v.  Pennington,  185  Ala.  53, 
64  So.  572;  Dugger  v.  Tutwiler,  129 
Ala.  258,  30  So.  91 ;  Haynes  v.  Short, 
88  Ala.  562,  7  So.  157;  Wells  v. 
Brown,  83  Ala.  161,  3  So.  439;  Brew- 
er V.  Browne,  68  Ala.  210.  See 
Causler  v.  Wharton,  62  Ala.  358 
Cannon  v.  Copeland,  43  Ala.  201 
Bradford  v.  Spyker,  32  Ala.  134 
White  V.  Conway,  66  Cal.  383,  5  Pac. 
672 ;  Taylor  v.  Morrison,  7  Dana 
(Ky.)  241 ;  McClung  v.  Capehart,  24 
Minn.  17;  Dye  v.  Bowling,  82  Mo. 
App.  587;  Todd  v.  Rafferty,  30  N. 
J.  Eq.  254  [affirmed  in  34  N.  J.  Eq. 
552];  Stout  v.  Seabrook,  30  N.  J. 
Eq.  187  (affd.  32  N.  J.  Eq.  826)  ; 
Green  v.  Ames,  14  N.  Y.  225;  Rob- 
erts V.  Nunn  (Tex.  Civ.  App.).  169 
S.  W.  1086;  Bluntzer  v.  Hirsch, 
32  Tex.  Civ.  App.  585,  75  S.  W.  326. 


12 — Row.  ON  Partn. — Vol.  2 


718 


LAW    OF    PARTNERSHIP 


984 


repudiation  of  the  trust,  or  of  demand,^^  while  others  make  the 
time  dependent  on  the  circumstances  of  each  particular  case.^" 
If  the  suit  is  based  on  fraud,  the  statute  begins  to  run  when  the 
fraud  was  discovered,  or  should  have  been  discovered  in  the 
exercise  of  ordinary  diligence.*'^  Even  where  the  statute  does  not 
apply  to  the  cause,  the  courts  have  many  times  held  a  demand 
for  accounting  barred  by  laches,*^"  as  where  brought  five,"^  ten,®* 
twenty,''^  twenty-five,*"'  or  thirty-one  years  after  dissolution  or 
settlement,^^  even  where  the  statute  of  limitations  had  not  barred 
the  action,^*  and  especially  have  denied  a  right  to  interest  be- 
cause of  laches.*'®  Where  the  business  had  been  the  buying  and 
selling  of  real  estate  and  no  lands  had  been  purchased  for  twenty 
years  and  all  had  been  sold  eleven  years  before  the  bill  was 
brought,  and  no  excuse  for  delay  appeared,  accounting  was  de- 


59  Riddle  V.  Whitehill,  135  U.  S. 
621,  34  L.  ed.  283,  10  Sup.  Ct.  924; 
Causler  v.  Wharton,  62  Ala.  358; 
Roach  V.  Caraffa,  85  Cal.  436,  25  Pac. 
22;  King  v.  Hamilton,  16  111.  190; 
Coudrey  v.  Gilliam,  60  Mo.  86; 
Faison  v.  Stewart,  112  N.  Car.  332, 
17  S.  E.  157;  McNair  v.  Ragland,  7 
N.  Car.  139;  Boyd  v.  Munro,  32  S. 
Car.  249,  10  S.  E.  963;  Carroll  v. 
Evans,  27  Tex.  262. 

eoMassey  v.  Tingle,  29  Mo.  437; 
Gray  v.  Green,  142  N.  Y.  316,  2>1  N. 
E.  124,  40  Am.  St.  596  (afiFg.  66 
Hun  469,  21  N.  Y.  S.  533)  ;  Mellish 
V.  McMahon,  64  Hun  638,  19  N.  Y. 
S.  455,  46  N.  Y.  St.  859;  Roberts  v. 
Nunn  (Tex.  Civ.  App.),  169  S.  W. 
1086. 

Gi  McCartney  v.  Boyd  (Wis.),  152 
N.  W.  820;  Betjemann  v.  Betjemann 
(1895),  2  Ch.  474. 

^'-  Gayle  v.  Pennington,  185  Ala.  53, 
64  So.  572;  Luke  v.  Rhodes  (Ark.), 
176  S.  W.  Ill;  Clock  v.  Weikel, 
149  Ky.  170,  147  S.  W.  897;  Law- 
rence V.  Rokes,  61   Maine  38 ;   Stout 


V.  Seabrook,  30  N.  J.  Eq.  187  (affd. 
32  N.  J.  Eq.  826)  ;  Hutchinson  v. 
Sperry,  158  App.  Div.  704,  143  N. 
Y.  S.  876;  Keller  v.  Swartz,  137  Pa. 
St.  65,  20  Atl.  627;  Andriessen's  Ap- 
peal, 123  Pa.  St.  303,  16  Atl.  840 ;  Ire- 
dell's Appeal,  13  Atl.  752,  10  Pa. 
Cas.  127,  10  Sad.  127;  Wagner  v. 
Sanders,  62  S.  Car.  1Z,  39  S.  E.  950; 
Toothe  V.  Kittredge,  24  Can.  Sup. 
Ct.  287. 

63  Luke  V.  Rhodes  (Ark.),  176  S. 
W.   111. 

6*  Van  Vleet  v.  Sledge,  45  Fed.  743. 

65  Philippi  V.  Philippi,  61  Ala.  41 ; 
Harris  v.  Hillegrass,  66  Cal.  79,  4 
Pac.  987;  Ray  v.  Bogart,  2  Johns. 
Cas.  (N.  Y.)  432. 

66  Bell  V.  Hudson,  IZ  Cal.  285,  14 
Pac.  791,  2  Am.  St.  791. 

67  Robertson  v.  Burrell,  110  Cal. 
568,  42  Pac.  1086. 

6S  Hutchinson  v.  Sperry,  158  App. 
Div.  704,  143  N.  Y.  S.  876. 

69  0'Lone  v.  O'Lone,  2  Grant  Ch. 
(U.  C.)  125 ;  Rowe  v.  Cotton,  17  U. 
C.  Q.  B.  533. 


985 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


§  719 


nied.'°  The  condition  of  partnership  affairs  during  its  continu- 
ance has  a  bearing  on  the  question  of  laches,  in  suing  for  an 
account  after  its  termination.'^  Merely  allowing  one  partner  to 
run  the  business  and  remaining  in  a  distant  state  is  not  such 
laches  as  to  bar  accounting/-  Circumstances  may  sometimes 
justify  delay. '^ 

§  719.     Parties. — It  is  often  stated  that  all   partners  are 
necessary  parties  to  an  action  for  dissolution  and  accounting^* 


70  Gayle  v.  Pennington,  185  Ala.  53, 
64  So.  572. 

71  Luke  V.  Rhodes  (Ark.),  176  S. 
W.  111. 

'2  Hutchinson  v.  Sperry,  79  Misc. 
523,  140  N.  Y.  S.  220. 

73  Consaul  v.  Cummings,  222  U.  S. 
262;  Clay  v.  Freeman,  118  U.  S.  97, 
30  L.  ed.  104,  6  Sup.  Ct.  964;  Mc- 
Guire  V.  Ramsey,  9  Ark.  518;  Har- 
ris V.  Hillegass,  54  Cal.  463;  Ex 
parte  Harlow,  3  App.  D.  C.  203 ; 
Baker  v.  Cummings,  4  App.  D.  C. 
230 ;  Petty  v.  Haas,  122  Iowa  257,  98 
N.  W.  104;  Lawrence  v.  Rokes,  61 
Maine  38;  Wiley  v.  Wiley,  115  Md. 
646,  81  Atl.  180,  Ann.  Cas.  1913  A, 
919n;  Glenn  v.  Hebb,  12  Gill  &  J. 
(Md.)  271 ;  Dye  v.  Bowling,  82  Mo. 
App.  587 ;  McPherson  v.  Swift,  22 
S.  Dak.  165,  116  N.  W.  76,  133  Am. 
St.  907;  McCartney  v.  Boyd  (Wis.), 
152  N.  W.  820. 

74  Fourth  Nat.  Bank  v.  New  Or- 
leans &c.  R.  Co.,  11  Wall.  (U.  S.) 
624,  20  L.  ed.  82 ;  Vose  v.  Pliilbrook, 
3  Story  (U.  S.)  335,  Fed.  Cas.  No. 
17010;  Parsons  v.  Howard,  2  Woods 
(U.  S.)  1,  Fed.  Cas.  No.  10777;  Gray 
V.  Larrimore,  2  Abb.  542,  4  Sawy. 
(U.  S.)  638,  Fed.  Cas.  No.  5721; 
Forcheimer  v.  Foster  (Ala.),  68  So. 
879;  Webb  v.  Butler  (Ala.),  68  So. 
369;  Cuyamaca  Granite  Co.  v.  Pa- 
cific Paving  Co.,  95  Cal.  252,  30  Pac. 


525 ;  Wright  v.  Ward,  65  Cal.  525,  4 
Pac.  534;  Settembre  v.  Putnam,  30 
Cal.  490;  Lynch  v.  Foley,  32  Colo. 
110,  76  Pac.  370;  Elliott  v.  Deason, 
64  Ga.  63 ;  Wells  v.  Strange,  5  Ga. 
22;  Gerard  v.  Bates,  124  111.  150,  16 
N.  E.  258,  7  Am.  St.  350;  Thickson 
V.  Barry,  138  111.  App.  100;  Francis 
V.  Lavine,  21  La.  Ann.  265 ;  Lincoln 
V.  Ball,  6  La.  685;  Dufau  v.  Massi- 
cot, 6  Mart.  (La.)  (N.  S.)  182;  Yerg- 
ler  V.  Kaufmann  (111.  App.),  176  111. 
App.  563 ;  Beal  v.  Bass,  86  Maine  325, 
29  Atl.  1088;  Fuller  v.  Benjamin,  23 
Maine  255 ;  McKaig  v.  Hebb,  42  Md. 
227;  Bartlett  v.  Parks,  1  Cush. 
(Mass.)  82;  Wilcox  v.  Comstock,  Zl 
Minn.  65,  ZZ  N.  W.  42 ;  De  Mander- 
f^eld  V.  Field,  7  N.  Mex.  17,  Z2  Pac. 
146;  Stokes  v.  Stokes,  128  N.  Y.  615, 
28  N.  E.  253  (afifg.  59  Hun  431,  13 
N.  Y.  S.  407,  36  N.  Y.  St.  620)  ;  Ar- 
nold V.  Arnold,  90  N.  Y.  580;  Kirk- 
wood  V.  Smith,  47  Misc.  301,  95  N. 
Y.  S.  926;  Heck  v.  Collins,  231  Pa. 
357,  80  Atl.  535;  Boyd  v.  Boyd,  34 
Tex.  Civ.  App.  57,  78  S.  W.  39; 
Stimson  v.  Lewis,  Zd  Vt.  91 ;  Wag- 
goner V.  Gray,  2  Hen.  &  Mun.  (Va.) 
603 ;  Bainbridge  v.  Burton,  2  Beav. 
539,  17  Eng.  Ch.  539;  Hills  v.  Nash, 
10  Jur.  148,  15  L,  J.  Ch.  107;  Sibley 
v.  Minton,  27  L.  J.  Ch.  53,  5  Wkly. 
Rep.  675 ;  Ireton  v.  Lewes,  Rep.  t. 
Finch  96,  23  Eng.  Reprint  52. 


§  719 


LAW    OF    PARTNERSHIP 


986 


and  it  is  certain  that  all  partners  in  the  jurisdiction  of  the  court 
must  be  joined/^  A  merchants'  association  which  conditionally 
agreed  to  give  a  partnership  land  on  which  to  build  a  factory  is 
not  a  necessary  party. '^'^  If  none  of  the  partners  are  dead,  and 
all  are  residents,  they  are  the  only  necessary  or  proper  parties 
to  an  action  for  dissolution  and  settlement. ^^  Generally,  the 
assignee  or  transferee  of  a  partner's  interest  is  a  necessary 
party.^^  So  are  the  personal  representatives  of  a  deceased  part- 
ner, ^°  unless  they  refuse  to  bring  the  suit  or  would  be  injured 


"Wright  V.  Ward,  65  Cal.  525, 
4  Pac.  534 ;  Towle  v.  Pierce,  12  Mete. 
(Mass.)  329,  46  Am.  Dec.  679; 
Beck  V.  Thompson,  22  Nev.  109,  36 
Pac.  562 ;  Duxbury  v.  Isherwood,  10 
L.  T.  Rep.  (N.  S.)  712. 

76  Yergler  v.  Kaufmann,  176  111. 
App.  563. 

"Howell  V.  Harvey,  5  Ark.  270, 
39  Am.  Dec.  7)l(i\  Isaacs  v.  Jones,  121 
Cal.  257,  53  Pac.  793,  1101;  Harper 
V.  Anderson,  104  Cal.  xvii,  Zl  Pac. 
926;  Townsend  v.  Anger,  3  Conn. 
354 ;  Warren  v.  Warren,  56  Maine 
360 ;  White  v.  White,  4  Md.  Ch.  418 ; 
Sanger  v.  French,  157  N.  Y.  213,  51 
N.  E.  979  (revg.  91  Hun  599,  36  N. 
Y.  S.  653,  71  N.  Y.  St.  603)  ;  Parker 
V.  Broadbent,  134  Pa.  St.  322,  19 
Atl.  631 ;  Luzier  v.  Naylor  Line  &c. 
Co.,  8  Pa.  Dist.  632 ;  In  re  Flavell,  25 
Ch.  D.  89,  53  L.  J.  Ch.  185 ;  Ehrmann 
V.  Ehrmann,  72  L.  T.  Rep.  (N.  S) 
17;  Wilhams  v.  Poole,  28  L.  T. 
Rep.  (N.  S.)  292. 

"^  Hoxie  V.  Carr,  1  Sumn.  (U.  S.) 
173,  Fed.  Cas.  No.  6802;  Fountaine 
V.  Urquhart,  ZZ  Ga.  Supp.  184;  Ger- 
ard V.  Bates,  124  III.  150,  16  N.  E. 
258,  7  Am.  St.  350;  Rosenstiel  v. 
Gray,  112  111.  282;  Fuller  v.  Benja- 
min, 23  Maine  255 ;  White  v.  White, 
4  Md.  Ch.  418;  Glynn  v.  Phetteplace, 
26  Mich.  383;  DeManderfield  v. 
Field,    7    N.    Mex.    17,    Z2    Pac.    1?6; 


Stokes  V.  Stokes,  59  Hun  (N.  Y.) 
431,  13  N.  Y.  S.  407,  36  N.  Y.  St. 
620  (affd.  128  N.  Y.  615,  28  N.  E. 
253)  ;  Dayton  v.  Wilkes,  5  Bosw.  (N. 
Y.)  655 ;  Johnson  v.  Snyder,  7  How. 
Pr.  (N.  Y.)  395;  Pitt  v.  Moore,  99 
N.  Car.  85,  5  S.  E.  389,  6  Am.  St. 
489;  Waugh  v.  Mitchell,  21  N.  Car. 
510;  Wagner  v.  Sanders,  49  S.  Car. 
192,  27  S.  E.  68.  See  also  Bartlett 
V.  Parks,  1  Cush.  (Mass.)  82.  Com- 
pare Pearce  v.  Sutherland,  164  Fed. 
609,  90  C.  C.  A.  519. 

■^9  Moore  v.  Huntington,  17  Wall. 
(U.  S.)  417,  21  L.  ed.  642;  Bartle  v. 
Nutt,  4  Pet.  (U.  S.)  184,  7  L.  ed. 
825  (aflfg.  3  Cranch  C.  C.  283,  Fed. 
Cas.  No.  1072)  ;  Brew  v.  Cochran,  141 
Fed.  459;  Burchard  v.  Boyce,  21  Ga. 
6;  Walmsley  v.  Mendelsohn,  31  La. 
Ann.  152 ;  Carpenter  v.  St.  Clair  Cir. 
Judge,  122  Mich.  2>2Z,  81  N.  W.  95; 
Jenness  v.  Smith,  58  Mich.  280,  25 
N.  W.  191;  Harrison  v.  Righter,  11 
N.  J.  Eq.  389;  Secor  v.  Tradesmen's 
Nat.  Bank,  92  App.  Div.  294,  87  N. 
Y.  S.  181 ;  Simpson  v.  Simpson,  44 
App.  Div.  492,  60  N.  Y.  S.  879; 
Krumbeck  v.  Clancy,  41  App.  Div. 
397,  58  N.  Y.  S.  727 ;  Coster  v.  Clarke, 
3  Edw.  Ch.  (N.  Y.)  428;  DeHavens 
Appeal,  44  Leg.  Int.  (Pa.)  38;  Pettit 
v.  Baird,  30  Leg.  Int.  (Pa.)  208; 
Blakely  v.  Smock,  96  Wis.  611,  71 
N.    W.    10S2 ;    Simpson   v.    Chapman, 


987 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


§  719 


by  being  made  parties.^"  But  an  administrator  in  another  state 
is  not  a  necessary  party. ^"^  Where  a  partner  broke  off  relations  of 
partnership  before  his  death,  the  other  partner  should  sue  for 
an  accounting  as  an  individual  partner,  not  as  surviving  partner 
in  behalf  of  the  firm,^^  Heirs  of  a  deceased  partner  may  be 
made  parties  defendant,  where  their  interests  will  be  affected,^^ 
but  can  not  bring  an  action  for  an  accounting,  since  this  should 
be  done  by  the  surviving  partner,^^  or  personal  representative 
of  the  deceased  partner.**  A  retired  partner  who  has  been 
forced  to  pay  debts  which  the  firm  agreed  to  assume  may  inter- 
vene.®^ Creditors  are  generally  held  not  to  be  necessary  or 
proper  parties  to  a  suit  between  partners  for  an  accounting,®^ 
but  are  sometimes  permitted  by  the  court  to  appear  for  the 
establishment  of  their  rights.®^   Where  it  is  essential  in  the  ac- 


4  DeG.,  M.  &  G.  154 ;  Clegg  v.  Fish- 
wick,  1  Hall  &  T.  390;  Cox  v.  Ste- 
phens, 9  Jur.  (N.  S.)  1144;  Schole- 
field  V.  Heafield,  5  L.  J.  Ch.  218.  But 
not  in  a  suit  for  accounting  by  one 
partner,  where  the  firm  is  solvent. 
Parry  v.  Parry,  155  N.  Y.  S.  1072. 

soMertens  v.  Mertens,  87  App. 
Div.  295,  84  N.  Y.  S.  352;  Blake  v. 
Barnes,  63  Hun  633,  18  N.  Y.  S. 
471,  28  Abb.  N.  Cas.  401,  45  N.  Y. 
St.  130;  Pointon  v.  Pointon,  L.  R, 
12  Eq.  547,  40  L.  J.  Ch.  609,  25  L.  T. 
Rep.   (N.  S.)  294. 

soaManship  v.  Newton,  94  S.  Car. 
260,  77  S.  E.  941. 

siGleeson  v.  Costello  (Ariz.),  138 
Pac.  544. 

82  Cannon  v.  Copeland,  43  Ala,  201 ; 
McGuire  v.  Ramsey,  9  Ark.  518; 
Frederick  v.  Cooper,  3  Iowa  171 ; 
Hackett  y.  Bank  &c.  Co.,  155  Ky. 
392,  159  S.  W.  952;  Savage  v.  Will- 
iams, 15  La.  Ann.  250,  253;  Dil- 
worth  V.  Mayfield,  36  Miss.  40;  Haas 
V.  Craighead,  19  Hun   (N.  Y.)  396. 

83  Van  Aken  v.  Clark,  82  Iowa  256, 
48  N.  W.  73. 


84  Mason  v.  Mason,  76  Vt.  287,  56 
Atl.  1011;  Robinson  v.  Swift,  3  Vt. 
377. 

85  Sheppard  v.  Bridges,  137  Ga. 
615,  74  S.  E.  245. 

86Duden  v.  Maloy,  37  Fed.  98; 
Hoxie  V.  Carr,  1  Sumn.  (U.  S.)  173, 
Fed.  Cas.  No.  6802;  New  Orleans 
V.  Gauthreaux,  32  La.  Ann.  1126; 
Gridley  v.  Conner,  2  La.  Ann.  87; 
Davis  V.  Grove,  2  Rob.  (N.  Y.)  134, 
27  How.  Pr.  70;  Freeman  v.  Miller, 
157  App.  Div.  715,  142  N.  Y.  S.  797; 
Escott  v.  Gray,  47  L.  J.  C.  P.  606, 
39  L.  T.  Rep.  (N.  S.)   121. 

87  Grossini  v.  Perazzo,  66  Cal.  545, 
6  Pac.  450;  White  v.  White,  169 
Mass.  52,  47  N.  E.  499;  Washburn 
v.  Goodman,  17  Pick.  (Mass.)  519; 
Bell  V.  Miller,  11  Ohio  Dec.  (Re- 
print) 163,  25  Cine.  L.  Bui.  126;  Up- 
dike V.  Doyle,  7  R.  L  446;  Holder 
V.  Shelby  (Tex.),  118  S.  W.  590; 
Jacobson  v.  Landolt,  73  Wis.  142,  40 
N.  W.  636,  9  Am.  St.  767;  Newton 
V.  Doran,  3  Grant.  Ch.   (U.  C.)  353. 


§  720 


LAW    OF    PARTNERSHIP 


988 


counting  to  impeach  a  transfer  made  by  one  partner  of  firm 
property  as  fraudulent,  or  where  one  partner  has  formed  a 
scheme  or  conspiracy  inimical  to  the  partnership  with  a  third 
person,  such  fraudulent  grantee  or  confederate  may  be  made  a 
party.®^ 

§  720.  Injunction. — An  injunction  will  not  be  granted 
upon  the  dissolution  of  a  partnership,  unless  necessary  to  the 
protection  of  the  rights  of  the  parties  to  the  suit.°°  It  may  be 
granted  to  restrain  an  insolvent  partner  from  misapplying  prop- 
erty of  the  firm;^^  from  excluding  a  partner  from  his  right  to 
participate  in  winding  up  partnership  affairs;^"   from  creating 


89  Doudell  V.  Shoo,  20  Cal.  App.  424, 
129  Pac.  478;  Lovejoy  v.  Bailey,  214 
Mass.  134,  101  N.  E.  63;  Palmer  v. 
Tyler,  15  Minn.  106;  Anable  v.  Min. 
Co.,  144  Mo.  App.  303,  128  S.  W. 
1012;  Penniman  v.  Jones,  58  N.  H. 
447 ;  Schlicher  v.  Vogel,  61  N.  J.  Eq. 
158,  47  Atl.  448  (affd.  65  N.  J.  Eq. 
404,  54  Atl.  1125),  59  N.  J.  Eq.  351, 
46  Atl.  726;  Jennings  v.  Whittemore, 
2  Thomps.  &  C.  (N.  Y.)  ZT7  (affd. 
58  N.  Y.  675)  ;  Webb  v.  Helion,  26  N. 
Y.  Super.  Ct.  625;  Wade  v.  Rusher, 
4  Bosw.  (N.  Y.)  537;  Capecci  v.  Al- 
ladio,  8  Wash.  637,  36  Pac.  692. 

^^  Goldman  v.  Circuit  Judge,  155 
Mich.  47,  118  N.  W.  600;  Moies  v. 
O'Neill,  23  N.  J.  Eq.  207;  Van  Kuren 
V.  Trenton  Locomotive  &c.  Mfg. 
Co.,  13  N.  J.  E:q.  302 ;  Petit  v.  Cheve- 
lier,  13  N.  J.  Eq.  181;  Greenwald  v. 
Gotham-Attucks  Music  Co.,  118  App. 
Div.  29,  103  N.  Y.  S.  123;  Dunham 
V.  Jarvis,  8  Barb.  (N.  Y.)  88,  2  Edm. 
Sel.  Cas.  145;  Walker  v.  Trott,  4 
Edw.  (N.  Y.)  38;  Ellis  v.  Command- 
er, 1  Strobh.  Eq.  (S.  Car.)  188;  Mori- 
son  V.  Moat,  16  Jr.  321,  21  L.  J.  Ch. 
248  (affg.  9  Hare  241,  15  Jur.  787, 
20  L.  J.  Ch.  513,  41  Eng.  Ch.  241, 
68  Eng.  Reprint  492)  ;  Littlewood  v. 


Caldwell,  11  Price  97,  25  Rev.  Rep. 
711;  Cofton  v.  Horner,  5  Price  537; 
Lawson  v.  Morgan,  1  Price  303  ;  Web- 
ster V.  Webster,  3  Swanst.  490,  19 
Rev.  Rep.  258 ;  Glassington  v. 
Thwaites,   1   L.  J.  Ch.    (O.   S.)    113, 

1  Sim.  &  St.  124. 

9iGaddie  v.  Mann,  147  Fed.  960 
(revd.  on  other  gi-ounds  in  158  Fed. 
42)  ;  Fletcher  v.  Vandusen,  52  Iowa 
448,  3  N.  W.  488;  Drury  v.  Roberts, 

2  Md.  Ch.  157;  McCabe  v.  Sinclair, 
66  N.  J.  Eq.  24,  58  Atl.  412;  Large 
V.  Ditmars,  27  N.  J.  Eq.  283;  Ran- 
dall V.  Morrell,  17  N.  J.  Eq.  343; 
Davis  V.  Grove,  2  Rob.  (N.  Y.)  134, 
27  How.  Pr.  70;  Haggerty  v. 
Granger,  15  How.  Pr.  (N.  Y.)  243; 
Taylor  v.  Russell,  119  N.  Car.  30, 
25  S.  E.  710;  Francis  v.  Spittle,  9 
L.  J.  Ch.  230;  Lawson  v.  Morgan,  1 
Price  303 ;  Hartz  v.  Schrader,  8  Ves. 
Jr.  317,  7  Rev.  Rep.  55;  Thibodo  v. 
Scobell,  5  Can.  L.  J.  117;  Watt  v. 
Foster,  4  Grant  Ch.  (U.  C.)  543; 
Wilson  V.  Richardson,  2  Grant  Ch. 
(U.  C.)   448. 

92  Caddie  v.  Mann,  147  Fed.  960 
(revd.  on  other  grounds  in  158  Fed. 
42);  Webb  v.  Butler  (Ala.),  68  So. 
369;  Sutro  v.  Wagner,  23  N.  J.  Eq.. 


989 


ACCOUNTING   AND   DISSOLUTION    ACTIONS 


721 


new  obligations,"^  or  from  doing  other  acts  which  would  cause 
irreparable  injury  to  the  partners  or  to  firm  property."*  An  injunc- 
tion and  receiver  may  be  granted  or  where  both  partners  have 
violated  their  reciprocal  duties  in  failing  to  properly  account  and 
take  exclusive  possession  of  firm  assets,  though  neither  is  insolv- 
ent."^ Generally  injunction  will  not  be  granted  where  a  part- 
nership is  denied,"*'  or  where  all  the  equitable  grounds  of  the  peti- 
tion are  denied."^ 

§  721.  Appointment  of  receiver. — Upon  suit  for  a  partner- 
ship dissolution  and  accounting,  it  is  usually  within  the  court's 
power  and  discretion  to  appoint  a  receiver."®  Courts  are  hesitant  in 


388  (affd.  24  N.  J.  Eq.  589) ;  Wol- 
bert  V.  Harris,  7  N.  J.  Eq.  60S ;  Mc- 
Crackan  v.  Ware,  3  Sandf.  (N.  Y.) 
688;  Ellis  v.  Commander,  1  Strobh. 
Eq.  (S.  Car.)  188;  Zimmerman  v. 
Chambers,  79  Wis.  20,  47  N.  W.  947 ; 
Hall  V.  Hall,  12  Beav.  414,  50  Eng. 
Reprint  1119;  Greatrex  v.  Greatrex, 
1  DeG.  &  Sm.  692,  11  Jur.  1052; 
Blachford  v.  Hawkins,  1  L.  J.  Ch. 
(O.  S.)   141. 

°3Joselove  v.  Bohrman,  119  Ga. 
204,  45  S.  E.  982;  J.  v.  S.  [1894],  3 
Ch.  72,  63  L.  J.  Ch.  615. 

94  Wilkinson  v.  Tilden,  9  Fed.  683 ; 
Wagoner  v.  Warne  (N.  J.),  14  Atl. 
215  (1888)  ;  Coe  v.  Davidge,  42  Hun 
656,  6  N.  Y.  St.  93 ;  Mitchell  v.  Stew- 
art, 3  Abb.  Pr.  (N.  S.)  (N.  Y.)  250; 
Sloan  V.  Moore,  Z1  Pa.  St.  217;  In 
re  Slobig's  Appeal,  2  Sad.  (Pa.)  365, 
5  Atl.  670 ;  Koehler  v.  Roshi,  28  Leg. 
Int.  (Pa.)  ZIZ;  Ballard  v.  Callison, 
4  W.  Va.  326;  Marshall  v.  Watson, 
25  Beav.  501,  53  Eng.  Reprint  728; 
Anderson  v.  Wallace,  2  Molloy  540 ; 
Elliot  V.  Brown,  3  Swanst.  489,  36 
Eng.  Reprint  948. 

ssPritchett  v.  Kennedy,  140  Ga. 
248,  78  S.  E.  902. 

96  McMahon  v.  O'Donnell,  20  X.  J. 


Eq.  306;  Goulding  v.  Bain,  4  Sandf. 
(N.  Y.)  716;  Popper  v.  Scheider,  7 
Abb.  Pr.  (N.  S.)  (N.  Y.)  56,  38 
How.  Pr.  34;  Baxter  v.  Buchanan,  3 
Brewst.  (Pa.)  435. 

97Gusdorff  V.  Schlessner,  85  Md. 
360,  Zl  Atl.  170;  Quinlivan  v.  Eng- 
lish, 44  Mo.  46;  HoIIister  v.  Barkley, 
9  N.  H.  230;  Fielding  v.  Lucas,  87 
N.  Y.  197  (aflfg.  22  Hun  22,  60  How. 
Pr.  134)  ;  Wickes  v.  Hatch,  103  App. 
Div.  426,  92  N.  Y.  S.  1017;  Don- 
nelly V.  Morris,  59  N.  Y.  Super.  Ct. 
557,  13  N.  Y.  S.  427;  White  v.  Jones, 

1  Abb.  Pr.  (N.  S.)  328,  24  N.  Y. 
Super.  Ct.  321 ;  Green  v.  Tuchner, 
39  Misc.  154,  79  N.  Y.  S.  143 ;  Philipp 
V.  Von  Raven,  26  Misc.  552,  57  N. 
Y.  S.  701. 

ssGillett  V.  Higgins,  142  Ala.  444, 
Z'&  So.  664;  Silveira  v.  Reese,  138 
Cat.  xix,  71  Pac.  515;  Robbins  v. 
Reed,  174  Ind.  291,  91  N.  E.  921; 
Meyer  v.  Meyer,  116  La.  456,  40  So. 
794 ;  McNair  v.  Gourrier,  40  La.  Ann. 
353,  4  So.  310;  Pratt  v.  McHatton, 
11  La.  Ann.  260;  Gridley  v.  Conner, 

2  La.  Ann.  87;  Bacon  v.  Engstrom, 
129  Minn.  229,  152  N.  W.  264,  537; 
Norton  v.  Sperry,  113  Minn.  447,  129 
N.  W.  843;  Walsh  v.  St.  Paul  School 


§  721 


LAW    OF    PARTNERSHIP 


990 


the  use  of  this  power,  since  the  partners  will  be  deprived  entirely 
from  participation  in  management  of  firm  affairs/^  and  will 
rarely  appoint  a  receiver  if  there  has  been  an  agreement  of  the 
partners  relative  to  the  manner  of  settlement/  If  the  existence 
of  the  partnership  is  denied,  the  court  must  be  satisfied  of  its 
existence,  and  that  the  funds  are  in  danger,  before  appointing  a 
receiver."     If  all  the  partners  are  living  and  join  in  a  request 


Furniture  Co.,  60  Minn.  397,  62  N. 
W.  383 ;  Cox  v.  Volkert,  86  Mo.  505 ; 
Rhodes  v.  Wilson  (N.  J.  Eq.),  19  Atl. 
732;  Wilson  v.  Pitcher,  11  N.  J.  Eq. 
71;  Birdsall  v.  Colie,  10  N.  J.  Eq. 
63;  Dunham  v.  Jarvis,  8  Barb.  88, 
2  Edm.  Sel.  Cas.  (N.  Y.)  145;  Pratt 
V.  Underwood,  4  N.  Y.  Civ.  Proc. 
167;  Garretson  v.  Weaver,  3  Edw. 
(N.  Y.)  385;  Greenwald  v.  Gotham- 
Attucks  Music  Co.,  118  App.  Div.  29, 
103  N.  Y.  S.  123 ;  Bimberg  v.  Wagen- 
hals,  53  Misc.  13,  102  N.  Y.  S.  925; 
Sarasohn  v.  Kamaiky,  110  App.  Div. 
713,  97  N.  Y.  S.  529;  Nolan  v.  Nolan, 
8  Lack.  Leg.  N.  (Pa.)  291;  Spencer 
V.  Emery,  8  Lack.  Leg.  N.  (Pa.) 
278 ;  Shulte  v.  Hoffman,  18  Tex.  678 ; 
Rische  v.  Rische,  46  Tex.  Civ.  App. 
23,  101  S.  W.  849;  Webb  v.  Allen,  15 
Tex.  Civ.  App.  605,  40  S.  W.  342; 
Martin  v.  Wilson,  84  Wash.  625,  147 
Pac.  404;  Pini  v.  Roncoroni  [1892], 
1  Ch.  633,  61  L.  J.  Ch.  218,  66  L.  T. 
255,  40  W.  R.  297. 

5*9  Gary  Bros.  v.  Dalhoff  Constr. 
Co.,  126  Fed.  584 ;  Devereux  v.  Flem- 
ing, 47  Fed.  177;  Bard  v.  Bingham, 
54  Ala.  463;  Loomis  v.  McKenzie,  31 
Iowa  425;  Goldman  v.  Manistee  Cir- 
cuit Judge,  155  Mich.  47,  118  N.  W. 
600;  Morey  v.  Grant,  48  Mich.  326, 
12  N.  W.  202;  Albrecht  v.  Diamon, 
125  Minn.  283,  146  N.  W.  1101;  Na- 
than V.  Bacon  (N.  J.),  72  Atl.  359; 
Hard  v.  Klaus,  9  N.  J.  L.  370 ;  Moies 
V.  O'Neill,  23  N.  J.  Eq.  207;  Cox  v. 


Peters,  13  N.  J.  Eq.  39;  Birdsall  v. 
Colie,  10  N.  J.  Eq.  63;  Cohn  v. 
Wahn,  117  N.  Y.  S.  62,Z;  Buchanan 
V.  Comstock,  57  Barb.  (N.  Y.)  568; 
Webb  V.  Allen,  15  Tex.  Civ.  App. 
605,  40  S.  W.  342;  Smith  v.  Brown, 
50  Wash.  240,  96  Pac.  684 ;  Wales  v. 
Dennis,  9  Wash.  308,  37  Pac.  450; 
Oliver  v.  Hamilton,  2  Anstr.  453,  3 
Rev.  Rep.  611;  Baxter  v.  West,  28 
L.  J.  Ch.  169;  Waters  v.  Taylor,  2 
Ves.  &  B.  299,  15  Ves.  10,  13  R. 
R.  91;  Carlen  v.  Drury,  1  Ves.  & 
B.  154,  12  R.  R.  203 ;  Burden  v.  How- 
ard, 2  N.  Brunsw.  Eq.  461. 

1  Fullenwider  v.  Bank,  101  Ark.  259, 
142  S.  W.  149;  Bufkin  v.  Boyce,  104 
Ind.  53,  3  N.  E.  615;  Heflebower  v. 
Buck,  64  Md.  15,  20  Atl.  991 ;  Drury  v. 
Roberts,  2  Md.  Ch.  157;  Simon  v. 
Schloss,  48  Mich.  233,  12  N.  W.  196; 
Parkhurst  v.  Muir,  7  N.  J.  Eq.  307; 
Hoffman  v.  Hauptner,  135  App.  Div. 
148,  119  N.  Y.  S.  1022;  Meyer  v. 
Reimers,  49  App.  Div.  638,  6Z  N.  Y, 
S.  1112  (affg.  30  Misc.  307,  63  N.  Y. 
S.  681)  ;  Rice  v.  Baggot,  54  Hun  637, 
7  N.  Y.  S.  518,  27  N.  Y.  St.  181,  4  Silv. 
Sup.  383  (affd.  130  N.  Y.  62,6,  29  N.  E. 
151)  ;  MacDonald  v.  Trojan  Button- 
Fastener  Co.,  56  Hun  648,  10  N.  Y. 
S.  91,  31  N.  Y.  St.  374 ;  Law  v.  Gar- 
rett, 8  Ch.  D.  26,  38  L.  T.  3,  26  W. 
R.  426. 

2  Rowland  v.  Auto  Car  Co.,  133 
Fed.  835 ;  Irwin  v.  Everson,  95  Ala. 
64,  10  So.  320;  Williamson  v.  Mon- 


991 


ACCOUNTIXG    AND    DISSOLUTION    ACTIONS 


§  721 


for  a  receiver,  the  court  will  usually  appoint  one.^  Receivers 
have  also  been  appointed  because  of  a  serious  breach  of  the 
agreement  as  to  the  disposition  of  assets  on  settlement;*  or  dis- 
agreements during  the  time  of  settlement,  concerning  manage- 
ment of  firm  affairs  f  or  misconduct  threatening  waste  of  as- 


roe,  3  Cal.  383 ;  Leeds  v.  Townsend, 
74  111.  App.  444;  Hobart  v.  Ballard, 
31  Iowa  521 ;  Bacon  v.  Engstrom,  129 
Minn.  229,  152  N.  W.  264;  Albrecht 
V.  Diamon,  125  Minn.  283,  146  N.  W. 
1101 ;  Bimberg  v.  Wagenhals,  53 
Misc.  13,  102  N.  Y.  S.  925;  Kirk- 
wood  V.  Smith,  64  App.  Div.  615,  72 
N.  Y.  S.  291 ;  Day  v.  Dow,  46  App. 
Div.  148,  61  N.  Y.  S.  793;  McCarty 
V.  Stanwix,  16  Misc.  132,  38  N.  Y. 
S.  820;  Goulding  v.  Bain,  4  Sandf. 
(N.  Y.)  716;  Moyn  v.  Rose,  245  Pa. 
601,  92  Atl.  39;  Baxter  v.  Buchanan, 
3  Brewst.  (Pa.)  435;  McGlensey  v. 
Cox,  1  Phila.  (Pa.)  387;  Smith  v. 
Brown,  50  Wash.  240,  96  Pac.  684; 
Ballard  v.  Callison,  4  W.  Va.  326; 
Wood  V.  Wood,  50  W.  Va.  570,  40  S. 
E.  416 ;  Rische  v.  Rische,  46  Tex.  Civ. 
App.  23,  101  S.  W.  849;  Goulding  v. 
Bain,  4  Sandf.  (N.  Y.)  716.  Compare 
Hackett  v.  Multnomah  R.  Co.,  12  Ore. 
124,  53  Am.  Rep.  327. 

3  Saylor  v.  Mockbie,  9  Iowa  209 ; 
Fitzner  v.  Noullet,  114  La.  167,  38 
So.  94;  Newman  v.  Schminke,  50  La. 
Ann.  516,  23  So.  714;  Todd  v.  Rich, 
2  Tenn.  Ch.  107;  Southwell  v. 
Church,  51  Tex  Civ.  App.  547,  111 
S.  W.  969;  Taylor  v.  Neute,  39  Ch. 
D.  538,  57  L.  J.  Ch.  1044,  60  L.  T. 
179,  Z7  W.  R.  190;  Mitchell  v.  Lister, 
21  Ont.  22. 

4  Einstein  v.  Schnebly,  89  Fed.  540 ; 
Whitley  V.  Bradley,  13  Cal.  App.  720, 
110  Pac.  596;  West  v.  Chasten,  12 
Fla.  315;  Haight  v.  Burr,  19  Md. 
130;  Sutro  v.  Wagner,  23  N.  J.  Eq. 
388   (aflfd.  24  N.  J.  Eq.  589)  ;  Wol- 


bert  V.  Harris,  7  N.  J.  Eq.  605; 
Heathcot  v.  Ravenscroft,  6  N.  J.  Eq. 
113;  Sloan  v.  Moore,  37  Pa.  St.  217; 
Go  wan  V.  Jeffries,  2  Ashm.  (Pa.) 
296;  Redding  v.  Anderson,  Z7  Wash. 
209,  79  Pac.  628;  Hale  v.  Hale,  4 
Beav.  369;  Lawson  v.  Morgan,  1 
Price  303 ;  Harding  v.  Glover,  18  Ves. 
281 ;  Blakeney  v.  Dufaur,  15  Beav. 
40,  51  Eng.  Reprint  451 ;  Steele  v. 
Grossmith,  19  Grant  Ch.  (U.  C.) 
141 ;  Doupe  v.  Stewart,  13  Grant  Ch. 
(U.  C.)  637;  Prentiss  v.  Brennan,  1 
Grant  Ch.    (U.  C.)   371. 

sGillett  V.  Higgins,  142  Ala.  444, 
38  So.  664;  Allen  v.  Hawley,  6  Fla. 
142,  6i  Am.  Dec.  198;  Bennett  v. 
Smith,  108  Ga.  466,  34  S.  E.  156; 
Taylor  v.  Bliley,  86  Ga.  154,  12  S. 
E.  210;  Dunn  v.  McNaught,  38  Ga. 
179;  Pressley  v.  Lamb,  105  Ind.  171, 
4  N.  E.  682;  Wehmeier  v.  Banking 
Co.,  49  Ind.  App.  454,  97  N.  E.  558; 
Taylor  v.  Welles,  113  Iowa  326,  85 
N.  W.  30;  Anderson  v.  Powell,  44 
Iowa  20;  Story  v.  Moon,  3  Dana 
(Ky.)  331 ;  Whitman  v.  Robinson,  21 
Md.  30;  Speights  v.  Peters,  9  Gill 
(Md.)  472;  Walker  v.  House,  4  Md. 
Ch.  89;  Kirby  v.  Ingersoll,  1  Dougl. 
(Mich.)  477;  Martin  v.  Hurle.v,  84 
Mo.  App.  670 ;  Veith  v.  Ress,  60  Nebr. 
52,  82  N.  W.  116;  Birdsall  v.  Colie, 
10  N.  J.  Eq.  63;  McElvey  v.  Lewis, 
76  N.  Y.  37Z;  Wilcox  v.  Pratt,  52 
Hun  340,  5  N.  Y.  S.  361  (affd.  125 
N.  Y.  688,  25  N.  E.  1091)  ;  Witherbee 
V.  Witherbee,  17  App.  Div.  181,  45 
N.  Y.  S.  297;  Brush  v.  Jay,  50  Hun 
446,   3   N.   Y.   S.  332,  21   N.   Y.   St. 


LAW    OF    rARTXERSIIIP 


992 


sets.^  Thus,  a  petition  for  the  appointment  of  a  receiver  for  a  firm, 
which  avers  that  the  parties  are  partners,  that  defendant  refuses 


312  (revd.  113  N.  Y.  482,  21  N.  E. 
184)  ;  Richards  v.  Baurman,  65  N. 
Car.  162 ;  Fleming  v.  Carson,  Zl  Ore. 
252,  62  Pac.  374;  Fox  v.  Curtis,  176 
Pa.  St.  52,  34  Atl.  952;  Sloan  v. 
Moore,  2,1  Pa.  St.  217;  Watson  v. 
McKinnon,  11  Tex.  210,  11  S.  W. 
197;  Southwell  v.  Church,  51  Tex. 
Civ.  App.  547,  111  S.  W.  792;  Rische 
V.  Rische,  46  Tex.  Civ.  App.  23,  101  S. 
W.  849;  Jordan  v.  Miller,  75  Va. 
442;  Martin  v.  Wilson,  84  Wash. 
625,  147  Pac.  404;  Whipple  v.  Lee, 
46  Wash.  266,  89  Pac.  712;  Mc- 
Mahon  v.  McClernan,  10  W.  Va.  419 ; 
Schmidt  V.  Mertes,  145  Wis.  468,  130 
N.  W.  474;  Jefferys  v.  Smith,  1  Jac. 
&  W.  298,  21  R.  R.  175;  Katsch  v. 
Schenck,  13  Jur.  668,  18  L.  J.  Ch. 
386;  Smith  v.  Jeyes,  4  Beav.  503,  49 
Eng.  Reprint  433 ;  Davis  v.  Amer,  3 
Drew  64,  61  Eng.  Reprint  826;  Wil- 
son v.  Greenwood,  1  Swanst.  471,  1 
Wils.  Ch.  223,  18  R.  R.  118,  Z^  Eng. 
Reprint  469;  McLaren  v.  Whiting,  16 
Ont.  Pr.  552. 

6  Caddie  v.  Mann,  147  Fed.  960 
(revd.  on  other  grounds  158  Fed. 
42)  ;  Watson  v.  Bettman,  88  Fed. 
825;  Brooke  v.  Tucker  (Ala.),  43 
So.  141 ;  Fischer  v.  Superior  Ct.  of 
Tuolumne  County,  98  Cal.  67,  32  Pac. 
875;  Joselove  v.  Bohrman,  119  Ga. 
204,  45  S.  E.  982;  Fink  v.  Montgom- 
ery, 162  Ind.  424,  68  N.  E.  1010; 
Barnes  v.  Jones,  91  Ind.  161 ;  Katz 
V.  Brewington,  71  Md.  79,  20 
Atl.  139;  Shannon  v.  Wright,  60  Md. 
520;  Speights  v.  Peters,  9  Gill  (Md.) 
472;  Drury  v.  Roberts,  2  Md.  Ch. 
157;  Williamson  v.  Wilson,  1  Bland 
(Md.)  418;  Reid  v.  Freed,  100  Aliss. 
48,   56  So.  278;   Maynard  v.   Railey, 


2  Nev.  313 ;  Coddington  v.  Tappan, 
26  N.  J.  Eq.  141;  Randall  v.  Mor- 
rell,  17  N.  J.  Eq.  343;  Geortner  v. 
Canajoharie,  2  Barb.  (N.  Y.)  625; 
Haggerty  v.  Granger,  15  How.  (N. 
Y.)  Pr.  243;  Phillips  v.  Trezevant, 
67  N.  Car.  370;  Jones  v.  Weir,  217 
Pa.  321,  66  Atl.  550.  See  also  War- 
ren v.  Stagner,  7  Wkly.  Notes  Cas. 
(Pa.)  127;  Dolphin  v.  Steell,  2  Lack. 
Leg.  N.  (Pa.)  Ill;  Gowan  v.  Jeffries, 
2  Ashm.  (Pa.)  296;  Whilden  v.  Chap- 
man, 80  S.  Car.  84,  61  S.  E.  261; 
Rische  v.  Rische,  46  Tex.  Civ.  App. 
23,  101  S.  W.  849;  Cole  v.  Price,  22 
Wash.  18,  60  Pac.  153;  Wilson  v. 
Lumber  Co.,  74  W.  Va.  65,  81  S.  E. 
568;  Ballard  v.  CalHson,  4  W.  Va. 
326;  Smith  v.  Jeyes,  4  Beav.  503,  49 
Eng.  Reprint  433 ;  Butchart  v.  Dres- 
ser, 4  DeG.,  M.  &  G.  542,  10  Hare 
453 ;  Freeland  v.  Stansfield,  2  Eq.  Rep. 
1181,  1  Jur.  (N.  S.)  8,  2  W.  R.  575,  2 
Sm.  &  G.  479,  23  L.  J.  Ch.  923 ;  Cane 
V.  Macdonald,  9  Brit.  Col.  297 ;  Pren- 
tiss V.  Brennan,  2  Grant  Ch.  (U.  C.) 
322.  Thus  where  two  partners,  who 
owned  timber  land  and  a  sawmill, 
formed  a  partnership  with  a  third 
party,  who  had  no  capital,  but  was 
to  operate  the  mill,  share  in  the  net 
profits  and  account  with  the  owners, 
and  the  third  partner  purchased  tim- 
ber without  the  consent  of  the  others, 
operated  a  store  without  their  con- 
sent and  at  a  loss,  caused  the  ex- 
penses to  be  largely  in  excess  of  the 
gross  income  from  the  mill,  improp- 
erly used  money  furnished  by  his 
partners,  failed  to  produce  proper  ac- 
counts or  pay  rolls  as  a  basis  for  a 
settlement  with  the  employes,  and  re- 
fused to  deliver  up  the  possession  of 


993  ACCOUNTING    AND    DISSOLUTION    ACTIONS  §    /'21 

to  contribute  his  part  of  the  capital,  that  plaintiff  has  contrib- 
uted more  than  his  share  of  the  expenses,  that  defendant  refuses 
to  account  to  him  for  any  part  thereof,  or  to  co-operate  in  the 
prosecution  of  the  business,  that  no  division  of  the  assets  or  good- 
will can  be  mutually  agreed  on,  and  that  the  only  equitable  way 
of  making  a  division  is  by  a  sale  of  the  property,  and  which 
asks  for  a  dissolution  and  an  accounting,  states  a  good  cause  of 
action  for  a  dissolution  and  an  accounting,  and  justifies  the 
appointment  of  a  receiver/  A  receiver  has  been  appointed  on 
the  ground  of  a  partner's  insanity;^  and  for  a  law  partnership 
where  there  was  lack  of  harmony  between  the  partners  and  one 
was  excluded  from  the  business.^  Very  strong  and  clear  proof  of 
mismanagement  or  unfair  conduct,  or  of  individual  insolvency, 
must  be  shown  before  a  court  will  appoint  a  receiver  to  take 
charge  of  the  affairs  of  a  firm  which  are  being  settled  by  a  sur- 
viving partner,^"  but  it  may  be  done  under  some  circumstances,  as 
where  the  surviving  partner  sold  the  entire  firm  property  to  a 
corporation,  and  refused  the  deceased  partner's  wife  access  to  the 
books."^  A  receiver  may  be  appointed  where  both  partners  are 
dead/^  A  receiver  may  be  appointed  to  wind  up  the  affairs  and 
distribute  profits,  when  persons  engaged  in  a  manufacturing  en- 

the  mill  to  his  partners,  it  was  held,  20   N.   Y.    S.   65)  ;    Brown   v.    Finch, 

on   a   bill    for   a   dissolution   of   the  63    Hun   235,    17    N.    Y.    S.    805,    28 

partnership,  that  a  receiver  was  neces-  Abb.  N.  Cas.  36 ;  People's  Nat.  Bank 

sary  to  manage  the  business  and  set-  v.  Hodgin,  129  N.  Car.  247,  39  S.  E. 

tie  the  rights  of  the  parties.     Reid  v.  959;  Holden  v.  McMakin,  1  Pars.  Eq. 

Freed,  100  Miss.  48,  56  So.  278.  Cas.    (Pa.)    270;  Jennings  v.  Chand- 

'^  Smith  V.  Lamon  (Tex.  Civ.  App.),  ler,  10  Wis.  21;  Madgwick  v.  Wim- 

143   S.  W.  304.  ble,  6  Beav.  495,  7  Jur.  661,  14  L.  J 

8  Reynolds  v.  Austin,  4  Del.  Ch.  24.  Ch.  387 ;   Eraser  v.  Kershaw,  2  Jur 

9  Martin  v.  Wilson,  84  Wash.  625,  (N.  S.)  880,  2  Kay  &  J.  496,  25  L.  J 
147  Pac.  404.  Ch.    445,    4   W.    R.    431 ;    Young    v, 

loPainterv.  Painter  (Cal.),  36  Pac.  Buckett,  51   L.  J.   Ch.  504,  46  L.   T 

865;  Helme  v.  Littlejohn,  12  La.  Ann.  266,  30  W.  R.  511 ;  Bilton  v.  Blakely 

298;     Comstock    v.    McDonald,     113  6  Grant  Ch.  (U.  C.)  575. 

Mich.  626,  71  N.  W.  1087 ;  Miller  v.  "a  Miller  v.  Miller,  80  N.  J.  Eq.  47, 

Miller,  80  N.  J.  Eq.  47,  82  Atl.  513;  82  Atl.  513. 

Booth  v.  Smith,  79  Hun  384,  29  N.  Y.  "  Philips    v.    Atkinson,    2    Bro.    C. 

S.   790,   61    N.   Y.    St.   496;    Dawson  C  272. 
V.   Parsons,  21    N.   Y.   S.  212    (afifg. 


§  m 


LAW    OF    PARTNERSHIP 


994 


terprise,  who  became  partners  through  an  invahd  corporate  or- 
ganization, ceased  business/"  It  is  only  in  rare  cases  that  credi- 
tors of  a  firm  can  obtain  the  appointment  of  a  receiver,  though 
they  have  been  permitted  to  do  so  in  some  instances  where  it  is 
necessary  to  preserve  the  property/^ 

§  722.  Powers  and  duties  of  receiver. — Immediately  upon 
appointment  of  a  receiver,  the  entire  assets  of  the  partnership 
come  into  the  custody  of  the  court,  and  a  partner  or  creditor 
who  interferes  with  the  assets  without  permission,  is  guilty  of 
a  contempt.^*  The  appointment  of  a  receiver  does  not  affect 
the  rights  of  creditors  in  the  property  taken/^    The  receiver  of 


12  Smith  V.  Schoodoc  Pond  Pack- 
ing Co.,  109  Maine  555,  84  Atl.  268. 

13  Oliver  v.  Victor,  74  Ga.  543 ; 
Staar  v.  Moy  Tong  Koon,  145  111. 
App.  341 ;  Choppin  v.  Wilson,  27  La. 
Ann.  444;  Lawrence  Lumber  Co.  v. 
Lyon,  9Z  Miss.  859,  47  So.  849; 
Greenwood  v.  Brodhead,  8  Barb.  (N. 
Y.)  593;  Henry  v.  Henry,  10  Paige 
(N.  Y.)  314;  Stone  Co.  v.  McLamb, 
153  N.  Car.  378,  69  S.  E.  281 ;  Bell  v. 
Miller,  11  Ohio  Dec.  (Reprint)  163, 
25  Cin.  Wkly.  L.  Bui.  126. 

14  Patterson  v.  Patterson,  182  Fed 
952;    Adams   v.    Woods,    9   Cal.   24 
Naglee     v.     Minturn,     8     Cal.     540 
Adams  v.  Woods,  8  Cal.  152,  68  Am 
Dec.  313;  Adams  v.  Hackett,  7  Cal 
187;  Jackson  v.  Lahee,  114  111.  287,  2 
N.  E.   172;  Wallace  v.  Milligan,   110 
Ind.  498,  11  N.  E.  599;  Andrew's  Suc- 
cession,   16   La.    Ann.    197;    Veith   v. 
Ress,  60  Nebr.  52,  82  N.  W.  116;  Ross 
V.  Titsworth,  Zl  N.  J.  Eq.  ZZi ;  Gross 
V.  Gross,   128  App.  Div.  429,   112  N. 
Y.   S.  790;  Holmes  v.  McDowell,  Id 
N.  Y.  596  (affg.  15  Hun  585)  ;  Clapp 
V.  Clapp,  10  N.  Y.  St.  nz ;  Barry  v. 
Kennedy,    11   Abb.   Pr.    (N.    S.)    (N. 
Y.)  421;  Waring  v.  Robinson,  1  Hofif. 
Ch.    (N.   Y.)    524;    Merrick  v.    Mer- 


chants' Nat.  Bank,  11  Ohio  Sup.  Ct. 
Com.  PI.  Dec.  293;  Foster  v.  Field, 
13  Okla.  230,  74  Pac.  190 ;  In  re  Ham- 
ilton, 26  Ore.  579,  38  Pac.  1088;  Cole 
V.  Price,  22  Wash.  18,  60  Pac.  153; 
Defries  v.  Creed,  11  Jur.  (N.  S.) 
360,  6  New  Rep.  17,  12  L.  T.  262, 
13  W.  R.  632;  Chater  v.  Maclean, 
3  Eq.  Rep.  375,  1  Jur.  (N.  S.)  175, 
3  W.  R.  261 ;  Brand  v.  Sandground, 
85  L.  T.  Rep.  (N.  S.)  517;  Dacie  v. 
John,  AlcClell.  206,  13  Price  446,  28 
Rev.  Rep.  706;  O'Brien  v.  Christie, 
30  Nova  Scotia  145 ;  Prentiss  v.  Bren- 
nan,  1  Grant  Ch.  (U.  C.)  484;  Hel- 
more  v.  Smith,  35  Ch.  D.  449,  56  L. 
J.  Ch.  145,  56  L.  T.  72,  35  W.  R. 
157;  Lane  v.  Sterne,  3  Giffard  629, 
9  Jur.  (N.  S.)  320,  10  W.  R.  555. 

12  Stuparick  Mfg.  Co.  v.  San  Fran- 
cisco Super.  Ct,  123  Cal.  290,  55  Pac. 
985;  Adams  v.  Woods,  9  Cal.  24; 
Norton  v.  Sperry,  113  Alinn.  447,  129 
N.  W.  843 ;  Bird  v.  Austin,  40  N.  Y. 
Super.  Ct.  109 ;  Van  Alstyne  v.  Cook, 
25  N.  Y.  489;  Higgins  v.  Bailey,  7 
Rob.  (N.  Y.)  613;  McGrath  v. 
Cowen,  57  Ohio  St.  385,  49  N.  E. 
338;  Blakeney  v.  Dufaur,  15  Beav. 
40,  51   Eng.  Reprint  451. 


995  ACCOUNTING    AND    DISSOLUTION    ACTIONS  §    722 

the  firm  has  no  rights  over  the  individual  property  of  the  part- 
ners/^ and  takes  no  better  title  to  any  property  than  that  which 
the  partnership  had,  being  affected  by  all  claims  and  liens  and 
equities  which  would  prevail  against  the  firm/^  The  appoint- 
ment of  a  receiver  for  a  solvent  partnership  on  request  of  the 
partners,  will  not  prevent  their  creditors  securing  judgment  liens 
on  firm  property/^  After  a  receiver  has  been  appointed  no  part- 
ner is  entitled  to  any  portion  of  the  money  into  which  firm 
assets  have  been  converted,  until  all  partnership  debts  have  been 
paid/^  The  receiver  may  do  everything  necessary  to  wind  up 
the  firm  business  in  the  ordinary  manner,  and  is  not  compelled 
to  follow  the  directions  of  any  of  the  partners.-"  He  is  a  trustee 
for  all  the  partners,"^  but  has  no  power  to  bind  them  to  a  new 
obligation,-"  A  receiver  may  be  authorized  to  carry  on  the  busi- 
ness temporarily,  in  order  to  finish  firm  contracts,  or  wind  it 
up  properly,  but  can  not  be  authorized  to  carry  on  the  business 
permanently.^^  It  is  held  that  a  receiver  for  a  law  partnership 
is  not  authorized  to  attend  to  the  law  practice  in  the  courts  of 
the  partners.-*  The  receiver  of  a  partnership  may  bring  actions  to 

16  Adams   v.   Hannah,   97    Ga.    515,  20  Holloway  v.  Turner,  61  Md.  217; 

25    S.    E.   330;    Wallace   v.    Milligan,  Dixon    v.    Dixon    [1904],    1    Ch.    161. 

110  Ind.  498,  11  N.  E.  599;  Saylor  v.  IZ  L.  J.  Ch.  103;  Hills  v.  Reeves,  31 

Mockbie,    9    Iowa   209.  Wkly.  Rep.  209  (affg.  30  Wkly.  Rep. 

i'^  Security  Title   Co.  v.   Schleuder,  439). 

190  III.  609,  60  N.  E.  854;   Gillan  v.  -1  Honore    v.     Colmesnil,     1    J.    J. 

Nussbaum,    95    111.    App.    277;    Rick-  Marsh.    (Ky.)    506. 

man  v.  Rickman,   180  Mich.  224,   146  22  L^ke  v.   Munford,   4    Sm.   &   M. 

N.  W.  609,  Ann.  Cas.  1915  C,  1237.  (Miss.)  312. 

18  Myers  v.  Myers,  15  App.  Div.  448,  23  Patterson  v.  Patterson,  182  Fed. 
44  N.  Y.  S.  513;  Schloss  v.  Schloss,  952;  Rochat  v.  Gee,  137  Cal.  497,  70 
14  App.  Div.  ZZZ,  43  N.  Y.  S.  788;  Pac.  478;  Allen  v.  Hawley,  6  Fla. 
Matter  of  Thompson,  10  App.  Div.  142,  dZ  Am.  Dec.  198;  Wolbert  v. 
40,  41  N.  Y.  S.  740,  75  N.  Y.  St.  Harris,  7  N.  J.  Eq.  605;  Jackson  v. 
1133;  Bergin  v.  Deering,  70  Hun  379,  DeForest,  14  How.  Pr.  (N.  Y.)  81; 
24  N.  Y.  S.  Z6,  53  N.  Y.  St.  893.  Marten  v.  Van  Schaick,  4  Paige  (N. 
Compare  Longstaff  v.  Hurd,  66  Conn.  Y.)    479. 

350.  34  Atl.  91.  24  Alartin  v.  Wilson,  84  Wash.  625, 

19  Bishop  V.   Pendley,   138  Ga.  738,     147  Pac.  404. 
76  S.  E.  (>Z. 


§    722  LAW    OF    PARTNERSHIP  996 

collect  the  debts  due  the  firm,  and  to  protect  its  rights,'^  and  can 
bring  a  suit  to  recover  unpaid  subscriptions  to  partnership  capital,-" 
but  has  no  right  to  bring  an  action  to  set  aside  transactions  of  the 
partners,  such  as  the  conveyance  of  firm  property,  as  in  fraud  of 
creditors,-''  and  can  not  be  sued  without  the  court's  permission."* 
A  receiver  to  hold  firm  assets  and  dispose  of  them,  may  refuse  to 
sue  to  set  aside  a  conveyance  by  a  partner  until  he  is  given  indem- 
nity for  costs  and  expenses,  where  the  cause  of  action  is  the 
firm's  sole  asset.^^  It  has  been  held  that  the  receiver  of  a  part- 
nership can  not  be  sued  for  a  tort  committed  by  the  partnership 
before  his  appointment,  on  the  theory  that  the  receiver  is  answer- 
able only  for  the  consequences  of  the  acts  and  negligence  of  his 
own  servants  and  employes. ^°  However,  it  is  also  held  that  such 
an  action  will  lie  for  the  reason  that  the  claim  should  not  be 
defeated  merely  because  the  property  of  the  wrongdoers  is  in  the 
hands  of  a  receiver.^^  The  receiver  is  under  a  duty  to  account,'^" 
and  to  pay  over  any  balance  to  the  partners. ^^  The  funds  earned 
by  a  receiver  in  carrying  on  the  business  should  be  paid  into  the 
general  fund  and  applied  to  capital  and  profits.^*  The  mere 
bringing  of  a  suit  for  accounting  and  dissolution  does  not  dis- 
solve the  partnership  before  decree.^^ 

25Nealis   v.   LIssner,   52   Hun   503,  465,    47    N.    E.    195;    Blum    v.    Van 

5   N.   Y.   S.  682,   24   N.   Y.   St.   196;  Vechten,  92  Wis.  378,  66  N.  W.  507. 

Fincke  v.   Fincke,   25   Hun    (N.   Y.)  2^  Flinn  v.  Hanbury,  157  App.  Div. 

616 ;  Barry  v.  Nelms,  2  Pac.  County  207,  141  N.  Y.  S.  844. 

Ct.  440;  Prentiss  v.  Brennan,  2  Grant  3o  Emory  v.  Faith,  113  Md.  253,  11 

Cli.   (U.  C.)   274.     Compare  McBride  Atl.  386,  Ann.  Cas.  1912  A,  586. 

V.   Ricketts,   98   Iowa  539,  67   N.  W.  ^i  Everett  v.  Gores,  89  Wis.  421,  62 

410,  and  May  v.  Pagett,  2  Pa.  Dist.  N.  W.  82. 

276.  ^2  Gridley   v.    Conner,    2    La.    Ann. 

26Torbe  v.   Strauss,   155  Wis.  518,  87;  Clapp  v.  Clapp,  10  N.  Y.  St.  1Z2>. 

144  N.  W.  184,  1136.  ss  Rochat  v.   Gee,   137  Cal.  497,  70 

27  Walsh  V.  St.  Paul  School  Furni-  Pac.  478 ;    Slater  v.   Slater,   78  App. 
ture    Co.,   60   Minn.   397,   62   N.   W.  Div.  449,  80  N.  Y.  S.  363. 

383 ;  Berlin  Mach.  Works  v.  Security  ^4  Kennedy  v.  Hill,  89  S.  Car.  462, 

Trust  Co.,  60  Minn.   161,  61   N.  W.  71  S.  E.  974. 

1131 ;  Ferguson  v.  Bruckman,  23  App.  ^^  Marye    v.     Jones,     9     Cal.     335 ; 

Div.    182,   48   N.    Y.    S.   887;    Weber  Naglee  v.  Minturn,  8  Cal.  540;  Bag- 

V.  Weber,  90  Wis.  467,  dZ  N.  W.  757.  netto  v.  Bagnetto,  51  La.  Ann.  1200, 

28  Robinson  v.  Hodgkins,  168  Mass.  25  So.  987 ;  Ross  v.  Titsworth,  Zl  N. 


997 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


§  723 


§  723.  Procedure  at  trial. — The  procedure  in  a  suit  for  a 
partnership  accounting  is  the  ordinary  equity  procedure,^*'  Dis- 
puted questions  of  fact  may  be  tried  by  a  jury  under  proper 
instructions  from  the  court,^^  but  it  is  the  rule  that  the  court 
may  adopt  or  reject  the  findings  of  the  jury  as  he  sees  fit.^^  If 
the  fact  of  partnership  is  not  admitted  the  court  should  find  it 
before  ordering  dissolution,  or  accounting,^''  but  this  is  unnec- 
essary where  the  partnership  is  admitted.*"  Where  the  bill  is 
for  accounting  after  dissolution,  there  is  a  right  of  course  to 
the  order  for  accounting,  if  not  lost  by  laches  or  otherwise.'*^ 
The  accounting  will  often  be  ordered  by  an  interlocutory  decree, 
or  an  interlocutory  decree  of  dissolution  may  be  granted.*"  A 
decree  awarding  the  assets  to  some  of  the  partners,  to  whom  it 
was  provided  in  the  partnership  agreement  they  should  go  ori^ 
dissolution,  should  not  be  granted  until  the  firm  debts  and  costs 


J.  Eq.  333 ;  Brown  v.  Gray,  17  Pa. 
Super.  Ct.  563. 

ssSouthworth  v.  People,  183  111. 
621,  56  N.  E.  407  (aflfg.  85  111.  App. 
289)  ;  Kirkwood  v.  Smith,  72  App. 
Div.  429,  75  N.  Y.  S.  1016;  Cook 
V.  Jenkins,  79  N.  Y.  575;  Fries  v. 
Ennis,  8  Pa.  Co.  Ct.  113;  Slaughter 
V.  Banner,  102  Va.  270,  46  S.  E. 
289;  Teacher  v.  Calder  [1899],  A.  C. 
451 ;  Ambler  v.  Bolton,  L.  R.  14  Eq. 
427,  41  L.  J.  Ch.  783,  20  W.  R.  934; 
Bate  V.  Robins,  32  Beav.  73,  55  Eng. 
Reprint  28. 

"Wadley  v.  Jones,  55  Ga.  329; 
Moore  v.  Stone,  50  Ga.  157 ;  Carlin 
V.  Donegan,  15  Kans.  495 ;  Smith  v. 
Smith,  93  Maine  253,  44  Atl.  905; 
Roache  v.  Pendergast,  3  Harr.  &  J. 
(Md.)  33;  Lenahan  v.  Casey,  46 
Mont.  367,  128  Pac.  601;  Gilliam  v. 
Newland,  37  Okla.  36,  130  Pac.  133; 
Russell  V.  Nail,  79  Tex.  664,  15  S. 
VV.  635 ;  Carroll  v.  Evans,  27  Tex. 
262.  See  also  Rush  v.  First  Nat. 
Bank  (Tex.  Civ.  App.),  160  S.  W. 
319;    Hengy    v.    Hengy    (Tex.    Civ. 


App.),  151  S.  W.  1127;  Johnson  v. 
Clements,  23  Tex.  Civ.  App.  112,  54 
S.  W.  272;  Herring  v.  Herring  (Tex. 
Civ.  App.),  51  S.  W.  865;  Yarwood 
V.  Billings,  31  Wash.  542,  72  Pac. 
104. 

2s  Lenahan  v.  Casey,  46  Mont.  367, 
128   Pac.  601. 

39Reybold  v.  Dodd,  1  Harr.  (Del.) 
401,  26  Am.  Dec.  401 ;  Nims  v.  Nims, 
20  Fla.  204 ;  Jones  v.  Lester,  77  App. 
Div.  174,  78  N.  Y.  S.  1000. 

^oNisbet  v.  Nash,  52  Cal.  540. 

41  Collins  V.  Owens,  34  Ala.  66 ; 
Jeter  v.  Johnson,  110  Ga.  308,  35  S. 
E.  166;  McKaig  v.  Hebb,  42  Md. 
227;  Glenn  v.  Hebb,  12  Gill  &  J.  271 
(Md.)  ;  Felder  v.  Wall,  26  Miss.  595; 
Rennie  v.  Crombie,  12  N.  J.  Eq.  457; 
Smith  v.  Fitchett,  56  Hun  473,  10  N. 
Y.  S.  459  (affg.  2  N.  Y.  S.  261,  15  N. 
Y.  Civ.  Proc.  207)  ;  Kennedy  v.  Shil- 
ton,  1  Hilt.  546,  9  Abb.  Pr.  (N.  Y.) 
157  note ;  Pine  v.  Ormsbee,  2  Abb. 
Pr.  (N.  S.)  (N.  Y.)  375;  Smith  v. 
Barringer,  74  N.  Car.  665. 

42  Rassaert  v.  Mensch,  17  Cal.  App. 


§    724  LAW    OF    PARTNERSHIP  998 

of  dissolution  were  paid."  In  case  of  a  partnership  for  a  single 
purpose,  at  end  before  suit,  it  is  unnecessary  to  adjudge  disso- 
lution in  a  decree  for  an  accounting.** 

§  724.  Burden  of  proof. — The  general  rules  of  proof  apply 
in  a  suit  for  a  partnership  accounting,  and,  of  course,  the  party 
pleading  the  affirmative  of  an  issue  has  the  burden  of  prov- 
ing it.  A  partner  has  the  burden  of  showing  authority  for 
a  claim  made  by  him.^''  The  partner  asserting  bad  faith  has, 
as  a  general  rule,  the  burden  of  proving  it.*^  A  defendant 
who  pleads  dissolution  and  settlement  has  the  burden  of  prov- 
ing it.**  The  widow  of  a  surviving  partner  who  charges  fraud, 
must  prove  her  allegations  by  clear  and  convincing  evidence.*^ 
The  administrator  of  a  partner  who  had  exclusive  control  of  the 
business  and  kept  firm  books,  but  did  not  keep  accurate  accounts, 
had  when  sued  for  a  settlement,  the  burden  of  showing  that  his 
decedent  applied  firm  assets  to  firm  debts. ^° 

§  725.  ■  Reference. — The  question  as  to  whether  the  de- 
fendants are  liable  to  account  must  be  decided  before  reference 
to  a  master  to  take  the  account,  for  accounting  may  be  unneces- 
sary.^^ The  right  to  a  reference  undoubtedly  exists  where  the 
answer  admits  all  the  essentials  necessary  to  an  accounting,^"  un- 

637,    120  Pac.    1072;    Quinn   v.   Reed,  so  Marcum  v.  Marcum,  154  Ky.  401, 

148  N.  Y.   S.  801;   Donnelly  v.   Mc-  157  S.  W.  1101. 

Ardle,  152  App.  DIv.  805,  137  N.  Y.  ^i  Smith  v.  Smith,  135  Ga.  582,  69 

S.  801.  S.    E.    1110;    Adams   v.    Gaubert,    69 

43  Steinberg  v.  Eagan,  234  Pa.  291,  III.  585 ;  Vermillion  v.  Bailey,  27  111. 

83  Atl.  272.  230;   Brmier  v.  Jacobson,   115   Minn. 

4*  Spencer  v.  Barnes,  25  Gal.  App.  425,  132  N.  W.  995 ;  Jones  v.  Lester, 

139,  142  Pac.  1088.  11  App.  Div.   174,  78  N.  Y.   S.  1000 

4G  See  post  §  729.  (applying  Code  Civ.  Proc,   §   1013)  ; 

47  Marcum  v.  Marcum,  154  Ky.  401,  Bantes  v.  Brady,  8  How.  Pr.  (N.  Y.) 
157  S.  W.  1101.  See  also  Costa  v.  216;  Dampf's  Appeal,  106  Pa.  St.  72; 
Costa  (Mass.),  110  N.  E.  309;  Na-  Collyer  v.  Collyer,  38  Pa.  St.  257; 
varro  v.  Lamana  (Tex.  Civ.  App.),  Driggs  v.  Morely,  2  Pinn.  (Wis.) 
179  S.  W.  922.  403,  2  Chandl.  59. 

48  Walker  v.  Frierson,  180  Ala.  11,  52\vilcoxon  v.  Wilcoxon,  111  111. 
60  So.  57.  App.   90;   Auld   v.   Butcher,   2   Kans. 

4^  Summerill   v.    Summerill    (N.    J. 
Eq.),  93  Atl.  726. 


999  ACCOUNTING   AND   DISSOLUTION    ACTIONS  §    726 

less  the  account  is  taken  by  the  court  ;^'  or  the  defendant  has 
pleaded  a  full  settlement;^*  or  accepts  the  plaintiff's  statement/'"^ 
And  if  all  the  firm  property  has  been  sold,  and  the  proceeds 
properly  applied,  the  court  may  properly  refuse  to  appoint  a 
master,  where  the  rights  of  all  the  parties  to  the  firm  property 
had  been  determined. ^"^ 

§  726.  Manner  of  drawing  account. — The  account  should 
include  all  firm  accounts  not  previously  settled,  or  taken  out  from 
the  accounting.^^  If  the  partnership  agreement  so  provides,  the 
court  may  take  cognizance  of  matters  relating  to  transactions 
prior  to  its  date,  as  well  as  those  subsequent.^^  There  is  no  right 
to  determine  matters  as  to  a  third  person  not  a  party.^^  The 
method  of  drawing  up  the  account  should  be  to  ascertain  and 
state  an  account  as  to  the  partnership  and  its  creditors,  then  to 
credit  each  partner  with  contributions  or  advances  made  by  him, 
then  profits  or  losses  should  be  ascertained,  and  all  claims  be- 
tween the  partners  as  to  partnership  affairs,  settled  and  one  bal- 
ance struck  as  the  sum  owing  by  one  partner  to  the  other,  or  by 
the  firm  to  each,*'''  although  another  method  may  be  followed  by 

135 ;  Bush  v.  Stamper,  61  S.  W.  267,  sg  Fullenwider   v.    Bank,    101    Ark. 

22  Ky.  L.  1592;  Gerber  v.  Jones,  36  259,  142  S.  W.  149. 

Nebr.  126,  54  N.  W.  81 ;  Kennett  v.  s?  Bernie  v.  Vandever,  16  Ark.  616 ; 

Hopkins,   175   N.  Y.  496,  67   N.   E.  Randolph  v.  Inman,  172  111.  575,  50 

1084,   174  N.  Y.  545,  67  N.  E.   1084  N.  E.  104 ;  Sharp  v.  Morrow,  6  T.  B. 

(affg.  58  App.  Div.  407,  69  N.  Y.  S.  Mon.  (Ky.)  300;  Wiggin  v.  Fine,  17 

18;  affg.  20  Misc.  259,  45  N.  Y.  S.  Mont.    575,    44    Pac.    75;    Boyle    v. 

797);   McPeters  v.  Ray,  85   N.  Car.  Hardy,    28    Mo.    390;    Parkhurst    v. 

462 ;  Conley  v.  Horner,  10  Okla.  277,  Muir,  7  N.  J.  Eq.  555 ;  In  re  Hearns, 

62   Pac.  807;   Bonland  v.  Carpin,  27  214  N.  Y.  426,  108  N.  E.  816;  Price 

S.  Car.  235,  3  S.  E.  219;  Frierson  v.  v.  Eccles,  IZ  N.  Car.   162;  Leinbach 

Morrow   (Tenn.),  48  S.  W.  245;  Za-  v.  Wolle,  211   Pa.  629,  61   Atl.  248; 

linoff  V.  Hammond   [1898],  2  Ch.  92,  Herring  v.  Herring  (Tex.  Civ.  App.), 

67  L.  J.  Ch.  370;  Barnes  v.  Youngs  51  S.  W.  865;  Sim  v.  Sim,  11  Ir.  Ch. 

[1898],  1  Ch.  414.  310. 

S3  Roelofs  V.  Wever,  119  Mich.  334,  ss  Gore  v.   Vines,   72   W.   Va.   783, 

78  N.  W.  136.  79  S.  E.  820. 

s^Wynkoop  v.  Wynkoop,  119  App.  ^^  Flinn  v.  Hanbury,  157  App.  Div. 

Div.  679,  104  N.  Y.  S.  296.  207,  141  N.  Y.  S.  844. 

S5  Diehl    V.    Dreyer,    84    App.    Div.  ^o  Garrett  v.  Robinson,  80  Ala.  192  ; 

247,  82  N.  Y.  S.  770.  McCall   v.   Moschowitz,    14   Daly    16, 

13 — Row.  ON  Partn. — Vol..  2 


§    726  LAW    OF    PARTNERSHIP  1000 

agreement.^^  As  said  by  Mr.  Lindley:"  "The  method  of  taking 
a  partnership  account  under  a  judgment  in  the  usual  form  is  as 
follows :  ( 1 )  Ascertain  how  the  firm  stands  as  regards  nonpart- 
ners.  (2)  Ascertain  what  each  partner  is  entitled  to  charge  in  ac- 
count with  his  copartners,  remembering,  in  the  words  of  Lord 
Hardwicke,  that 'each  is  entitled  to  be  allowed  as  against  the  other, 
everything  he  has  advanced  or  brought  in  as  a  partnership  trans- 
action, and  to  charge  the  other  in  the  account  with  what  that 
other  has  not  brought  in,  or  has  taken  out  more  than  he  ought.' 
(3)  Apportion  between  the  partners  all  profits  to  be  divided  or 
losses  to  be  made  good;  and  ascertain  what,  if  anything,  each 
partner  must  pay  to  the  others,  in  order  that  all  cross-claims  may 
be  settled.  In  order,  therefore,  to  take  a  partnership  account, 
it  is  necessary  to  distinguish  joint  estate  from  separate  estate; 
joint  debts  from  separate  debts;  and  to  determine  what  gains  and 
what  losses  are  to  be  placed  to  the  joint  account  of  all  the  part- 
ners, or  to  the  separate  accounts  of  some  or  one  of  them  exclu- 
sively." If  the  itemized  statement  of  amounts  due  the  parties 
leaves  no  doubt  as  to  what  was  included  in  the  total,  it  is  suffi- 
cient without  giving  details  of  the  several  items. "^^  But  where 
the  master's  report  is  obscure,  confused,  and  so  unintelligible 
that  the  court  can  not  pass  on  it  satisfactorily,  the  accounting 
will  be  referred  again  for  another  report.®^  An  auditor  to  whom 
reference  was  made,  in  an  accounting  in  which  there  was  a  dis- 
pute as  to  the  date  of  commencement  of  the  partnership,  having 

1   N.  Y.   St.  99,   10  Civ.   Proc.   107;  ilton   Bank-Note  Engraving  &c.   Co., 

Cockerham   v.    Bosley,   52   La.    Ann,  56  App.  Div.  488,  67  N.  Y.   S.  827; 

65,  26  So.  814 ;  Neudecker  v.  Kohl-  Thornton  v.  Proctor,  Austr.  94,  3  Rev. 

berg,  3  Daly  (N.  Y.)  407;  Strathy  v.  Rep.  558;  Watney  v.  Wells,  1  N.  R.  82. 

Crooks,   6   Grant    Ch.    (U.    C.)    162.  32  L.  J.  Ch.  194,  9  Jur.  (N.  S.)  396, 

See  also  Hicks  v.  Chadwell,  1  Tenn.  11  W.  R.  228;  Davidson  v.  Thirkell, 

Ch.  251.  3  Grant  Ch.   (U.  C.)  330. 

61  Kelsey  v.  Hobby,  16  Pet.  (U.  S.)  62  Lindley   Partnership    (8   ed.),   p. 

269,  10  L.  ed.  961 ;  Hume  v.  McNees,  598. 

10  S.  W.  384,  10  Ky.  L.  947;  Kliger  es  shadburne   v.    Sbarbaro,    182   111. 

v.  Rosenfeld,  120  App.  Div.  396,  105  App.  54. 

N.  Y.  S.  214;   Lowther  v.   Lowther,  eiReid  v.  Freed,   100  Miss.  48,  56 

105  App.  Div.  638,  94  N.  Y.  S.  159;  So.  278. 
New  York  Bank-Note  Co.  v.  Ham- 


1001  ACCOUNTING   AND   DISSOLUTION    ACTIONS  §    727 

no  power  to  pass  on  this  question,  properly  reported  the  amount 
which  was  due  each  partner  on  each  of  the  different  theories 
as  to  the  date.'' 

§  727.  Partnership  books  and  accounts. — Where  a  part- 
ner has  not  kept  accurate  accounts,  all  doubtful  items  will  be 
resolved  against  him,  as  a  general  rule,'"  although  this  will  not 
be  done  when  he  is  not  able  or  qualified  to  keep  accounts,"  and, 
presumably,  when  there  was  such  reliance  on  the  other  partner 
as  to  make  his  conduct  fraud,  and  then  the  best  evidence  ob- 
tainable will  be  competent  in  order  to  ascertain  the  true  state 
of  affairs.'^  Where  both  partners  were  trying  to  obtain  advan- 
tage of  each  other,  and  the  books  were  kept  by  one  in  the 
absence  of  the  other  who  could  not  read  or  write,  and  the  part- 
ner keeping  the  books  obtained  the  advantage,  it  was  held  these 
things  should  be  considered  by  the  court  and  the  settlement  made 
as  nearly  as  possible  in  conformity  with  the  books  and  con- 
tract.'^ In  an  action  for  an  accounting,  each  partner  has  the 
right  to  inspect  the  firm  books.^*'    Where  it  appears  that  all  the 

65Hengy     v.     Hengy     (Tex.     Civ.  23  Ky.  L.  12;  Knapp  v.  Edwards,  57 

App.),  151  S.  W.  1127.  Wis.  191,  15  N.  W.  140. 

60  Pierce  v.  Scott,  37  Ark.  308 ;  ^s  Petty  v.  Haas,  122  Iowa  257,  98 
Marcum  v.  Marcum,  154  Ky.  401,  N.  W.  104;  Bevans  v.  Sullivan,  4 
157  S.  W.  1101;  Harman  v.  Stuart  Gill  (Md.)  383;  Young  v.  Barras, 
(Ky.),  119  S.  W.  210;  Archer  74  Mich.  343,  42  N.  W.  42;  Schmidt 
V.  Barry,  62  S.  W.  485,  23  Ky.  L.  v.  Lebby,  11  Rich.  Eq.  (S.  Car.) 
12;  Kirwan  v.  Henry,  16  S.  W.  828,  329;  Myers  v.  Bennett,  3  Lea 
13  Ky.  L.  199;  Leftwitch  v.  Left-  (Tenn.)  184;  Budeke  v.  Ratterman, 
witch,  6  La.  Ann.  346;  Bevans  v.  2  Tenn.  Ch.  459;  Dimond  v.  Hen- 
Sullivan,  4  Gill  (Md.)  383;  Mitch-  derson,  47  Wis.  172,  2  N.  W.  7Z. 
ell  V.  Mitchell,  92  Mich.  618,  52  N.  eo  Hirshberg  v.  Ciconett,  146  Ky. 
W.  1024;  Young  v.  Barras,  74  Mich.  642,  143  S.  W.  10. 
343,  42  N.  W.  42;  Van  Ness  v.  Van  ^oStebbins  v.  Harmon,  17  Hun  (N. 
Ness,  32  N.  J.  Eq.  669  (revd.  on  Y.)  445;  Kelly  v.  Eckford,  5  Paige 
other  grounds  in  32  N.  J.  Eq.  729);  (N.  Y.)  548;  Knoch  v.  Funke,  59 
Clements  v.  Mitchell,  62  N.  Car.  3;  N.  Y.  Super.  Ct.  240,  14  N.  Y.  S. 
Gay  V.  Householder,  71  W.  Va.  277,  477;  Saunders  v.  Duval,  19  Tex.  467; 
76  S.  E.  440,  Ann.  Cas.  1914  C,  Calloway  v.  Tate,  1  Hen.  &  M. 
297n;  Knapp  v.  Edwards,  57  Wis.  (Va.)  9;  Millar  v.  Craig,  6  Beav. 
191,  15  N.  W.  140.  See  Martinez  433,  49  Eng.  Reprint  893;  Walmsley 
V.  Ong  Pong  Co.,   14  Philippine  726.  v.  Walmsley,  3  Jo.  &  Lat.  556. 

"Archer  v.   Barry,  62   S.  W.  485, 


§  '^2.7, 


LAW    OF    rxVRTXERSIIIP 


1002 


partners  had  access  to  the  partnership  books,  at  or  about  the 
lime  the  entries  were  made,  the  presumption  is  that  the  entries 
were  correct,  and  they  are  admissible  as  to  all  the  partners,'^  or 
their  representatives.''^  This  has  been  held  even  when  the  books 
contradicted  the  partnership  articles.^^  Unless  the  contrary  ap- 
pears, it  is  presumed  that  the  parties  stand  on  an  equal  footing 
as  to  the  books  of  the  firm/*  Where  a  partner's  account  is  based 
on  the  book  entries,  there  is  a  stronger  presumption  that  such 
entries  are  correct  as  to  him/^  If  a  partner  made  no  objection 
to  an  item  in  his  copartner's  account,  in  which  he  credited  him- 
self with  an  amount,  and  did  not  offer  evidence  to  show  that 


"Powers  V.  Dickie,  49  Ala.  81; 
Desha  v.  Smith,  20  Ala.  747;  Hal- 
ler  V.  Willamowicz,  23  Ark.  566; 
Morgans  v.  Adel,  76  Cal.  xix,  18  Pac. 
247;  O'Brien  v.  Hanley,  86  111.  278; 
Eden  v.  Lingenfelter,  39  Ind.  19; 
Reno  V.  Crane,  2  Blackf.  (Ind.)  217; 
Hale  V.  Philbrick,  47  Iowa  217; 
Moon  V.  Story,  8  Dana  (Ky.)  226; 
Carpenter  v.  Camp,  39  La.  Ann. 
1024,  3  So.  269;  Parker  v.  Jonte,  15 
La.  Ann.  290;  Armistead  v.  Spring, 
1  Rob.  (La.)  567;  Jordan  v.  White, 
4  Mart.  (N.  S.)  (La.)  335;  Top- 
liff  V.  Jackson,  12  Gray  (Mass.) 
565;  Howard  v.  Patrick,  38  Mich. 
795;  Dunnell  v.  Henderson,  23  N. 
J.  Eq.  174;  Cheever  v.  Lamar,  19 
Hun  (N.  Y.)  130;  Caldwell  v.  Lei- 
ber,  7  Paige  (N.  Y.)  483;  Heartt  v. 
Corning,  3  Paige  (N.  Y.)  566; 
Stoughton  V.  Lynch,  2  Johns.  Ch. 
(N.  Y.)  209;  Cobb  v.  Martin,  32 
Okla.  588,  123  Pac.  422;  Boire  v. 
McGinn,  8  Ore.  466;  Congdon  v. 
Aylsworth,  16  R.  I.  281,  18  Atl.  247; 
Richardson  v.  Wyatt,  2  Desaus,  Eq. 
(S.  Car.)  471;  Cameron  v.  Watson, 
10  Rich.  Eq.  (S.  Car.)  64;  Myers 
V.  Bennett,  3  Lea  (Tenn.)  184;  Bu- 
deke  v.  Ratterman,  2  Tenn.  Ch.  459; 
Hicks  V.  Chadwell,  1  Tenn.  Ch.  251; 


Brickhouse  v.  Hunter,  4  Hen.  &  M. 
(Va.)  363,  4  Am.  Dec.  528;  Fletcher 
V.  Pollard,  2  Hen.  &  M.  (Va.)  544; 
Brierly  v.  Cripps,  7  C.  &  P.  709; 
Lodge  V.  Pritchard,  3  DeG.,  M.  &  G. 
906;  Sim  v.  Sim,  11  Ir.  Ch.  310. 
Compare  Sutton  v.  Mandeville,  1 
Cranch  (C.  C.)  2,  Fed.  Cas.  No.  13648. 
See  Phillips  v.  Reynolds,  236  111.  119, 
86  N.  E.  193;  Hirshberg  v.  Ciconett, 
146  Ky.  642,  143  S.  W.  10;  Ben- 
nett V.  McKay,  4  Newfoundl.  178, 
462    (1879). 

72Routen  v.  Bostwick,  59  Ala.  360; 
Powers  V.  Dickie,  49  Ala.  81 ;  Gard- 
ner V.  Cummings,  Ga.  Dec.  1 ;  How- 
ard V.  Patrick,  38  Mich.  795;  More- 
house V.  Newton,  3  DeG.  &  Sm. 
307,  13  Jur.  420;  Townend  v.  Town- 
end,  1  Giffard  201,  5  Jur.  (N.  S.) 
506,  7  W.  R.  529;  In  re  Wood,  34 
Ont.  L.  278,  8  Ont.  W.  N.  583; 
Browning  v.  Browning,  5  Newfoundl. 
161  (1887).  See  Cronk  v.  Crandall, 
137  App.  Div.  440,  121  N.  Y.  S. 
805. 

73  Gregg  V.  Hord,  129  111.  613,  22 
N.  E.  528. 

■^^  Hirshberg  v.  Ciconett,  146  Ky. 
642,  143  S.  W.  10. 

75  Donovan  v.  Clark,  138  N.  Y. 
631,  ZZ  N.  E.  1066. 


1003 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


■28 


the  copartner  did  not  properly  pay  such  amount,  the  copartner's 
account  could  not  be  surcharged  with  it.'*^  A  verified  pleading 
attesting  the  correctness  of  partnership  books  adds  it  is  held  to 
their  evidentiary  value.'^'^  There  is  no  presumption  that  entries  in 
firm  books  are  correct  as  to  a  dormant  partner,  who  exercised  no 
right  of  inspection/''  nor  is  a  retiring  partner  bound  by  entries 
made  in  firm  books  after  his  retirement/'*  There  is  no  presump- 
tion that  a  partner's  private  books  are  correct/"  In  the  absence 
of  estoppel/^  the  presumption  of  the  correctness  of  partnership 
books  may  be  rebutted  by  a  showing  of  mistake  or  fraud/^  Ac- 
counts rendered  between  partners  may  be  competent  to  show  that 
certain  items  have  been  admitted  by  the  parties  not  to  be  ele- 
ments of  the  partnership  account/^  The  failure  of  defendant 
partners  to  make  the  accounting  asked  will  not  deprive  the  plain- 
tiff of  his  right  to  relief  when  he  has  produced  all  the  evidence 
in  his  power/* 

§  728.     Conversion  of  assets  into  cash. — After  the  appoint- 
ment of  a  receiver  he  has  the  sole  right  to  collect  debts  of  a 


76  Donnelly  v.  McArdle,  152  App. 
Div.  805,  137  N.  Y.  S.  801. 

"7  Haller  v.  Willamowicz,  23  Ark. 
566;  Wendling  v.  Jennisch,  85  Iowa 
392,  52  N.  W.  341. 

■^8  Taylor  v.  Herring,  10  Bosw.  (N. 
Y.)    447. 

'■^  Bank  of  British  Columbia  v. 
Delafield,  80  Hun  564,  30  N.  Y.  S. 
600,  62  N.  Y.  St.  655  (affd.  152  N. 
Y.  624,  46  N.  E.  1144)  ;  Clements 
V.  Mitchell,  62  N.  Car.  3. 

soTurnipseed  v.  Goodwin,  9  Ala. 
Zll;  Adams  v.  Funk,  53  111.  219; 
Wheatley  v.  Wheeler,  34  Md.  62; 
Sim  V.   Sim,  11   Ir.  Ch.  310. 

^1  Wendling  v.  Jennisch,  85  Iowa 
392,  52  N.  W.  341. 

82  Roberts  v.  Eldred,  IZ  Cal.  394,  15 
Pac.  16;  Butler  v.  Beech,  55  Cal.  28; 
Donaldson  v.  Donaldson,  142  111. 
App.  21;  Peden  v.  Mail,  118  Ind. 
560,  20  N.  E.  446;   Bannon  v.  Haw- 


kins, 35  S.  W.  636,  18  Ky.  L.  150; 
Greer  v.  Greer,  23  S.  W.  866,  15  Ky. 
L.  472 ;  Kirwan  v.  Henry,  16  S.  W. 
828,  13  Ky.  L.  199;  Moon  v.  Story, 
8  Dana  (Ky.)  226;  James  v.  Jacobs, 
147  N.  Y.  710,  42  N.  E.  723  (aflfg.  71 
Hun  176,  24  N.  Y.  S.  1126)  ;  Don- 
ovan V.  Clark,  138  N.  Y.  631,  ZZ  N. 
E.  1066;  Boyd  v.  Foot,  5  Bosw.  (N. 
Y.)  110;  Barrett  v.  Kling,  16  N.  Y. 
S.  92,  40  N.  Y.  St.  823;  Keys  v. 
Baldwin,  10  Ohio  Dec.  (Reprint) 
271,  19  Cine.  L.  Bui.  216;  Ziegler's 
Appeal,  2  Sad.  (Pa.)  351,  4  Atl.  837; 
Johnston  v.  Ballard,  83  Tex.  486,  18 
S.  W.  686. 

s^  Barry  v.  Barry,  3  Cranch.  C.  C. 
120.  Fed.  Cas.  No.  1060;  Browning 
V.  Browning,  5  Newfoundl.  161 
(1887). 

S4  Oustad  V.  Hahn,  27  N.  Dak.  334, 
146  N.  W.  557. 


§  728 


LAW    OF    PARTNERSHIP 


1004 


firm,  as  against  the  partners,  or  their  assignees.®^  The  general 
practice  in  an  action  for  a  partnership  accounting  and  dissolu- 
tion is  to  sell  all  of  the  property,  and  convert  it  into  cash,  unless 
there  is  a  valid  and  honest  agreement  to  divide  the  assets  in 
kind.®''  It  was  said  in  one  case  :^^  "Taking  into  consideration  the 
fact  that  the  assets  were  not  equal  to  the  liabilities,  that  the  first 
claim  upon  the  assets  rested  with  the  creditors,  and  that  their 
right  to  present  their  claims  at  any  subsequent  stage  of  the  liti- 
gation was  still  existent,  we  think  their  interests  were  proper 


85  Adams  v.  Haskell,  6  Cal.  113,  65 
Am.  Dec.  491 ;  Murphy  v.  DuBerg, 
11  Abb.  N.  Cas.  (N.  Y.)  112;  Til- 
linghast  v.  Champlin,  4  R.  I.  173, 
67  Am.  Dec.  510;  Dixon  v.  Paddock, 
104  Va.  387,  51  S.  E.  841 ;  Irvine  v. 
Hervey,  47  Nova  Scotia  310. 

86  Burns  v.  Rosenstein,  135  U.  S. 
449,  34  L.  ed.  193,  10  Sup.  Ct.  817; 
Olcott  V.  Wing,  4  McLean  (U.  S.) 
15,  Fed.  Cas.  No.  10481;  Montross 
V.  Mabie,  30  Fed.  234;  Wiegand  v. 
Copeland,  14  Fed.  118,  7  Sawy.  442; 
Wulff  V.  San  Joaquin  County  Super. 
Ct,  110  Cal.  215,  42  Pac.  638,  52  Am. 
St.  78;  Hall  v.  Lonkey,  57  Cal.  80; 
Stower  V.  Kamphefner,  6  Cal.  App. 
80,  91  Pac.  424;  Dickinson  v.  Dick- 
inson, 29  Conn.  600 ;  Sigourney  v. 
Mume,  7  Conn.  324 ;  Tomlinson  v. 
Ward,  2  Conn.  396;  Renfrow  v. 
Pearce,  68  111.  125 ;  Marcum  v.  Mar- 
cum,  154  Ky.  401,  157  S.  W.  1101; 
Whitney  v.  Whitney,  88  S.  W.  311, 
27  Ky.  L.  1197,  11  S.  W.  206,  25 
Ky.  L.  1142,  115  Ky.  552,  74  S.  W. 
194,  24  Ky.  L.  2465;  Pratt  v.  Mc- 
Hatton,  11  La.  Ann.  260;  Kohn  v. 
Marsh,  3  Rob.  (La.)  48;  Loney  v. 
Bayly,  45  Md.  447;  Filbrun  v.  Ivers, 
92  Mo.  388,  4  S.  W.  674;  Murphy 
V.  Patterson,  24  Mont.  591,  63  Pac. 
380;  Rhodes  v.  Williams,  12  Nev.  20; 
Bogardus  v.  Reed,  160  App.  Div.  294, 


145  N.  Y.  S.  597 ;  Wing  v.  Bliss,  138 
N.  Y.  643,  34  N.  E.  513  (affg.  8  N. 
Y.  S.  500)  ;  Waugh  v.  Mitchell,  21 
N.  Car.  510;  Snyder  Mfg.  Co.  v. 
Snyder,  54  Ohio  St.  86,  43  N.  E. 
325,  31  L.  R.  A.  657;  Fleming  v.  Car- 
son, Zl  Ore.  252,  62  Pac.  374;  Slem- 
mer's  Appeal,  58  Pa.  St.  168,  98  Am 
Dec.  255 ;  Watson  v.  Williamson 
(Tex.  Civ.  App.),  76  S.  W.  793 
Pierce  v.  Trigg,  10  Leigh  (Va.)  406 
Rowlands  v.  Evans,  30  Beav.  302,  31 
L.  J.  Ch.  265,  8  Jur.  (N.  S.)  f 
Wild  V.  Milne,  26  Beav.  504,  53  Eng, 
Reprint  993 ;  Burdon  v.  Barkus,  4 
DeG.,  F.  &  J.  42;  Cook  v.  Colling- 
ridge,  Jac.  617,  1  L.  J.  Ch.  (O.  S.) 
74,  23  R.  R.  155,  767;  Hall  v.  Bar- 
rows, 9  Jur.  (N.  S.)  483,  1  N.  R. 
543,  8  L.  T.  227,  11  W.  R.  525;  Page 
v.  Slade,  54  L.  J.  Ch.  1131;  Heath 
V.  Fisher,  38  L.  J.  Ch.  14;  Crawshay 
v.  Collins,  2  Russ.  325 ;  Crawshay 
V.  Maule,  1  Swanst.  495,  36  Eng.  Re- 
print 479 ;  Waters  v.  Taylor,  2  Ves. 
&  B.  299;  Featherstonhaugh  v.  Fen- 
wick,  17  Ves.  Jr.  298,  11  Rev.  Rep. 
11;  Class  V.  Marshall,  ZZ  Wkly.  Rep. 
409;  Cragg  v.  Ford,  1  Y.  &  Coll.  280, 
20  Eng.  Ch.  280.  Compare  Rassaert 
V.  Mensch,  17  Cal.  App.  637,  120 
Pac.    1072. 

87  Wulff    V.     Superior     Court,     110 
Cal.  215,  52  Am.  St.  78. 


1005  ACCOUNTING   AND   DISSOLUTION    ACTIONS  §    728 

subject-matter  for  the  cognizance  of  the  court  in  dealing  with 
these  assets,  notwithstanding  they  were  in  no  way  parties  to 
the  record.  And,  taking  all  the  facts  into  consideration,  we  see 
no  excess  of  power  exercised  by  the  trial  court  in  ordering  the 
sale.  It  must  be  conceded  that  the  court,  by  its  receiver,  had 
the  power  to  sell  perishable  property,  and,  upon  the  showing 
here  made,  this  business  was  clearly  property  of  that  character. 
The  assets  consisted  of  articles  of  trade  and  the  good-will  of 
the  business.  The  tangible  assets  were  becoming  dissipated  and 
lost  in  spite  of  care  and  skill  in  the  management  of  them,  and 
without  these  assets  the  good-will  would  seem  to  be  entirely 
valueless.  These  two  classes  of  property  were  indissolubly  con- 
nected, and,  if  the  court  had  the  power  to  sell  either,  it  had  the 
power  to  sell  both.  Likewise,  the  book  accounts;  if  any  part  of 
these  assets  could  be  sold,  and  it  was  for  the  best  interests  of 
the  copartnership  and  the  creditors  that  these  accounts  should 
go  with  the  business,  the  court  had  the  power  to  so  adjudge.  A 
litigious  partner,  by  means  incident  to  litigation,  might  be  able 
to  delay  the  entry  of  a  decree  of  dissolution  for  years,  and 
thereby  encompass  the  utter  destruction  of  the  entire  partner- 
ship assets;  and  it  would  seem,  in  the  interest  of  parties  having 
claims  upon  these  assets,  that  a  court  of  equity  was  vested  with 
the  right  to  give  relief  by  converting  them  into  money.  In  a  proper 
case,  as  where  litigation  has  necessitated  a  postponement  of  ma- 
terial issues  involved,  the  court  may  order  a  partial  distribu- 
tion.®^ The  partnership  real  estate  should  be  included  in  the 
property  sold,*"*  and  also  the  good-will  of  the  business. ^'^  As  said 
in  one  case  :®^    "Upon  the  dissolution  of  a  trading  copartnership 

88  Marcum  v.  Marcum,  154  Ky.  401,  88  S.  W.  311,  27  Ky.  L.  1197,  115  Ky. 

157  S.  W.  1101.  552,  74   S.  W.   194,  24  Ky.  L.  2465; 

8''  Tarabino  v.  Nicoli,  5  Colo.  App.  Mitchell  v.  Read,  84  N.  Y.  556  (affg. 

545,  39  Pac.  362 ;  Mauck  V.  Mauck,  54  19    Hun    418);     Dougherty    v.    Van 

111.  281;  Shearer  v.  Shearer,  98  Mass.  Nostrand,  1  Hoffm.  (N.  Y.)  68;  Sny- 

107;  Barron  v.  Mullin,  21  Minn.  374;  der    Mfg.    Co.    v.    Snyder,    54    Ohio 

Pierce  v.  Covert,  39  Wis.  252.  St.  86,  43  N.  E.  325,  31  L.  R.  A.  657. 

soWulff    V.    San    Joaquin    County  See    Moore    v.    Ravvson,    199    Mass. 

Super.  Ct,  110  Cal.  215,  42  Pac.  638,  493.  85  N.  E.  586. 
52  Am.  St.  78;  Whitney  v.  Whitney,         "i  Snyder   Mfg.    Co.   v.    Snyder,   54 


§    728  LAW    OF    TARTNERSHIP  1006 

its  assets,  including  the  good-will  of  the  business,  may  be  sold 
as  a  whole,  either  by  the  partners  directly,  or  through  a  receiver 
under  an  order  made  by  a  court  in  a  case  to  which  they  are 
parties;  and  that  a  purchaser  thereof  under  either  method  of 
sale  is  entitled  to  continue  the  business  as  the  successor  of  the 
firm  and  make  use  of  the  firm  name  for  that  purpose.  *  *  * 
If  it  is  desired  to  limit  the  right  of  the  purchaser  or  his  vendee 
in  the  use  of  the  firm  name,  or  exclude  such  right  altogether, 
it  should  be  done  by  stipulation  in  the  contract  when  the  sale  is 
made  by  the  partners,  or  by  a  provision  to  that  effect  in  the 
order,  when  the  sale  is  made  through  the  court."  However,  the 
order  for  sale  should  not  include  property  which  it  is  not  neces- 
sary to  sell,^"  property  the  sale  of  which  will  give  one  partner 
an  unfair  advantage,^^  nor  property  which  the  firm  does  not 
own."*  Where  a  wife  of  a  partner  has  a  dower  right  in  partner- 
ship real  estate,  the  sale  must  be  made  subject  to  her  interest."^ 
If  one  partner  purchases  the  property  at  the  sale,  it  is  held  that 
the  other  partner  may  avoid  it,  on  the  ground  that  they  stand 
in  a  trust  relation  to  each  other."*^  Where  there  was  a  suit  to 
dissolve  a  solvent  firm,  and  no  attempt  was  made  to  settle  with 
creditors,  and  litigation  had  lasted  three  years,  a  judgment  cred- 
itor was  permitted  to  levy  on  assets  in  the  hands  of  the  re- 
ceiver pendente  lite,  with  orders  to  convert  them  into  cash,  and 
hold  for  further  orders."^  The  court  should  provide  for  the  filing 
of  all  claims  before  final  distribution,  in  order  to  pass  on  their 
validity.®^ 

Ohio  St.  86,  43  N.  E.  325,  31  L.  R.  26  N.  E.  509;  Brush  v.  Jay,   113  N. 

A.  657.  Y.  482,  21  N.  E.  184 ;  Graham  v.  Mc- 

°2Duden  v.  Maloy,  63  Fed.  183,  11  Culloch,  L.  R.  20  Eq.  397. 

C.  C.  A.  119;  Pratt  v.  McHatton,  11  os  chase    v.    Angell,    148    Mich.    1, 

La.  Ann.  260.  108  N.  W.  1105. 

«3  Kelley  v.   Shay,  206  Pa.  208,  55  sc  Cresse  v.  Loper,  72  N.  J.  Eq.  784. 

Atl.  925 ;  Rowell  v.  Rowell,  122  Wis.  65   Atl.    1001 ;    Livingston   v.    Living- 

1,   99   N.   W.  473;    Pawsey  v.   Arm-  ston,  7  Ont.  W.  N.  406  (mod.  26  Ont. 

strong,  18  Ch.  Div.  698,  50  L.  J.  Ch.  L.  246). 

683;  Knight  v.  Marjoribanks,  2  Hall  ^7  Abrahams    v.    Beneke,    155    App. 

&   Tw.    308,   47   Eng.    Reprint    1700;  Div.  525,  140  N.  Y.  S.  753. 

BIyth  V.  Blyth,  4  L.  T.   (N.  S.)   536.  ^'"^  Leppel  v.  Lumley,  19  Colo.  App. 

94  Nichols  V.   Murphy,   136  111.  380,  413,  7S  Pac.  605;  Hubbard  v.  Curtis, 


1007 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


§  729 


§  729.  Charges  and  credits. — Each  partner  should  be 
credited  in  stating  the  account,  with  each  and  every  contribution 
which  he  has  made  to  partnership  assets.  These  may  be  shown 
by  the  books,^^  or  by  other  evidence.^  He  is  entitled  to  be  cred- 
ited for  all  payments  made  from  his  own  property  for  debts  of 
the  firm,  or  its  losses  or  legitimate  expenses,"  including  interest 
or  discount  charges.^    A  partner  may  be  reimbursed  for  paying 


8  Iowa  1,  74  Am.  Dec.  283 ;  Johnson 
V.  Johnson,  132  Iowa  457,  107  N.  W. 
802 ;  Holloway  v.  Turner,  61  Md.  217 ; 
Berry  v,  Folkes,  60  Miss.  576;  Law- 
son  V.  Dunn,  66  N.  J.  Eq.  90,  57  Atl. 
415;  Richardson  v.  Hatch  (N.  J.),  55 
Atl.  1115;  Matter  of  Brown,  3  Edw. 
(N.  Y.)  384;  Law  v.  Ford,  2  Paige 
(N.  Y.)  310;  Mitchell  &c.  Furni- 
ture Co.  V.  Runk,  7  Ohio  Dec.  (Re- 
print) 491,  3  Cin.  Law  Bui.  538 ;  Gor- 
don V.  Moore,  134  Pa.  St.  486,  19 
Atl.  753;  McCay  v.  Black,  36  Leg. 
Int.  (Pa.)  471. 

99  Murphey  v.  Bush,  122  Ga.  715, 
50  S.  E.  1004;  Ernst  v.  Schmitz,  207 
III.  604,  69  N.  E.  923;  Rosenstiel  v. 
Gray,  112  111.  282;  Parker  v.  Rams- 
bottom,  5  D.  &  R.  138,  3  B.  &  C. 
257.  Compare  Moore  v.  Rawson,  199 
Mass.  493,  85  N.  E.  586. 

1  Consaul  v.  Cummings,  24  App. 
Cas.  (D.  C.)  36;  Van  Fleet  v.  King, 
33  App.  Cas.  (D.  C.)  47;  McAlHster 
V.  Payne,  108  Ga.  517,  34  S.  E.  165; 
Snell  V.  DeLand,  136  111.  533.  27  N. 
E.  183;  Young  v.  Potter,  150  Mich. 
375,  114  N.  W.  215;  Hake  v.  Coach, 
114  Mich.  558,  72  N.  W.  623;  Randle 
V.  Richardson,  53  Miss.  176;  Neal  v. 
Abel,  103  App.  Div.  414,  92  N.  Y.  S. 
1045;  Hebblethwaite  v.  Flint,  115 
App.  Div.  597,  101  N.  Y.  S.  43 ;  Fin- 
letter  V.  Baum,  207  Pa.  361,  56  Atl. 
941 ;    Frierson    v.    Morrow    (Tenn.), 


48  S.  W.  245;  Barber  v.  Morgan 
(Tex.  Civ.  App.),  76  S.  W.  319; 
Dixon  V.  Paddock,  104  Va.  387,  51 
S.  E.  841 ;  Gay  v.  Householder,  71 
W.  Va.  277,  76  S.  E.  440,  Ann.  Cas. 
1914  C,  297n;  Moore  v.  Wheeler,  10 
W.  Va,  35 ;  Cruikshank  v.  McVicar, 
8  Beav.  106,  14  L.  J.  Ch.  41,  50  Eng. 
Reprint  42. 

2  Lewis  V.  Loper,  54  Fed.  237 ; 
Clark  V.  Gridley,  41  Cal.  119;  Smith 
V.  Brush,  11  Conn.  359;  Brownell  v. 
Steere,  128  111.  209,  21  N.  E.  3  (affg. 
29  111.  App.  358)  ;  Harman  v.  Stuart 
(Ky.),  119  S.  W.  210;  Craig  v. 
Warner,  216  Mass.  386,  103  N.  E. 
1027;  Fletcher  v.  Reed,  131  Mass. 
312;  Harvey  v.  Varney,  104  Mass. 
436;  Goldman  v.  O'Hara,  164  Mich. 
612,  130  N.  W.  352;  Hake  v.  Coach, 
114  Mich.  558,  72  N.  W.  623;  Pierce 
v.  Pierce,  89  Mich.  233,  50  N.  W. 
851;  In  re  Welch,  77  Misc.  427,  137 
N.  Y.  S.  941 ;  Van  Bokkelen  v.  Ber- 
dell,  130  N.  Y.  141,  29  N.  E.  254 
(revg.  3  N.  Y.  S.  333)  ;  Robertson  v. 
Read,  17  Grat.  (Va.)  544;  Burdon 
v.  Barkus,  4  DeG.,  F.  &  J.  42,  8 
Jur.  (N.  S.)  656;  Storm  v.  Cumber- 
land, 18  Grant  Ch.  (U.  C.)  245.  But 
see  Winnard  v.  Clinton,  233  111.  320, 
84  N.  E.  261,  in  which  expenses  in- 
curred in  auditing  the  books  were 
not  charged  to  the   firm. 

3  Marcum  v.  Marcum,  154  Ky.  401, 


§    729  LAW    OF    PARTNERSHIP  1008 

usury  after  death  of  a  partner  on  money  borrowed  by  the  firm, 
when  usury  had  been  paid  on  the  debt  in  good  faith  before  the 
other  partner's  death/  If  he  compromises  a  debt,  he  should  be 
credited  only  with  the  amount  paid.*^  If  he  pays  a  note  without 
suit,  he  can  not  recover  for  attorney's  fees  stipulated  in  the  note.^ 
Personal  expenses  must  ht  clearly  proved,  where  there  is  a  right 
to  recover  them,"  nor  is  it  sufficient  to  show  by  a  witness  engaged 
in  the  same  business  the  average  expenses  which  would  be  in- 
curred in  such  business/  If  no  accounts  have  been  kept,  testi- 
mony of  experts  has  been  permitted  to  show  the  amount  which 
should  be  credited  for  expenses/  Credit  may  be  allowed  for 
loss  by  defendant  partners  in  purchasing  live  stock  from  the  firm 
at  a  fixed  price/  In  order  to  obtain  credit  for  money  expended 
for  the  partnership,  or  compensation  for  services,  a  partner 
must  show  authority  from  the  firm  to  receive  it,"  and  has  the 
burden  of  proving  his  right  to  such  allowance/^  The  burden  is 
also  on  the  partner  claiming  compensation  to  prove  it/-  Under 
some  circumstances  credits  may  be  allowed  for  money  paid  for 
improvements/^  A  partner  who  carries  on  business  in  his  own 
name   for  his  own  benefit  and  who  uses  partnership  property 

157  S.  W.  1101;  Fletcher  v.  Reed,  131  Cummings,  8  App.  Cas.   (D.  C.)  515; 

Mass.    312;    Bundy   v.    Youmans,    44  Morgart  v.  Smouse,  112  Md.  615,  77 

Mich.  376,  6  N.  W.  851.  Atl.  137;  Willard  v.  Bullen,  41   Ore. 

4  Marcum  v.  Marcum,  154  Ky.  401,  25,   67   Pac.   924,   68    Pac.   422 ;    Wil- 
157  S.  W.  1101.  lock  V.  Dubbs,  32  Pitts.  L.  J.  (N.  S.) 

4a  Filbrun  V.  Ivers,  92  Mo.  388,  4  S.  (Pa.)    250;    Gorman   v.    Madden,    27 

W.  674.  S.  Dak.  319,   131  N.  W.  290;   Dixon 

5  Berah  v.  O'Niell,  121  La.  733.  v.    Paddock,    104  Va.   387,   51    S.    E. 

6  Sandberg  v.    Scougale,   75   Wash.  841 ;  Barrett  v.  Hartley,  L.  R.  2  Eq. 
313,  134  Pac.  1051.  789,    12  Jur.    (N.    S.)    426;    Macdon- 

''  Sandberg  v.    Scougale,   75   Wash,  aid   v.    Richardson,    1    Giffard,    81,    5 

313,  134  Pac.  1051.  Jur.  (N.  S.)  9,  10  L.  T.  (N.  S.)  166; 

8  Lamb  v.   Rowan,  83  Miss.  45,  35  Whittle  v.  McFarlane,  1  Knapp  311, 
So   427,  690.  12  Eng.  Reprint  338. 

9  Fuller    V.    El    Paso    Live    Stock         n  Keller  v.   Keller,    154   App.   Div. 
Commission    Co.    (Tex.    Civ.    App.),  919,  139  N.  Y.  S.  87. 

174  S.  W.  930.  12  Cole  v.  Cole   (Ark.),   177  S.  W. 

10  Stone  V.  Fowlkes,  29  App.   Cas.     915. 

(D.  C.)  379;  Consaul  v.  Cummings,  is  Harris  v.  Stevenson,  110  Ark. 
24  App.   Cas.    (D.  C.)    36;   Baker  v.    632,  162  S.  W.  769. 


1009  ACCOUNTING   AND   DISSOLUTION    ACTIONS  §    729 

therefor  is  not  entitled  to  have  such  business  considered  part- 
nership business,  and  is  chargeable  on  an  accounting  with  reason- 
able rent  for  the  use  of  the  partnership  property ;  that  is,  with  the 
fair  and  customary  rental  value  for  the  time  during  which  he 
used  it  as  his  own.^*  Individual  claims  between  partners  should 
not  be  credited  or  charged  in  any  case."  Thus  a  claim  by  one 
partner  that  he  invested  in  another  enterprise  money  which  a 
copartner  promised  to  repay  him,  is  not  a  matter  to  be  charged 
in  a  partnership  accounting/'^  Even  though  there  are  only  two 
partners,  claims  between  them  which  are  not  connected  with 
the  partnership,  should  not  be  credited."  On  a  dissolution 
agreement  where  the  continuing  partners  were  authorized  to  de- 
duct all  existing  liabilities  in  ascertaining  the  plaintiff  partner's 
interest,  they  v/ere  not  limited  to  liabilities  entered  on  the  firm 
books. ^^  All  money  drawn  from  the  firm  by  a  partner,  and  any 
other  firm  property  which  has  been  appropriated  to  his  indi- 
vidual use,  or  debts  owing  by  him  to  the  firm  should  be  charged 
against  him,'^  together  with  any  losses  which  have  been  caused 
by  his  neglect,  or  failure  in  performance  of  partnership  duties, ~° 

14  Painter  v.  Wilcox,  52  Colo.  639,  N.  Dak.  515,  79  N.  W.  1053 ;  Bing- 
125  Pac.  503.  ham    v.    Keylor,    25    Wash.    156,    64 

15  Dennis  v.  Gordon,  163  Cal.  427,  Pac.  942;  Hart  v.  Hart,  117  Wis. 
125  Pac.  1063;  Byassee  v.  Evans,  143  639,  94  N.  W.  890;  Fereday  v. 
Ky.  415,  136  S.  W.  857;  Shearman  Wightwick,  1  Russ.  &  M.  45.  See 
V.  Cameron,  76  N.  J.  Eq.  426,  74  Atl.  Walcott  v.  Hanaford,  2  Porto  Rico 
979.  Fed.  444;  Gorman  v.  Madden,  27  S. 

16  Bishop  V.   Pendley,   138  Ga.  738,  Dak.  319,  131  N.  W.  290. 

1^  S.  E.  63.  20Gillett    v.    Hall,    13    Conn.    426; 

17  Payne  v.  Martin,  39  Colo.  265,  Randolph  v.  Inman,  71  111.  App.  176; 
89  Pac.  46.  Yetzer    v.    Applegate,    83    Iowa    726, 

isjarvie    v.     Arbuckle,     163     App.  50  N.  W.  66;   Webb  v.   Fordyce,  55 

Div.  199,  148  N.  Y.  S.  189.  Iowa  11,  7  N.  W.  385;  Lee  v.  Lash- 

19  Couch  V.  Woodruff,  63  Ala.  466;  brooke,  8  Dana    (Ky.)    214;   Richard 

Clark  V.  Gridley,  41  Cal.  119;  Chan-  v.  Monton,  109  La.  465,  2,Z  So.  563; 

dler   V.    Sherman,    16   Fla.    99;    Har-  Webber    v.    Webber.    146    Mich.    31, 

man    v.    Stuart     (Ky.),    119    S.    W.  109  N.  W.  50;  Jessup  v.  Cook,  6  N. 

210;    Archer    v.    Barry,    62     S.    W.  J.    L.    434;    Kennett    v.    Hopkins,    58 

485,  23  Ky.  L.   12;   Stiles  v.  Haight,  App.  Div.  407,  69  N.  Y.  S.  18   (affd. 

124  App.  Div.  60,  108  N.  Y.  S.  136;  174  N.  Y.  545,  67  N.  E.  1084)  ;  Mc- 

Phelan  v.  Hutchison,  62  N.  Car.  116,  Coy  v.    Crossfield,    54   Ore.    591,    104 

93  Am.   Dec.  602;   Lay  v.   Emery,  8  Pac.   423;    Lyons   v.   Lyons,   207   Pa. 


§    729  LAW    OF    PARTNERSHIP  1010 

but  not  with  losses  which  are  due  to  honest  mistakes. ^^  Where 
one  partner  was  permitted  to  continue  the  business  during  a  dis- 
sohition  suit  after  the  refusal  to  appoint  a  receiver  on  the  other 
partner's  application,  he  must  account  for  the  other's  share  in 
profits  up  to  the  time  of  dissolution.-^  One  partner  in  the  culti- 
vation of  land  is  not  permitted  to  share  in  crops  raised  during 
a  time  when  he  contributed  nothing  to  aid  in  the  cultivation  of 
the  farm.-^  A  partner  should  be  charged  with  profits  which 
he  prevented  the  other  partner  from  making  by  excluding  him 
wrongfully  from  the  business.^'  A  partner  may  be  charged  with 
interest  on  a  sum  withdrawn  in  excess  of  his  share. ^^  And  under 
some  circumstances,  it  is  proper  to  charge  him  with  interest  on 
liquidated  amounts  due  the  firm.^"  A  partner  who  excluded  his 
copartner  from  the  business,  or  who  has  assumed  the  payment 
of  debts  from  such  assets,  is  charged  with  the  receipts  of  the 
business,  credited  with  the  reasonable  and  legitimate  expenses  of 
conducting  it  and  winding  it  up,  and  whatever  balance  remains 
is  to  be  divided  as  profits.^^  A  partner's  share  is  finally  deter- 
mined by  his  ratable  proportion  of  the  remaining  funds,  after 
creditors  of  the  firm  have  been  paid,  and  the  partners  have  each 
been  credited  with  the  amounts  due  to  them  from  the  partner- 
ship, and  charged  with  the  amounts  due  to  the  firm  from  them.-^ 

7,  56  Atl.  54,  99  Am.  St.  779;  473,  55  N.  E.  545  (affg.  79  111.  App. 
Fairfield  v.  Kreps,  33  Pitts.  L.  J.  462)  ;  Randolph  v.  Inman,  172  111. 
(N.  S.)  (Pa.)  407;  Devall  v.  Bur-  575,  50  N.  E.  104;  Moore  v.  Raw- 
bridge,  6  Watts  &  S.  (Pa.)  529;  son,  185  Mass.  264,  70  N.  E.  64; 
Moore  v.  Wheeler,  10  W.  Va.  35.  Porter   v.    Long,    136   Mich.    150,   98 

21  Day  V.  Lockwood,  24  Conn.  185 ;  N.   W.  990 ;    Brenner  v.   Carter,   203 
Leon    Exch.    Bank   v.    Gardner,    104  Pa.  St.  75,  52  Atl.  178. 

Iowa  176,  73  N.  W.  591.  27  Howell   v.   Harvey,    5    Ark.   270, 

22  Zimmerman  v.   Harding,   227  U.  39    Am.    Dec.    376 ;    Dale    v.    Hogan, 
S.  489,  57  L.  ed.  608,  33  Sup.  Ct.  387.  39   Mo.   App.   646;    Koelz   v.    Brink- 

23  Jenkins   v.   Jenkins,   66   Ore.    12,  man,  50  W.  Va.  270,  40  S.  E.  578. 
132  Pac.  542.  28  Glover  v.  Hembree,  82  Ala.  324, 

2*  Zimmerman  v.   Harding,  227  U.  8  So.  251 ;  Archer  v.  Barry,  62  S.  W. 

S.  489,  57  L.  ed.  608,  33  Sup.  Ct.  387.  485,  23  Ky.  L.  12 ;  Snyder  v.  O'Beirne, 

25  Ferguson    v.    Cripps,    87    Conn.  132  Mich.  340,  93  N.  W.  872 ;  Beller 
241,  87  Atl.  792.  v.    Murphy,    139   Mo.   App.   663,    123 

26  Buckley  v.  Kelly,   70  Conn.  411,  S.  W.  1029;  Jarvie  v.  Arbuckle,   163 
39  Atl.  601;  Snell  v.  Taylor,  182  111.  App.    Div.    199,    148    N.    Y.    S.    189; 


1011 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


§  /30 


These  rules  as  to  the  charging  and  crediting  of  a  partner  are 
often  modified  because  of  agreements  between  the  partners,  either 
in  original  articles,  or  later  made,  if  in  good  faith."^  An  item 
should  not  be  made  a  double  charge.^"  And  where  a  defendant 
elected  to  credit  payments  to  the  principal  account,  he  can  not 
change  his  election  and  credit  them  to  an  interest  account.^^  The 
firm  is  charged  with  what  each  partner  has  contributed  to  it,"- 
but  Avith  nothing  which  has  not  become  the  property  of  the  firm, 
as  distinguished  from  the  property  of  one  of  the  partners  even 
though  used  in  firm  business. ^^ 

§  730.  Decision. — The  important  matters  to  be  embraced 
in  the  decision,  findings,  or  report  on  accounting  should  be  the 
amount  of  firm  assets,  the  claims  against  it,  and  the  share  of  each 


Hagenbuckle  v.  Schultz,  69  Hun 
183,  23  N.  Y.  S.  611;  Wanby  v. 
Jahn,  34  Pitts.  L.  J.  (Pa.)  (N.  S.) 
91 ;  Kennedy  v.  Hill,  89  S.  Car.  462, 
71  S.  E.  974;  Gresham  v.  Harcourt, 
93  Tex.  149,  53  S.  W.  1019  (revg. 
50  S.  W.  1058)  ;  Koelz  v.  Brinkman, 
50  W.  Va.  270,  40  S.  E.  578 ;  Moore 
V.  Wheeler,  10  W.  Va.  35. 

29  Brooklyn  Trust  Co.  v.  !Mc- 
Cutchen,  189  Fed.  273;  Richards  v. 
Eraser,  136  Cal.  460,  60  Pac.  83; 
Clemens  v.  Crane,  234  111.  215,  84 
N.  E.  884;  Hetzel  v.  Fadner,  167 
111.  App.  92 ;  Levi  v.  Karrick,  8  Iowa 
150;  Ferguson  v.  Johnson,  2  Ky.  Op. 
549;  Stevens  v.  Yeatman,  19  Md. 
480;  Young  v.  Potter,  150  Mich.  375, 
114  N.  W.  215;  Loveland  v.  Peter, 
108  Mich.  154,  65  N.  W.  748;  Pardue 
V.  McCollum,  116  Mo.  App.  603,  92 
S.  W.  757;  Leighton  v.  Clarke,  42 
Nebr.  427,  60  N.  W.  875;  Morrill  v. 
Weeks,  70  N.  H.  178,  46  Atl.  32 ;  Van 
Horn  v.  Van  Horn  (N.  J.),  20  Atl. 
826;  Parkhurst  v.  Muir,  7  N.  J.  Eq. 
555  :  Langell  v.  Langell,  17  Ore.  220, 


20  Pac.  286;  Manship  v.  Newton,  94 
S.  Car.  260,  11  S.  E.  941 ;  Becker  v. 
Hill,  20  Lane.  L.  Rev.  345 ;  Coventry 
V.  Barclay,  i?)  Beav.  1,  2  New  Rep. 
375 ;  Featherstonhaugh  v.  Turner,  25 
Beav.  382,  28  L.  J.  Ch.  812;  Thorn- 
ton V.  Proctor,  1  Austr.  94,  3  Rev. 
Rep.  358;  Luckie  v.  Forsyth,  3  Jo. 
&  Lat.  388;  Worthington  v.  Mac- 
donald,  9  Can.  Sup.  Ct.  ZZJ . 

"°Lovejoy  v.  Bailey,  214  Mass. 
134,  101  N.  E.  (iZ. 

31  Keller  v.  Keller,  154  App.  Div. 
919,  139  N.  Y.  S.  87. 

32Boskowitz  v.  Nickel,  97  Cal.  19, 
31  Pac.  732 ;  Durham  v.  Sumpter,  2iZ 
S.  W.  257,  17  Ky.  L  655;  Imeson  v. 
Schriver,  11  S.  W.  598,  11  Ky.  L. 
71;  Mitchell  v.  Alitchcll,  92  Mich. 
618,  52  N.  W.  1024;  Westerfield  v. 
Price.  80  Hun  401,  30  N.  Y.  S.  356; 
Schulte  v.  Anderson,  45  N.  Y.  Super. 
Ct.  489. 

ssQillett  v.  Hall,  13  Conn.  426; 
Grubbs  v.  Mcllvain,  36  S.  W.  16.  18 
Ky.  L.  383;  Plumly's  Appeal,  1  Pa. 
177,  16  Atl.  728. 


§  730 


LAW    OF    PARTNERSHIP 


1012 


partner  in  the  balance.^*  The  findings  should  embrace  all  mat- 
ters submitted.^'"'  The  findings  are  bad  if  objected  to,  where  they 
fail  to  find  on  a  matter  which  was  properly  submitted,^^  or  when 
there  is  a  material  finding  as  to  a  matter  not  submitted,  and  not 
in  litigation.^^  The  finding  is  not  objectionable  because  it  con- 
tains an  immaterial  finding  which  is  not  in  issue,  as  where  the 
principal  issue  was  the  existence  of  a  partnership,  and  the  court 
also  found  its  duration  which  was  immaterial."^  Laches  may 
cause  a  partner  to  lose  his  right  to  object  to  a  defective  finding,^" 
and  the  court  may  correct  the  fmding,  if  it  has  sufficient  facts 


34  Van  Tine  v.  Hilands,  142  Fed. 
613;  Zimmerman  v.  Huber,  29  Ala. 
379;  Haight  v.  Haight,  151  Cal.  90, 
90  Pac.  197;  Hart  v.  Finigan,  71 
Cal.  578,  12  Pac.  682;  Stower  v. 
Kamphefner,  6  Cal.  App.  80,  91  Pac. 
424;  Durphy  v.  Pearsall,  6  Cal.  App. 
54,  91  Pac.  407;  Johnson  v.  Sanford, 
13  Conn.  461  ;  Nims  v.  Nims,  20 
Fla.  204;  Brockman  v.  Aulger,  12 
111.  277;  Lannan  v.  Clavin,  3  Kans. 
17;  Young  v.  Winkley,  191  Mass. 
570,  78  N.  E.  Zn ;  Johnson  v.  Ewald, 
82  Mo.  App.  276;  Kennett  v.  Hop- 
kins, 174  N.  Y.  545,  67  N.  E.  1084 
[affg.  58  App.  Div.  407,  69  N.  Y.  S. 
18]  ;  Rodgers  v.  Clement,  162  N.  Y. 
422,  56  N.  E.  901,  76  Am.  St.  342 
(revg.  15  App.  Div.  561,  44  N.  Y. 
S.  516)  ;  Matter  of  Muller,  96  App. 
Div.  619,  88  N.  Y.  S.  673;  McCall 
V.  Moschowitz,  14  Daly  16,  1  N.  Y, 
St.  99,  10  Civ.  Proc.  107;  Quinn  v. 
Reed,  85  Misc.  510,  148  N.  Y.  S.  801 ; 
Kapp  V.  Barthan,  1  E.  D.  Smith  (N. 
Y.)  622;  Powell  v.  Ford,  4  Lea 
(Tenn.)  278;  Kahn  v.  Central 
Smelting  Co.,  2  Utah  371  (revd.  102 
U.  S.  641,  26  L.  ed.  266)  ;  Koelz  v. 
Brinkman,  50  W.  Va.  270,  40  S.  E. 
5-78;  Ciscel  v.  Wheatley,  27  Wis.  618; 


Smith   V.    Crooks,   3   Grant   Ch.    (U 
C.)  321. 

s^Doudell  v.  Shoo,  20  Cal.  App 
424,  129  Pac.  478;  Levi  v.  Karrick 
8  Iowa  150;  Hengy  v.  Hengy  (Tex 
Civ.  App.),  151  S.  W.  1127. 

3*5  Day  v.  Lockwood,  24  Conn.  185 
Laswell     v.     Robbins,     39     111.     210; 
Lyons  v.  Lyons,   199  Pa.  St.  302,  48 
Atl.  1079;  Eaton's  Appeal,  66  Pa.  St. 
483. 

3^  Kennett  v.  Hopkins,  174  N.  Y. 
545,  67  N.  E.  1084  [affg.  58  App. 
Div.  407,  69  N.  Y.  S.  18];  Bullock 
v.  Bemis,  51  Hun  637,  3  N.  Y.  S. 
390;  Bouton  v.  Bouton,  42  How.  Pr. 
(N.  Y.)  11  [revg.  40  How.  Pr.  217]  ; 
Green  v.  Castleberry,  11  N.  Car.  164 ; 
Shipman  v.  Fletcher,  83  Va.  349,  2 
S.  E.  198. 

ssDoudell  V.  Shoo,  20  Cal.  App. 
424,  129  Pac.  478. 

39Duden  v.  Maloy,  (iZ  Fed.  183, 
11  C  C.  A.  119;  Pond  v.  Clark,  24 
Conn.  370 ;  Whalen  v.  Stephens,  193 
111.  121,  61  N.  E.  921  [affg.  92  111. 
App.  235]  ;  Donnelly  v.  McArdle. 
152  App.  Div.  805,  137  N.  Y.  S.  801 ; 
Smith  V.  Fitchett,  56  Hun  473,  10 
N.  Y.  S.  459,  31  N.  Y.  St.  606; 
Jones  V.  Jones,  36  N.  Car.  332. 


1013 


ACCOUNTING    AND    DISSOLUTION    ACTIONS 


5  731 


Ijefore  it.""'     The  judgment  in  an  action  for  accounting  and  dis- 
solution should  fix  the  terms  of  the  dissolution/^  and  its  date.''" 

§  731.  Decree. — All  matters  in  controversy  should  be  ad- 
judicated, and  the  distribution  of  all  firm  assets  provided  for/^ 
and  it  is  customary  to  adjudge  the  payment  of  a  balance  due  from 
one  partner  to  another.'*''  Payment  of  such  balance  should  not 
be  decreed  on  partial  settlement/^  or  before  selling  the  partner- 


^°  Patterson  v.  Kellogg,  53  Conn. 
38,  22  Atl.  1096;  Lobb's  Appeal,  3 
Walk   (Pa.)  374. 

41  Lyon  V.  Tweddell,  17  Ch.  D.  529, 
45  J.  P.  680. 

^~  Dumont  v.  Ruepprecht,  38  Ala. 
175;  Durbin  v.  Barber,  14  Ohio  311; 
Barclay  v.  Barrie,  209  N.  Y.  40,  102 
N.  E.  602;  Besch  v.  Frolich,  7  Jur. 
73,  12  L.  J.  Ch.  118. 

43Nothen  v.  Tatum,  164  Ala.  368, 
51  So.  17;  Moran  v.  Mclnerney, 
129  Cal.  29,  61  Pac.  575;  Nims  v. 
Nims,  20  Fla.  204;  Veneman  v. 
Ruckle,  120  111.  App.  251;  Levi  v. 
Karrick,  8  Iowa  150;  Lannan  v. 
Clavin,  3  Kans.  17;  Stark  v.  How- 
cott,  118  La.  489,  43  So.  61;  Tyng 
V.  Thayer,  8  Allen  (Mass.)  391; 
Lenahan  v.  Casey,  46  Mont.  367,  128 
Pac.  601 ;  Pierson  v.  Garrison,  83  N.  J. 
Eq.  334,  91  Atl.  829;  Gimpel  v.  Wil- 
son, 10  Misc.  153,  30  N.  Y.  S.  942 ; 
Williams  v.  Lindblom,  142  N.  Y. 
682,  37  N.  E.  825  [afifg.  68  Hun 
173,  22  N.  Y.  S.  678]  ;  Dickerson 
V.  Wilcoxon,  97  N.  Car.  309,  1  S. 
E.  636 ;  Oglesby  v.  Thompson,  59 
Ohio  St.  60,  51  N.  E.  878;  Peck  v. 
Cavagna,  7  Ohio  Super.  Ct.  Com. 
PI.  142 ;  Durkheimer  v.  Heilner,  24 
Ore.  270,  33  Pac.  401,  34  Pac.  475; 
Ashley  v.  Williams,  17  Ore.  441,  21 
Pac.  556 ;  McGinn  v.  Benner,  22  Pa. 
Super.  Ct.  134;  Becker  v.  Hill,  20 
Lane.  L.  Rev.  (Pa.)  345;  Lantz  v. 
Tumlin,    74    W.    Va.    196,    81    S.    E. 


820;  Gore  v.  Vines,  72  W.  Va.  783, 
79  S.  E.  820;  Hyre  v.  Lambert,  37 
W.  Va.  26,  16  S.  E.  446;  Carper  v. 
Hawkins,  8  W.  Va.  291;  Strang  v. 
Thomas,  114  Wis.  599,  91  N.  W.  237; 
Green  v.  Stacy,  90  Wis.  46,  62  N. 
W.  627;  Singer  v.  Heller,  40  Wis. 
544.  See  Wedderburn  v.  Wedder- 
burn,  2  Keen  722,  15  Eng.  Ch.  722. 

4*  Taylor  v.  Peterson,  1  Idaho  513 ; 
McGillvray  v.  Moser,  43  Kans.  219, 
23  Pac.  96;  Tenney  v.  Simpson,  37 
Kans.  579,  15  Pac.  512;  Swafford  v. 
White,  28  Ky.  L.  119,  89  S.  W.  129; 
Cazeau  v.  Paget,  11  Rob.  (La.)  10; 
Young  V.  Winkley,  191  Mass.  570, 
78  N.  E.  377;  Robinson  v.  Simmons, 
146  Mass.  167,  15  N.  E.  558,  4  Am. 
St.  299;  McLean  v.  McLean,  109 
Mich.  258,  67  N.  W.  118;  Wyatt  v. 
Sweet,  48  Mich.  539,  12  N.  W.  692, 
13  N.  W.  525 ;  Raymond  v.  Came, 
45  N.  H.  201 ;  White  v.  Reed,  124  N. 
Y.  468,  26  N.  E.  1037  [mod.  58  N. 
Y.  Super.  Ct.  333,  11  N.  Y.  S.  575] ; 
Reilly  v.  Freeman,  109  N.  Y.  App. 
Div.  4,  95  N.  Y.  S.  1069  [affd.  in  184 
N.  Y.  610,  77  N.  E.  1196];  Hollis- 
ter  V.  Simonson,  36  App.  Div.  63,  55 
N.  Y.  S.  372;  Scott  v.  Pinkerton,  3 
Edw.  Ch.  (N.  Y.)  70;  Yarwood  v. 
Billings,  31  Wash.  542,  72  Pac.  104; 
Steele  v.  Moore,  71  W.  Va.  436,  76  S. 
E.  850;  Strang  v.  Thomas,  114  Wis. 
599,  91  N.  W.  237. 

45  Steele  v.  Moore,  71  W.  Va.  436, 
76  S.  E.  850. 


731 


LAW    OF    I'AKTXEKSIIIP 


1014 


ship  property  and  applying  the  proceeds  to  the  debts,  including 
a  firm  liability  to  one  partner/"  It  seems  that  firm  liabilities 
should  be  adjusted  to  the  satisfaction  of  creditors,  before  final 
decree/'  Equity  may  compel  a  partner  to  assign  to  the  firm 
patent  rights  adjudged  to  belong  to  it,  and  in  case  of  his  refusal 
appoint  a  trustee  to  make  the  assignment/^  The  decree  should 
be  conclusive  in  regard  to  all  partners  as  to  partnership  affairs/'^ 
However,  a  partnership  dissolution  decree  has  been  held  effective, 
though  it  did  not  provide  for  the  disposition  of  certain  notes 
given  by  the  defendant  to  the  plaintiff  before  the  account  was 
taken/"  Ordinarily  separate  judgments  should  be  rendered  as 
to  each  partner/^  although  there  may  be  such  joint  interests  of 
contract^"  or  tort  between  two  of  the  parties  as  against  a  third  that 
a  joint  judgment  may  be  rendered  against  them/^  It  is  not  im- 
proper to  award  all  the  firm  assets  to  one  partner  who  assumed 
the  debts,  with  a  recovery  against  the  other  partners/"^  The  judg- 
ment should  conform  to  the  findings,^'*  and  to  the  issues  made 
by  the  pleadings, ^^  though  a  judgment  in  terms  indefinite  or 


46  Lantz  V.  Tumlin,  74  W.  Va.  196, 
81  S.  E.  820. 

4^  Rassaert  v.  Mensch,  17  Cal.  App. 
627,  120  Pac.  1072. 

48Whitcomb  v.  Whitcomb,  85  Vt 
76,  81  Atl.  97. 

49  Griggs  V.  Clark,  23  Cal.  427; 
Smith  V.  Knight,  77  Iowa  540,  42  N. 
W.  438;  Maude  v.  Rodes,  4  Dana 
(Ky.)  144;  Grove  v.  Fresh,  9  Gill 
&  J.  (Md.)  280;  Clink  v.  Carpenter, 
122  Mich.  681,  81  N.  W.  932;  Ray- 
mond V.  Came,  45  N.  H.  201 ;  Child- 
ers  V.  Neely,  47  W.  Va.  70,  34  S.  E. 
828,  49  L.  R.  A.  468,  81  Am.  St.  777 ; 
Ex  parte  Marlin,  2  Bro.  Ch.  15,  29 
Eng.  Reprint  8. 

so  Lenahan  v.  Casey,  46  Mont.  267, 
128  Pac.  601. 

51  Starr  v.  Case,  59  Iowa  491,  13 
N.  W.  645 ;  Levi  v.  Karrick,  8  Iowa 
150;  Lord  v.  Anderson,  16  Kans. 
185;  Leserman  v.  Bernheimer,  113  N. 


Y.  39,  20  N.  E.  869 ;  Rhiner  v.  Sweet, 
2  Lans.    (N.  Y.)    386. 

5-  Groth  V.  Kersting,  23  Colo.  213, 
47  Pac.  393  (affg.  4  Colo.  App.  395,  26 
Pac.  156)  ;  Colehour  v.  Coolbaugh, 
81  111.  29. 

52  Lord  V.  Anderson,  16  Kans.  185  ; 
Berkey  v.  Judd,  12  Minn.  52  (Gil. 
23)  ;  Bloomfield  v.  Buchanan,  14  Ore. 
181,  12  Pac.  238. 

53a  Rassaert  v.  Mensch,  17  Cal.  App. 
637,  120  Pac.  1072. 

5*  Williams  v.  Williams,  104  Cal. 
85,  27  Pac.  784;  Albery  v.  Geis,  1 
Cal.  App.  381,  82  Pac.  262 ;  Griffith  v. 
Kirley,  189  Mass.  522,  76  N.  E.  201  : 
Arnold  v.  Angell,  62  N.  Y.  508 ;  Clark 
v.  Gallaher,  3  Tex.  Civ.  App.  541,  22 
S.  W.  1047. 

55  Johnson  v.  Miller,  50  111.  App. 
60 ;  Turner  v.  Turner,  9  Ky.  L.  456, 
5  S.  W.  457;  Dunlap  v.  Byers,  110 
Mich.   109,  67  N.  W.   1067;   Clark  v. 


1015  ACCOUNTING   AND    DISSOLUTION    ACTIONS  §    731 

ambiguous  will  be  so  construed  as  to  uphold  it,  if  possible.^®  A 
decree  settling  the  principles  by  which  the  amount  of  loss  charge- 
able against  one  partner  was  to  be  ascertained  and  providing  for 
a  future  decree  to  be  rendered  when  the  amount  was  ascertained 
is  not  erroneous  as  being  indefinite  in  amount.^^  Under  some 
circumstances,  usually  where  some  partners  have  been  guilty  of 
misconduct,  a  personal  judgment  against  certain  partners  in  fa- 
vor of  other  partners  may  be  rendered  in  a  suit  for  accounting 
requiring  them  to  assume  debts  or  pay  over  a  sum  of  money. ^* 
The  partners  may  be  held  individually  liable  for  firm  debts  after 
the  exhaustion  of  firm  assets.^^  In  some  cases  a  decree  may 
•be  entered  without  first  settling  partnership  affairs,  as  where 
the  defendant  partner  filed  a  bond  to  secure  the  payment 
of  any  amount  which  might  be  found  due  to  the  complaining 
partner,  retained  the  assets,  and  made  no  offer  to  show  there 
was  no  such  settlement.'^"  The  interest  of  a  deceased  partner 
ascertained  in  equity  may  be  paid  to  his  administrator  leaving 
the  rights  of  those  claiming  a  lien  on  it  to  be  determined  in  a 
probate  court.°^  Although  the  general  rule  is  that  a  dissolution 
of  a  partnership  will  be  adjudged  as  of  the  date  of  the  judg- 
ment, if  the  equities  warrant  it  may  be  adjudged  as  of  a  date 
earlier  than  the  judgment,  as  in  a  case  where  dissolution  was 
sought  because  of  the  plaintiff  partner's  physical  incapacity, 
and  because  of  the  slow  progress  of  the  case  through  the  courts, 

Hall,  54  Nebr.  479,  74  N.  W.  856;  Marcus,  4  Wills.  Civ.  Cas.  Ct.  App. 

Bushby   v.    Berkeley,    135    App.    Div.  (Tex.),  §  208,  15  S.  W.  412.   See  Rawl- 

443,  119  N.  Y.  S.  739.    See  LaCotts  v.  ings  v.  Fish,  151  Ivy.  764,  152  S.  W. 

Pike,  91  Ark.  26,  120  S.  W.  144,  134  941. 

Am.   St.  48;   Reilly  v.  Freeman,   109  "Gore  v.   Vines,   72  W.   Va.   783, 

App.  Div.  4,  95  N.  Y.  S.  1069  (affd.  in  79  S.  E.  820. 

184  N.  Y.  610,  11  N.  E.  1196)  ;  Cox  v.  ^s  Thomas    v.    Hollingsworth,     181 

Clarke,  45  Misc.  102,  91  N.  Y.  S.  587;  Ind.  411,   103   N.   E.  840;   Oustad  v. 

Yarwood  v.   Billings,  31   Wash.  542,  Hahn,  27  N.  Dak.  334,  146  N.  W.  557. 

12  Pac.  104;  Turquand  v.  Wilson,  1  ^^^  Rassaert  v.  Mensch,  17  Cal.  App. 

Ch.  D.  85,  45  L.  J.  Ch.  104.  637,  120  Pac.  1072. 

s«  Noble  v.  Faull,  26  Colo.  467,  58  co  Shadburne   v.    Sbarbaro,    182   111. 

Pac.    681;    Knowlton    v.    Dolan,    151  App.  54. 

Ind.  79,  51  N.  E.  97 ;  Hayes  v.  Reese,  ^i  pierson    v.    Garrison,    83    N.    J. 

34   Barb.    (N.  Y.)    151;   Goldman  v.  Eq.  334,  91  Atl.  829. 

14 — Row.  ON  Partn. — Vol.  2 


732 


LAW    OF    PARTNERSHIP 


1016 


the  term  of  the  partnership  had  practically  expired  before  the 
final  judgment.^- 

§  732.  Costs. — The  general  rule  is  that  the  costs  of  a  part- 
nership accounting  are  paid  out  of  firm  assets,**^  and  this  includes 
fees  for  attorneys  or  expert  accountants,*^*  and  the  partners  must 
bear  them  in  proportion  to  their  shares  in  the  partnership,  if  its 
assets  are  insufficient.^^     But,  in  the  court's  discretion,*'*^  costs 


62  Barclay  v.  Barrie,  209  N.  Y.  40, 
102  N.  E.  602,  47  L.  R.  A.  (N.  S.) 
839  (revg.  154  App.  Div.  925,  139  N. 
Y.  S.  81). 

63  Swafford  V.  White,  28  Ky.  L.  119, 
89  S.  W.  129;  Dyer  v.  Ballinger,  24 
Ky.  L.  1918,  72  S.  W.  738 ;  Broeg  v. 
Pool,  22  Ky.  L.  1354,  60  S.  W.  518; 
Lyford  v.  Haines,  21  Ky.  L.  948,  53 
S.  W.  646;  McBurnie  v.  Semple,  14 
Ky.  L.  30,  19  S.  W.  183;  Baxter  v. 
Hewes,  45  La.  Ann.  1065,  13  So.  864 ; 
Burke  V.  Fuller,  41  La.  Ann.  740,  6 
So.  557;  Philpot  v.  Patterson,  5 
Mart.  (N.  S.)  (La.)  273;  Whitney 
V.  Cook,  5  Mass.  139;  Patrick  v. 
Patrick,  71  N,  J.  Eq.  347,  63  Atl. 
848;  Masters  v.  Brooks,  132  App. 
Div.  874,  117  N.  Y.  S.  585;  Hopfen- 
sack  V.  Hopfensack,  9  Daly  (N.  Y.) 
457,  61  How.  Prac.  498;  Crotty  v. 
Jarvis,  1  Misc.  316,  20  N.  Y.  S.  728, 
48  N,  Y.  St.  781  (affg.  17  N.  Y.  S. 
949)  ;  Fleming  v.  Carson,  Zl  Ore, 
252,  62  Pac.  374;  Gordon  v.  Moore, 
134  Pa.  St.  486,  19  Atl.  753;  In  re 
Gyger's  Appeal,  62  Pa.  St.  IZ,  1  Am. 
Rep.  382;  Potter  v.  Jackson,  13  Ch. 
D.  845,  49  L.  J.  Ch.  232;  Austin  v. 
Jackson,  11  Ch.  Div.  942;  Bonville 
V.  Bonville,  35  Beav.  129,  55  Eng. 
Reprint  844;  Jones  v.  Welch,  1  Jur. 
(N.  S.)  994;  Rosher  v.  Crannis,  ^Z 
L.  T.  (N.  S.)  272;  Rowlands  v. 
Evans,  14  Wkly.  Rep.  882;  Timothy 
V.  Hindley,  14  Wkly.  Rep  382;  Cur- 
ran  V.  Carey,  4  Manitoba  459;  Chap- 


man V.  Newell,  14  Ont.  Pr.  208; 
Blaney  v.  McGrath,  9  Ont.  Pr.  417; 
Evans  v.  Honsinger,  11  Ont.  W.  R. 
861;  Hall  v.  Antrobus,  44  Nova 
Scotia  96.  See  Mitchell  v.  Lister,  21 
Ont.  318. 

64  Faulkner  v.  Hendy,  79  Cal.  265, 
21  Pac.  754;  Chandler  v.  Sherman, 
16  Fla.  99;  Payne  v.  McNamara,  6 
Ohio  Cir.  Dec.  62,  9  Ohio  Cir.  Ct. 
132.  See  Patrick  v.  Patrick,  71  N. 
J.  Eq.  347,  63  Atl.  848;  Cronk  v. 
Crandall,  137  App.  Div.  440,  121  N. 
Y.  S.  805. 

65  Isenhart  v.  Hazen,  10  Kans.  App. 
577,  63  Pac.  451;  Pratt  v.  McHat- 
ton,  11  La.  Ann.  260;  Campbell  v. 
Coquard,  16  Mo.  App.  552 ;  In  re 
Beck,  19  Ore.  503,  24  Pac.  1038;  In 
re  Gj'ger's  Appeal,  62  Pa.  St.  IZ,  1 
Am.  Rep.  382;  Gordon  v.  Moore,  8 
Pa.  Co.  Ct.  289;  Baker  v.  Milde 
(Tex.  Civ.  App.  1895),  ZZ  S.  W. 
152;  Newton  v.  Taylor,  L.  R.  19  Eq. 
14,  23  Wkly.  Rep.  330;  Curran  v. 
Carey,  4  Alanitoba  450 ;  Cliapman  v. 
Newell,  14  Ont.  Pr.  208;  Blaney  v. 
McGrath,  9  Ont.  Pr.  417. 

66  Granville  v.  Arnott,  ll  Conn. 
716,  59  Atl.  405;  McBurnie  v.  Sem- 
ple, 14  Ky.  L.  30,  19  S.  W.  183; 
Struthers  v.  Christal,  3  Daly  (N.  Y.) 
Z21\  Smith  v.  Green,  8  N.  Y.  .Civ. 
Proc.  163;  Smith  v.  Underbill,  64 
Hun  639,  19  N.  Y.  S.  249,  47  N.  Y. 
St.  23;  Wehrman  v.  McFarland,  10 
Ohio  Super.  Ct.  Com.  PI.  320,  8  Ohio 


1017 


ACCOUNTING   AND   DISSOLUTION    ACTIONS 


732 


may  be  awarded  against  one  partner,  where  justice  or  his  mis- 
conduct demands  it,^^  or  where  the  claims  of  former  partners  are 
involved  they  may  be  apportioned  between  the  parties  to  thesuit.*^^^ 
A  partner  who  has  overdrawn  his  share  may  be  required  to  repay 
it,  before  costs  are  charged.^^  It  was  said  In  one  case:^®^  "In 
equity  costs  do  not  always  follow  a  decree  against  a  party.  They 
rest  on  the  sound  discretion  of  the  court,  and  are  to  be  awarded 
or  refused,  according  to  the  justice  of  each  particular  case."''  It 
has  been  decided  that  wherever  an  account  is  intricate  or  doubt- 
ful, there  should  be  no  costs,'^*'  and  this  is  especially  applicable 
to  partnership  accounts.^^  In  such  cases  the  costs  are  usually 
divided,  or  what  is  practically  the  same  thing,  are  taxed  on  the 
partnership  effects.^"    There  were  conflicting  claims  in  this  case 


N.  P.  673 ;  Markle  v.  Wilbur,  200  Pa. 
473,  50  Atl.  209;  Gordon  v.  Moore, 
8  Pa.  Co.  Ct.  289;  Kennedy 
V.  Hill,  89  S.  Car.  462,  71 
S.  E.  974;  Boothe  v.  Nim  Co., 
n  Wash.  679,  683,  131  Pac. 
252;  Smith  v.  Harris,  88  Kans. 
226,  128  Pac.  378.  See  also  Starr 
V.  Case,  59  Iowa  491,  13  N.  W. 
645;  Hart  v.  Hart,  117  Wis.  639, 
94  N.  W.  890;  Ritter  v.  Ritter,  100 
Wis.  468,  1(>  N.  W.  347;  Wright  v. 
Hunter,  5  Ves.  Jr.  792,  31  Eng.  Re- 
print 861 ;  Bingham  v.  Smith,  16 
Grant  Ch.  (U.  C.)  2>1Z;  O'Lone  v. 
O'Lone,  2  Grant  Ch.  (U.  C.)  125. 
See  Barker  v.  Wl:ite,  42  N.  Y.  617, 
1  Abb.  Dec.  95,  5  Abb.  Prac.  (N.  S.) 
124. 

'■■'Ginn  v.  Ewan,  93  Fed.  80,  35 
C.  C.  A.  213;  Taft  v.  Schwamb,  80 
111.  289;  Caldwell  v.  Lang,  101  S. 
W.  972,  31  Ky.  L.  237;  Borah  v. 
O'Niell.  121  La.  IZZ,  46  So.  788; 
Richard  v.  Mouton,  109  La.  465,  ZZ 
So.  563 ;  Taylor  v.  Cawthorne,  17  N. 
Car.  221 ;  Kennedy  v.  Hill,  89  S.  Car. 
462,  71  S.  E.  974;  Boothe  v.  Summit 
Coal  Min.  Co.,  72  Wash.  679,  131  Pac. 
252;  Navarro  v.  Lamana   (Tex.  Civ. 


App.),  179  S.  W.  922;  Briere  v.  Tay- 
lor, 126  Wis.  347,  105  N.  W.  817; 
Knapp  V.  Edwards,  57  Wis.  191,  15  N. 
W.  140;  Hamer  v.  Giles,  11  Ch.  Div. 
942,  48  L.  J.  Ch.  508;  Norton  v.  Rus- 
sell, L.  R.  19  Eq.  343,  23  Wkly.  Rep. 
252;  Lodge  v.  Pritchard,  4  Giffard 
295,  66  Eng.  Reprint  717;  Payne  v. 
Felton,  4  L.  J.  Ch.  (O.  S.)  175;  Car- 
michael  v.  Sharp,  1  Ont.  381 ;  Wool- 
ans  V.  Vansickle,  17  Grant  Ch.  (U. 
C.)  451;  Garven  v.  Allan,  3  Grant 
Ch.  (U.  C.)  238.  Compare  Stevens 
V.  Yeatman,  19  Md.  480. 

67a  Smith  v.  Harris,  88  Kans.  226, 
128  Pac.  278. 

68  Ross  V.  White  [1894],  3  Ch.  326; 
Potter  V.  Jackson,  13  Ch.  Div.  845; 
Rosher  v.  Crannis,  63  L.  T.  (N.  S.) 
272. 

68a  In  re  Gyger's  Appeal,  62  Pa.  St. 
IZ. 

69  Citing  3  Daniell's  Ch.  Pr.  2. 

70  Citing  Pitt  V.  Page,  1  Bro.  P. 
C.  1. 

71  Citing  Collyer  on  Partn.  339. 

72  Citing  Hutcheson  v.  Smith,  5 
Irish  Eq.  117;  Jones  v.  Morehead,  3 
B.  Mon.  (Ky.)  385;  Taylor  v.  Caw- 
thorne, 2  Dev.  Eq.   (N.  Car.)   221. 


§    733  LAW    OF    PARTNERSHIP  1018 

on  both  sides,  and  each  party  has  been  found  as  to  some  of  them 
to  be  in  the  wrong.  There  were  questions  of  real  doubt  and 
difficuhy  as  to  the  amount  of  rent,  and  the  apportionment  of 
expenses,  as  well  as  to  interest  and  compensation.  It  is  not  easy 
to  see  how  they  could  have  been  settled  without  a  suit  or  a  ref- 
erence to  mutual  friends.  Wc  can  not  give  so  much  weight  as 
the  master  has  done  to  the  general  denial  by  defendant  in  his 
answer  of  liability  to  account.  It  was  not  that  which  rendered 
the  suit  unavoidable.  The  costs  of  this  litigation  appear,  there- 
fore, to  be  a  necessary  expense  in  consequence  of  the  disputes 
between  the  parties  in^  closing  up  the  concerns  of  this  copartner- 
ship. It  is  an  item  in  the  amount  of  profit  and  loss,  which  it 
would  have  been  much  better  for  all  the  partners  to  have  saved 
by  mutual  concessions  or  otherwise,  but  which  can  not  in  equity 
be  charged  upon  one  of  them  exclusively.^^  We  are  of  the  opin- 
ion that  all  the  costs  in  the  court  below  as  well  as  the  costs  of 
this  appeal  should  be  paid  out  of  the  partnership  money  in  the 
hands  of  the  defendant,  and  that  he  should  be  allowed  a  credit 
therefor  in  his  account." 

§  733.  Appeal — Conclusiveness  of  judgment. — A  judg- 
ment will  not  be  reversed  on  appeal  for  matters  based  on  a  find- 
ing of  fact  from  conflicting  evidence,  if  there  is  sufficient  evi- 
dence, without  regard  to  that  in  conflict  with  it,  which  supports 
the  findings  and  judgment.'*     Nor  will  a  judgment  be  reversed 

^3  Citing     Caldwell     v.     Leiber,     7  652,  52  N.  W.  288 ;  Stepper  v.  Bruenn, 

Paige  (N.  Y.  Ch.)  508.  28  N.  Dak.  1,  147  N.  W.  724;  Tillot- 

74  Reynolds  v.  Locke,  218  Fed.  442;  son  v.  Paquet,  74  Ore.  539,  145  Pac. 

Gunn  V.  Black,  60  Fed.  151,  8  C.  C.  268;    Gloninger    v.    Barclay,   246    Pa. 

A.  534 ;  Reynolds  v.  Jackson,  25  Cal.  St.   265,   92   Atl.    191 ;    Fidelity   Title 

App.   490,    144    Pac.    305;    Yetzer   v.  &c.  Co.  v.  Bell,   188  Pa.   St.  637,  41 

Applegate,  83  Iowa  726,  50  N.  W.  66 ;  Atl.  637 ;  In  re  Burrough's  Appeal,  26 

Newberry  v.  Rhinehart,  159  Ky.  513,  Pa.   St.  264;   Mays  v.  Melat,  29  Pa. 

167  S.  W.  674;  Rawlings  v.  Fish,  151  Super.   Ct.  365;   Rush  v.   First   Nat. 

Ky.    764,    152    S.   W.   941;   Harris   v.  Bank    (Tex.   Civ.   App.),    160   S.   W. 

Dotson,  149  Ky.  695,  149  S.  W.  1008;  319;    Pederson    v.    Parke,    68    Wash. 

Bannon   v.   Hawkins,   35    S.   W.  636,  482,  123  Pac.  777;  Torbe  v.   Strauss, 

18  Ky.  L.  150;  May  v.  Cahn,  34  Nebr.  155  Wis.  518,  144  N.  W.  184,  1136. 


1019  ACCOUNTING    AND    DISSOLUTION    ACTIONS  §    733 

on  a  finding  made  at  the  appellant's  request/^  or  where  substan- 
tial justice  was  done.'"  It  may  be  reversed  because  contrary  to 
the  rules  of  law  applicable  to  the  case,"  or  where  there  is  a  mis- 
take in  computation,"  or  there  is  insufficient  evidence  to  support 
it.'''  Thus,  on  an  appeal  by  plaintiff  in  a  suit  for  the  dissolution 
of  a  partnership  from  a  decree  which  was  based  on  a  finding 
that  a  general  partnership  did  not  exist,  the  decree  was  affirmed, 
although  the  court  was  in  doubt  as  to  whether  the  evidence 
showed  that  plaintiff  had  been  fairly  treated  by  defendant,  since 
the  court  was  not  satisfied  that  the  plaintiff  had  discharged  the 
burden  upon  him  of  showing  that  a  general  partnership  existed.**" 
The  court  will  regulate  the  right  of  a  partner  to  share  earnings 
accruing  to  the  firm  pending  appeal  from  a  decree  of  dissolu- 
tion.^^ A  judgment  in  an  action  for  an  accounting  between  part- 
ners is  conclusive  upon  the  parties  as  to  all  matters  adjudicated 
therein  until  set  aside. '^"  It  is  of  no  effect  as  to  matters  not  be- 
fore the  court  when  the  settlement  was  had.^^  It  may  be  opened 
or  set  aside  upon  the  grounds  for  which  any  judgment  in  equity 

"^^  Schermerhorn     v.      Brewer,     63  ^^  Richard  v.  Mouton,   106  La.  435, 

Hun  626,  17  N.  Y.  S.  701,  44  N.  Y.  30  So.  894.     See  Aldecoa  v.  Warner, 

St.     135;     Yarwood    v.     Billings,    31  16  P.  I.  423. 

Wash.  542,  72  Pac.  104.     See  Snyder  so  Smith  v.  Lancaster,  37  App.    (D. 

V.    O'Beirne,    132    Mich.    340,    93    N.  C.)  25. 

W.  872.  siRuggles    v.    Buckley,     192    Fed. 

7fi  Smith  V.  Lancaster,  37  App.   (D.  907,  113  C.  C.  A.  299. 

C.)    25;   Eames  v.   Miller,   108  Mich.  ^2  Broda     v.     Greenwald,     66    Ala. 

406,   66   N.   W.   338;    McCullough   v.  538;   Williams  v.   Lane,   158  Cal.  39, 

DeWitt,  163  Mo.  306,  63  S.  W.  694;  109    Pac.    873;    Maginnis    v.    Crosby, 

Jones  V.  Webb,  8  S.  Car.  202;  Green  11    La.   Ann.   400;   Tiemann   v.    Mol- 

V.  Stacy,  90  Wis.  46,  62  N.  W.  627;  liter,    71    Mo.   512;    Hayes   v.    Reese, 

Tolford  V.  Tolford,  44  Wis.  547.  34    Barb.    (N.    Y.)    151 ;    Cockley    v. 

'"  Savage  v.  Carter,  9  Dana   (Ky.)  Brucker,  54  Ohio   St.  214,  44   N.   E. 

408;  Ferrell  v.  Bales,  23  Ky.  L.  1516,  590. 

65   S.   W.  604;   Lafferty  v.   Lafiferty,  83  Schnell  v.  Schnell,  39  Ind.  App. 

174    Pa.    St.    536,    34   Atl.    203,    205 ;  556,  80  N.  E.  432. 
Botham  v.  Keefer,  2  Ont.  App.  595. 

7s  White    V.    Bullock,    18    Mo.    16; 
Chaves  v.  Linan,  2  P.  L  12. 


§    733  LAW    OF    PARTNERSHIP  1020 

will   be   opened.^*     Upon   opening  the   judgment,   the   account 
should  ordinarily  be  restated  entirely.^^ 

8*  Powers    V.    Dickie,    49   Ala.   81;  §5  Black  v.   Merrill,  65   Cal.   90,   3 

Green    v.    Thornton,    96    Cal.    67,    30  Pac.    113;    Hunt   v.    Stuart,    53    Md. 

Pac.    965;     Robertson    v.    Gibb,    38  225;   Pritt  v.   Clay,  6  Beav.   503,   49 

Mich.    165 ;   Vechsler   v.   Blitzer,    165  Eng.  Reprint  920. 
App.  Div.  967,  150  N.  Y.  S.  770. 


CHAPTER  XXIV 


ACTIONS   BETWEEN    PARTNERS 


SECTION 

740.  In  general. 

741.  Actions  between  firm  and  part- 

ner. 

742.  Actions    between     firms     having 

common  partner. 

743.  Actions  at  law  between  partners 

in  general. 

744.  Matters  outside  partnership. 

745.  Partnership  transactions  not  in- 

volving an  accounting. 

746.  Action  on  express  stipulation. 

747.  Action     on     preHminary     agree- 

ment. 

748.  Partnership    for    single    transac- 

tion. 

749.  Action    on    agreement    for    con- 

tribution  to   partnership    fund. 

750.  Action  on  personal  promises  of 

pay  for  services. 

751.  Action    upon    account    stated    or 

balance  due. 

752.  Action  on  promissory  note. 

753.  Action   for  damages   for  breach 

or  abandonment  of  partnership 
agreement. 

754.  Action  upon  one  item  unadjusted. 

755.  Assumpsit. 

756.  Action  for  damages  for  fraud  of 

partner. 

757.  Partition  and  suits  involving  real 

estate. 

758.  Tort  actions  between  partners. 

759.  Trespass,  trover,  and  conversion. 

760.  Actions    between    partners    after 

dissolution. 

761.  Attachment  and  garnishment. 

762.  Arrest  of  partner  in  civil  action. 


SECTION 

763.  Defenses. 

764.  Set-ofif  and  counterclaim. 

765.  Demand — Laches. 

766.  Venue — Time  to  sue. 

767.  Parties  and  trial. 

768.  Damages  for  breach  of  contract 

of  partnership. 

769.  Profits  as  the  measure  of  dam- 

age. 

770.  Other  measures  of  damage. 

771.  Damages  for  breach  of  contract 

to   pay   firm   debts — or  not   to 
engage  in  business. 

772.  Judgment  and  execution. 
nZ.  Equitable  actions — In  general. 

774.  Accounting — Dissolution. 

775.  Rescission    of    partnership    con- 

tract. 

lid.  Rescission  of  partnership  con- 
tract under  Uniform  Partner- 
ship Act. 

117.  Reformation  of  partnership  con- 
tract. 

778.  Specific  performance  of  partner- 

ship contract. 

779.  Specific    performance    after    dis- 

solution. 

780.  Injunctions. 

781.  Injunction  to  prevent  breach  of 

agreement. 

782.  Injunction  to  restrain  change  in 

the  application  of  profits. 

783.  Injunction  against  change  in  na- 

ture of  partnership  business. 

784.  Injunction    against    commencing 

legal  actions. 

785.  Injunction  against  dissolution. 


1021 


§    740  LAW    OF    PARTNERSHIP  1022 

SECTION  SECTION 

786.  Other  acts  enjoined.  788.  Receiverships. 

787.  Injunction  in  action  for  dissoUi-     789.  Receiverships  on  account  of  mis- 

tion  or  after  dissolution.  conduct  of  a  partner. 

§  740.  In  general. — Partnership  brings  many  strange  re- 
lations to  those  adopting  its  use  for  the  transaction  of  their  busi- 
ness ventures,  but  in  no  manner  are  these  strange  relations  more 
forcibly  shown  than  in  suits  inter  sese.  In  one  sense,  the  firm 
is  an  entity,  separate  and  apart  from  the  members  which  com- 
pose it.  In  another  sense,  it  is  simply  the  sum  total  of  all  the 
members,  with  no  separate  and  distinct  identity.  Every  partner, 
therefore,  being  a  distinct  part  thereof,  must  sue  himself  if  he 
should  sue  the  firm  or  be  sued  by  the  firm,  and  the  law  has  ever 
discountenanced  a  person  suing  himself.  Consequently,  many 
peculiar  rules  and  remedies  have  arisen  in  partnership  suits  inter 
sese,  which  will  be  discussed  in  this  chapter,  both  from  a  legal 
and  an  equitable  viewpoint. 

§  741.  Actions  between  firm  and  partner. — There  can  be 
no  action  at  law  by  a  partner  against  the  firm  or  the  firm  against 
the  partner.  There  are  various  reasons  why  this  can  not  be. 
Suits  can  not  be  brought  by  a  partnership  in  the  firm  name  un- 
less there  is  a  statute  authorizing  such  procedure.  The  part- 
ners, therefore,  in  most  jurisdictions  must  sue  and  be  sued  as 
individuals  and  all  of  them  must  be  joined  in  an  action  against 
the  firm.  So  if  one  partner  could  sue  the  firm,  he  must  be  both 
plaintiff  and  defendant  and  the  law  does  not  permit  him  to  be 
a  party  on  both  sides  of  an  action.  He  might  be  put  in  the 
position  of  recovering  a  judgment  against  himself,  which  he 
might  be  compelled  himself  to  satisfy.^  Another  reason  why  a 
partner  can  not  sue  the  firm  at  law  is  that  there  can  in  fact  be 
no  debt  due  from  the  partner  to  the  firm,  or  from  the  firm  to 

1  Story     Partnership,     221 ;     Bates  42  Kans.  49,  21  Pac.  784 ;  Remington 

Partnership,  §  849;  T.  Parsons  Part-  v.  Allen,  109  Mass.  47;  Duff  v.  Ma- 

nership,  §§  184,  185.    See  also  Pico  v.  guire,  99  Mass.  300;  Burley  v.  Har- 

Cuyas,  47  Cal.   174;   Mickle  v.   Peet,  ris,  8  N.   H.  233,  29  Am.  Dec.  650; 

43  Conn.  65;  Bracken  v.  Kennedy,  3  Newby   v.    Harrell,    99    N.    Car.    149, 

Scam.    (111.)   558;  O'Brien  v.  Smith,  5  S.  E.  287,  6  Am.  St.  503. 


1023  ACTIONS    BETWEEN    PARTNERS  §    741 

one  partner,  until  accounts  have  been  settled,  which  is  usually 
upon  dissolution.  Such  is  the  nature  of  the  partnership  relation 
that  prior  to  that  time  advances  by  one  partner  to  the  firm  or 
from  the  firm  to  one  partner  are  not  debts,  merely  items  in  the 
account."  Judge  Story  says:^  "The  ground  why  at  law,  inde- 
pendent of  any  special  covenant,  or  any  distinct  several  con- 
tract, one  partner  can  not  maintain  a  suit  against  the  other 
partners,  for  moneys  paid,  or  advanced,  or  contributed,  or  lia- 
bilities incurred,  on  account  of  the  partnership  (or  for  neglect 
of  the  partnership  business),  may  be  readily  explained  in  a 
satisfactory  manner.  In  the  first  place,  upon  the  more  technical 
principles  of  the  common  law,  one  partner  can  not  sue  the  others 
for  a  contribution  or  payment  made  for  a  just  partnership  lia- 
bility; for  in  such  a  suit  all  the  partners,  including  himself, 
must  be  made  defendants;  and  it  is  clear,  upon  the  acknowl- 
edged principles  of  pleading  at  the  common  law,  that  a  party 
can  not  at  once  be  a  plaintiff  and  a  defendant  in  the  same  suit; 
or  in  other  words,  he  can  not  vSue  himself,  either  alone,  or  in 
conjunction  with  others.  But  a  reason,  far  more  satisfactory, 
because  it  is  in  no  shape  founded  upon  technical  principles,  is, 
that  until  all  the  partnership  concerns  are  ascertained  and  ad- 
justed, it  is  impossible  to  know  whether  a  particular  partner  be 
a  debtor  or  a  creditor  of  the  firm;  for  although  he  may  have 
advanced  large  sums  of  money  on  account  thereof,  he  may  be 
indebted  to  the  firm  in  a  much  larger  amount.  Now,  a  settle- 
ment of  all  the  partnership  concerns  is  ordinarily,  during  the 

2  Tipton  V.  Nance,  4  Ala.  194;  Cole  Mattingly  v.  Stone,  35  S.  W.  921,  18 

V.  Fowler,  68  Conn.  450,  36  Atl.  807 ;  Ky.    L.    187 ;    Ryder    v.    Wilcox,    103 

Stoddard  v.  Wood,  9  Gray    (Mass.)  Mass.  24;  Miner  v.  Lorman,  56  Mich. 

90 ;  Towle  v.  Meserve,  38  N.  H.  9 ;  212,  22  N.  W.  265 ;  Crosby  v.  Timolat, 

Gibson  v.  Moore,  6  N.  H.  547;  Ives  50  Minn.  171,  52  N.  W.  526;  Halsted 

V.    Miller,    19    Barb.     (N.    Y.)     196;  v.  Schmelzel,  17  Johns.    (N.  Y.)   80; 

Oglesby   v.    Thompson,    59   Ohio    St.  Casey   v.    Brush,    2    Caines    (N.    Y.) 

60,  51  N.  E.  878 ;  Richardson  v.  Bank  293 ;    Newby  v.   Harrell,   99  N.    Car. 

of  England,  4  Myl.  &  C.  165,  8  L.  J.  149,    5    S.    E.    284,    6    Am.    St.    503 ; 

Ch.   1,  2  Jur.  911.     See  also  Merritt  Ferguson  v.  Wright,  61  Pa.  St.  258; 

V.    Smith,   158  Ala.   186,   48   So.   495;  Sadler  v.  Nixon,  5   B.  &  Ad.  936. 

Burns    v.    Nottingham,    60    111.    531;  s  story  Partnership   (5  ed.),  §  221. 


§    741  LAW    OF    TARTNERSIIIP  1024 

continuance  of  the  partnership,  unattainable  at  law;  and  even 
in  equity  it  is  not  ordinarily  enforced  except  upon  a  dissoKi- 
tion  of  the  partnership.  If  one  partner  could  recover  against 
the  other  partners  the  whole  amount  paid  by  him  on  account  of 
the  partnership,  they  would  immediately  have  a  cross  action 
against  him  for  the  whole  amount,  or  his  share  thereof;  and  if 
he  could  recover  only  their  shares  thereof,  then,  in  order  to 
ascertain  those  shares,  a  full  account  of  all  the  partnership  con- 
cerns must  be  taken,  and  the  partnership  itself  wound  up.  This 
would  manifestly  be  a  most  serious  inconvenience,  as  well  as 
a  change  of  the  original  contract,  from  a  joint  contract  of  all 
the  partners,  in  solido,  to  a  several  contract,  each  for  his  own 
aliquot  part  of  the  final  balance,  due  to  a  particular  partner 
upon  a  special  transaction.  And  in  cases  of  this  sort  the  maxim 
may  justly  apply:  Frustra  petis,  quod  statim  alteri  reddere 
cogeris :  or,  as  it  is  sometimes  expressed,  Frustra  peterit,  quod 
mox  rediturus  esset."  So  one  partner  can  not  sue  the  firm  at 
law  and  recover  for  services  performed  for  the  firm;*  or  for 
advances  or  loans  to  the  firm;^  or  for  contribution  for  money 
paid  for  the  firm's  use  or  in  satisfaction  of  a  firm  debt;^  or  for 

4  O'Brien  v.  Smith,  42  Kans.  49,  ton,  9  Wis.  268 ;  Richardson  v.  Bank 
21  Pac.  784;  Wright  v.  Troop,  70  of  England,  4  Myl.  &  C.  165,  8  L.  J. 
Maine    346;    Nickerson    v.    Spindell,     Ch.  1,  2  Jur.  911, 

164  Mass.  25,  41  N.  E.  105 ;  Wood  v.  ^  philips  v.   Lockhart,   1   Ala.   521 ; 

Cullen,     13    Minn.    394     (Gill    365)  ;  De  Jarnette  v.  McQueen,  31  Ala.  230, 

Drewer  v.  Person,  22  Wis.  651.  68  Am.   Dec.   164;   Johnson  v.   Peck, 

5  Johnson  v.  Peck,  58  Ark.  580,  25  58  Ark.  580,  25  S.  W.  865;  Price  v. 
S.  W.  865 ;  Cole  v.  Fowler,  68  Conn.  Drew,  18  Fla.  670 ;  Crossley  v.  Tay- 
450,  36  Atl.  807;  Mickle  v.  Peet,  43  lor,  83  Ind.  ZZ7 ;  Coleman  v.  Cole- 
Conn.  65;  Price  v.  Drew,  18  Fla.  man,  78  Ind.  344;  Lawrence  v.  Clark, 
670;  Elliott  V.  Deason,  64  Ga.  63;  9  Dana  (Ky.)  257,  35  Am.  Dec.  133; 
Bracken  v.  Kennedy,  4  111.  558;  Red-  Warring  v.  Arthur,  98  Ky.  34,  32  S. 
dick  V.  White,  46  La.  Ann.  1198.  15  W.  221,  17  Ky.  L.  605;  Ward  v.  Best, 
So.  487;  Starbuck  v.  Shaw,  10  Gray  8  Ky.  L.  784;  O'Brien  v.  Drexilius,  7 
(Mass.)  492;  Gridley  v.  Dole,  4  N.  Ky.  L.  527;  Shattuck  v.  Lawson,  10 
Y.  486;  Weidig  v.  Moore,  24  Cin.  Gray  (Mass.)  405;  White  v.  Har- 
Wkly.  Law  Bui.  376;  Leidy  v.  Mes-  low,  5  Gray  (Mass.)  463;  Haskell 
singer,  71  Pa.  St.  177;  Merriwether  v.  Adams,  7  Pick.  (Mass.)  59;  Morin 
V.  Hardeman,  51  Tex.  436;  Gauger  v.  Martin,  25  Mo.  360;  Halsted  v. 
V.  Pautz,  45  Wis.  449;  Lower  v.  Den-  Schmelzel,  17  Johns.  (N.  Y.)  80;  Mc- 


1025 


ACTIONS    BETWEEN    PARTNERS 


§  741 


goods  sold  to  the  firm;^  or  for  rent  for  property  used  by  the 
firm;^  or  for  a  share  in  the  profits.'*  A  partner  can  not  recover 
on  a  firm  note  executed  to  him/°  But  it  has  often  been  held 
that  if  a  partner  takes  a  note  of  the  firm  for  an  advance  to  it 
by  him,  and  indorses  it  to  a  holder  for  value,  the  latter  may 
recover  from  the  firm."  The  same  difficulty  as  to  making  a 
party  both  plaintiff  and  defendant  applies  to  an  action  by  a  firm 
against  a  partner  on  an  advance  to  him,  and  it  is  also  true  that 
until  an  accounting  is  had,  his  share  in  the  firm  assets  is  not 
known,  nor  whether  there  will  in  fact  be  a  duty  on  him  to  con- 


Donald  V.  Holmes,  22  Ore.  212,  29 
Pac.  735 ;  Leidy  v.  Messinger,  71 
Pa.  St.  177;  Lockhart  v.  Lytle, 
47  Tex.  452;  Spear  v.  Newell,  13 
Vt.  288.  But  see  Wheeler  v.  Ar- 
nold, 30  Mich.  304,  and  compare 
Clark  V.  Mills,  2,6  Kans.  393,  13  Pac. 
569.  See  also  Philips  v.  Lockhart, 
1  Ala.  521;  Warring  v.  Arthur,  98 
Ky.  34,  Z2  S.  W.  221,  17  Ky.  L.  60S; 
Starbuck  v.  Shaw,  10  Gray  (Mass.) 
492;  Cockrell  v.  Thompson,  85  Mo. 
510;  Harris  v.  Harris,  39  N.  H.  45; 
Murray  v.  Herrick,  171  Pa.  St.  21, 
32  Atl.  1125;  Blakely  v.  Smock,  96 
Wis.  611,  71  N.  W.  1052. 

7  Myrick  v.  Daine,  9  Cush.  (Mass.) 
248.  Contra:  Krall  v.  Forney,  182 
Pa.  St.  6,  27  La.  Ann.  846. 

8  Pico  V.  Cuyas,  47  Cal.  180 ;  John- 
son V.  Wilson,  54  111.  419;  Hemen- 
way  V.  Burnham,  90  Mich.  227,  51 
N.  W.  276;  Estes  v.  Whipple,  12  Vt. 
Z7Z. 

^  Burhans  v.  Jefferson,  76  Fed.  25, 
40  U.  S.  App.  302,  22  C.  C.  A.  25; 
Fisher  v.  Sweet,  67  Cal.  228,  7  Pac. 
657 ;  Russell  v.  Ford,  2  Cal.  86 ;  Lang 
V.  Oppenheim,  96  Ind.  47 ;  Meredith 
V.  Ewing,  85  Ind.  410;  Maguire  v. 
Pingree,  30  Maine  508 ;  Gomersall  v. 
Gomersall,  14  Allen  (Mass.)  60; 
Stone  V.  Aldrich,  43  N.  H.  52;  Har- 


ris V.  Harris,  39  N.  H.  45 ;  Attwater 
V.  Fowler,  1  Hall  (N.  Y.)  180;  De- 
vore  V.  Woodruff,  1  N.  Dak.  143,  45 
N.  W.  701 ;  Masters  v.  Freeman,  17 
Ohio  St.  323 ;  Patton  v.  Ash,  7  Serg. 
&  R.  (Pa.)  116;  M'Fadden  v.  Hunt, 
5  Watts  &  S.  (Pa.)  468;  Ozeas  v. 
Johnson,  4  Dall.  (Pa.)  434,  1  L.  ed. 
897,  1  Binn.  (Pa.)  191;  Kutz  v.  Drei. 
belbis,  126  Pa.  St.  335;  Rice  v.  An^ 
gell.  72,  Tex.  350,  11  S.  W.  338,  3  L.  R 
A.  769;  Kruschke  v.  Stefan,  83  Wis. 
2,72,,  53  N.  W.  679.  But  see  Stan- 
berry  V.  Cattell,  55  Iowa  617,  8  N. 
W.  478,  and  compare  Ferguson  v. 
Baker,  116  N.  Y.  257,  22  N.  E.  400; 
Whetstone  v.  Shaw,  70  Mo.  575. 

1*^ Thompson  v.  Lowe,  111  Ind.  272, 
12  N.  E.  476;  Cutting  v.  Daigneau, 
151  Mass.  297,  23  N.  E.  839;  Hall  v. 
Logan,  34  Pa.  St.  331;  Woods  v. 
Ridley,  11  Humph.  (Tenn.)  194.  Con- 
tra: Morrison  v.  Stockwell,  9  Dana 
(Ky.)   172. 

11  Carpenter  v.  Greenup,  74  Mich. 
664,  42  N.  W.  276,  4  L.  R.  A.  241, 
16  Am.  St.  666;  Walker  v.  Wait,  50 
Vt.  668.  Compare  Wintermute  v. 
Tarrant,  83  Mich.  555,  47  N.  W.  358 ; 
Davis  V.  Merrill,  51  Mich.  480,  16 
N.  W.  864.  See  cases  cited  in  pre- 
ceding note. 


§  742 


LAW    OF    PARTNERSHIP 


1026 


tribute  the  amount  of  the  advance/"  so  there  is  no  right  to 
recover  on  a  note  given  by  a  partner  to  the  firm/^  nor  on  an 
assignment  of  his  note  to  the  firm;^*  nor  on  his  indorsement  of 
a  note/^  But  it  seems  the  firm  may  assign  the  note  of  a  partner 
to  a  third  party,  who  will  have  the  right  to  bring  an  action  on 
it.^''  Nor  can  the  trustee  in  hquidation  of  a  dissolved  firm  sue 
one  of  the  partners  in  an  action  at  law  upon  a  note  which  repre- 
sented an  advance  by  the  firm  to  the  partner/'' 

§  742.  Actions  between  firms  having  common  partner. — 
The  rule  is  that  one  firm  can  not  maintain  an  action  at  law  on 
an  obligation  to  it  from  another  firm  having  a  common  partner, 
but  relief  must  be  had  in  equity.  The  same  difficulties  as  to  par- 
ties and  accounting  arise  as  in  suits  between  firms  and  partners.^^ 
The  bar  to  an  action  at  law  between  two  firms  because  of  the 


12  Kwapil  V.  Bell  Tower  Co.,  55 
Wash.  583,  104  Pac.  824. 

13  Tipton  V.  Nance,  4  Ala.  194 ;  Mil- 
ler V.  Andres,  13  Ga.  366;  Hall  v. 
Kimball,  11  111.  161 ;  Haven  v  .Wake- 
field, 39  111.  509;  Parker  v.  Macom- 
ber,  18  Pick.  (Mass.)  505;  Ivy  v. 
Walker,  58  Miss.  253 ;  Burley  v.  Har- 
ris, 8  N.  H.  233,  29  Am.  Dec.  650; 
Summerson  v.  Donovan,  110  Va.  657, 
66  S.  E.  822,  19  Ann.  Cas.  253.  Com- 
pare Jemison  v.  Walsh,  30  Ind.  167. 

14  Hall  v.  Kimball,  11  111.  161. 
i^Tindal  v.   Bright,    Minor    (Ala.) 

103;  Tipton  v.  Nance,  4  Ala.  194. 

16  Bank  of  British  North  America 
V.  Delafield,  126  N.  Y.  410,  27  N.  E. 
797;  Comer  v.  Thompson,  4  U.  C.  Q. 
B.  (O.  S.)  256. 

1^  Summerson  v.  Donovan,  110  Va. 
657,  66  S.  E.  822,  19  Ann.  Cas.  253. 

15  Alexander  v.  Jones,  90  Ala.  474, 
7  So.  903 ;  Alexander  v.  King,  87  Ala. 
642,  6  So.  382;  Hall  v.  Kimball,  11 
111.  161;  Haven  v.  Wakefield,  39  111. 
509;  Schnebly  v.  Culter,  22  111.  App. 
87;  Herriott  v.  Kersey,  69  Iowa  111, 


28  N.  W.  468;  Frye  v.  Sanders,  21 
Kans.  26;  Denny  v.  Metcalf,  28 
Maine  389;  Portland  Bank  v.  Hyde, 
11    Maine    196;    Grahame   v.    Harris, 

5  Gill  &  J.  (Md.)  489;  Crosby  v. 
Timolat,  50  Minn.  171,  52  N.  W.  526; 
Morris  v.  Hillery,  7  How.  (Miss.) 
61 ;  Calvit  V.  Markham,  3  How. 
(Miss.)  343;  Chapman  v.  Evans,  44 
Miss.  113;  Willis  v.  Barron,  143  Mo. 
450,  45  S.  W.  289,  65  Am.  St.  673; 
Cole  V.  Reynolds,  18  N.  Y.  75 ;  Eng- 
lis  V.  Furniss,  4  E.  D.  Smith  (N. 
Y.)  587;  Rogers  v.  Rogers,  5  Ired. 
Eq.  (N.  Car.)  31;  Beacannon  v. 
Liebe,  11  Ore.  443,  5  Pac.  273 ;  M'Fad- 
den  v.  Hunt,  5  Watts  &  S.  (Pa.) 
468;  Hall  v.  Logan,  34  Pa.  St.  331; 
Miller  V.  Knaufif,  2  Clark  (Pa.)  11, 
3  Pa.  L.  J.  225 ;  Price  v.  Spencer,  7 
Phila.  (Pa.)  179;  Allen  v.  Erie  City 
Bank,  57  Pa.  St.  129;  Tassey  v. 
Church,  6  Watts  &  S.  (Pa.)  465,  40 
Am.   Dec.  575 ;    Pennock  v.    Swayne, 

6  Watts  &  S.  (Pa.)  239;  Banks  v. 
Mitchell,  8  Yerg.  (Tenn.)  Ill,  29  Am. 
Dec.  104;  Jungk  v.  Reed,  9  Utah  49, 


1027 


ACTIONS    BETWEEN    PARTNERS 


742 


common  partner,  is,  it  is  held,  removed  by  his  death/^  The 
authorities  all  hold,  however,  that  there  is  a  remedy  in  equity 
on  liabilities  between  firms  having  a  common  partner.-"  There 
are  also  difficulties  in  the  way  of  equitable  settlement  of  claims 
between  firms  having  common  partners.  The  weight  of  author- 
ity holds  that  in  equity  one  firm  may  sue  the  other  on  an  obliga- 
tion, and  usually  the  mutual  partner  is  treated  only  as  a  debtor, 
not  as  a  creditor,  and  the  members  of  the  creditor  firm  are  left 
to  settle  their  own  equities."^  This  position  is  strengthened  by 
the  fact  that  under  the  codes,  the  difficulty  as  to  a  partner  being 
both  plaintiff  and  defendant  is  obviated."  It  was  said  in  a  lead- 
ing case:"^   *'By  the  code  the  distinction  between  actions  at  law 


33  Pac.  236;  Green  v.  Chapman,  27 
Vt.  236 ;  Bosanquet  v.  Wray,  6  Taunt. 
597,  1  E.  C.  L.  597,  2  Marsh.  319. 

10  Lacy  v.  LeBruce,  6  Ala.  904; 
Wilby  V.  Phinney,  15  Mass.  116; 
Denny  v.  Metcalf,  28  Maine  389. 

20  Haven  v.  Wakefield,  39  111.  509; 
Schnebly  v.  Culter,  22  111.  App.  87; 
Herriott  v.  Kersey,  69  Iowa  111,  28 
N.  W.  468;  Portland  Bank  v.  Hyde, 
11  Maine  196;  Crosby  v.  Timolat,  50 
Minn.  171,  52  N.  W.  526;  Calvit  v. 
Markham,  3  How.  (Miss.)  343;  Chap- 
man V.  Evans,  44  Miss.  113;  Schnaier 
V.  Schmidt,  59  Hun  625,  13  N.  Y.  S. 
725  (affd.  128  N.  Y.  683)  ;  Englis  v. 
Furniss,  4  E.  D.  Smith  (N.  Y.)  587,  2 
Abb.  Pr.  333;  Cole  v.  Reynolds,  18 
N.  Y.  75 ;  Rogers  v.  Rogers,  5  Ired. 
Eq.  (N.  Car.)  31  ;  Riddle  v.  McBeth, 
4  West.  L.  M.  (Ohio)  153,  2  Ohio 
Dec.  (Reprint)  606;  Banks  v.  Mitch- 
ell, 8  Yerg.  (Tenn.)  Ill,  29  Am.  Dec. 
104;  Bosanquet  v.  Wray,  6  Taunt. 
597,  1  E.  C.  L.  597,  2  Marsh.  319. 

21  Cole  V.  Reynolds,  18  N.  Y.  74.  is 
the  leading  case  holding  this  view. 
See  also  Schnebly  v.  Culter,  22  111. 
App.  87;  Haven  v.  Wakefield,  39  111. 
509;  Duff  v.  Maguire,  107  Mass.  87; 


Crosby  v.  Timolat,  50  Minn.  171,  52 
N.  W.  526;  Chapman  v.  Evans,  44 
Miss.  113;  Mangels  v.  Shaen,  21  App. 
Div.  507,  48  N.  Y.  S.  526;  First  Nat. 
Bank  of  Champlain  v.  Wood,  128  N. 
Y.  39,  27  N.  E.  1020;  Beacannon  v. 
Liebe,  11  Ore.  443,  5  Pac.  273;  Price 
v.  Spencer,  7  Phila.  (Pa.)  179;  Tas- 
sey  V.  Church,  6  Watts  &  S.  (Pa.) 
465,  40  Am.  Dec.  575 ;  Bryant  v.  War- 
dell,  2  Exch.  479;  Bates  Partnership, 
§  905 ;  1  Story  Eq.  Jur.,  §  679. 

22  First  Nat.  Bank  of  Champlain  v. 
Wood,  128  N.  Y.  39,  27  N.  E.  1020; 
Payne  v.  Freer,  91  N.  Y.  43,  43  Am. 
Rep.  640;  Cole  v.  Reynolds,  18  N. 
Y.  74;  Mangels  v.  Shaen,  21  App. 
Div.  507,  48  N.  Y.  S.  526;  Schnaier 
V.  Schmidt,  13  N.  Y.  S.  725  (affd. 
without  opinion  128  N.  Y.  683)  ; 
Kingsland  v.  Braisted,  2  Lans.  (N. 
Y.)  17;  Englis  v.  Furniss,  4  E.  D. 
Smith  (N.  Y.)  587;  Gibson  v.  Ohio 
Farina  Co.,  4  Wkly.  L.  Gaz.  (Ohio) 
81,  3  Ohio  Dec.  (Reprint)  151,  2  Dis- 
ney (Ohio)  499;  Beacannon  v.  Liebe, 
11  Ore.  443,  5  Pac.  273.  See  also 
Frye  v.  Sanders,  21  Kans.  26. 

23  Cole  V.  Reynolds,  18  N.  Y.  74. 


§    742  LAW    OF    PARTNERSHIP  1028 

and  suits  in  equity  is  abolished.  The  course  of  proceeding  in 
Ijoth  classes  of  cases  is  not  the  same,  whether  the  action  depends 
upon  legal  principles  or  equitable,  it  is  still  a  civil  action,  to  be 
commenced  and  prosecuted  without  reference  to  this  distinction. 
But,  while  this  is  so  in  reference  to  the  form  and  course  of 
proceeding  in  the  action,  the  principles,  by  which  the  rights  of 
the  parties  are  to  be  determined,  remain  unchanged.  The  code 
has  given  no  new  cause  of  action.  In  some  cases  parties  are 
allowed  to  maintain  an  action  who  could  not  have  maintained 
it  before,  but  in  no  case  can  such  an  action  be  maintained  where 
no  action  at  all  could  have  been  maintained  before  upon  the 
same  state  of  facts.  If  under  the  former  system  a  given  state 
of  facts  would  have  entitled  a  party  to  a  decree  in  equity  in 
his  favor,  the  same  state  of  facts  now,  in  an  action  prosecuted 
in  the  manner  prescribed  by  the  code,  will  entitle  him  to  a  judg- 
ment to  the  same  effect.  If  the  facts  are  such  as  that,  at  the 
common  law,  the  party  would  have  been  entitled  to  judgment, 
he  will,  by  proceeding  as  the  code  requires,  obtain  the  same 
judgment.  The  question,  therefore,  is  whether,  in  the  case  now 
under  consideration,  the  facts  as  they  are  assumed  to  be,  would 
before  the  adoption  of  the  code  have  sustained  an  action  at  law 
or  a  suit  in  equity.  The  defendants'  firm  are  indebted  to  the 
plaintiffs'  firm  upon  an  account  stated  and  settled  between  them. 
This  fact,  standing  alone,  would  have  entitled  the  plaintiffs  to 
maintain  an  action  at  law.  But  there  is  another  fact  in  the  case, 
which  upon  a  technical  rule  peculiar  to  the  common  law,  would 
have  defeated  such  an  action.  One  of  the  individuals  composing 
the  plaintiffs'  firm  is  also  a  member  of  the  defendants'  firm.  A 
man  can  not  sue  himself;  and  as,  at  common  law,  all  the  mem- 
bers of  a  firm  must  unite  in  bringing  an  action,  it  follows  that 
in  such  a  case  no  action  at  law  could  be  sustained.  But  in  equity 
this  technicality  does  not  stand  in  the  way  of  justice.  It  is 
enough  that  the  proper  parties  are  before  the  court.  They  may 
be  plaintiffs  or  defendants,  according  to  circumstances,  but,  be- 
ing before  the  court,  it  will  proceed  to  pronounce  such  judgment 
as  the  facts  of  the  case  require.     This  latter  rule  is  obviously 


1029  ACTIONS    BETWEEN    PARTNERS  §    743 

the  dictate  of  common  sense.  *  *  *  There  is  no  difficuhy, 
therefore,  growing  out  of  the  fact  that  one  of  the  parties  is  a 
member  of  both  firms,  in  sustaining  this  action."  Under  the 
codes  it  is  held  that  one  firm  may  maintain  an  action  against 
another  having  a  common  partner,  for  goods  sold,  since  for 
such  action  an  accounting  is  not  necessary.^*  But  the  codes, 
though  removing  the  technical  objections  as  to  parties,  have  not 
changed  the  difficulties  as  to  accounting  inherent  in  the  nature 
of  partnership  relations,  and  the  character  of  relief  which  can 
be  given  in  a  code  action  is  the  same  as  in  equity,  except  where 
an  accounting  is  not  necessary.  And  at  least  one  well-known 
text-writer,^^  and  some  cases,'^  hold  that  even  in  equity,  the 
matter  can  not  be  treated  as  one  between  firms,  but,  the  equities 
of  each  individual  partner  in  each  firm  must  be  reached,  and 
their  rights  adjusted  in  accordance  if  it  requires  dissolution  of 
both  firms,  the  reason  being  the  difficulties  of  the  situation  in 
fixing  the  rights  and  liabilities  of  the  common  partner  as  a  mem- 
ber of  each  firm. 

§  743.  Actions  at  law  between  partners  in  general. — It 
has  been  almost  uniformly  held  that  no  actions  can  be  main- 
tained, at  law,  between  partners,  as  such,  by  reason  of  the  part- 
nership relation.  There  is  no  rule  forbidding  suits  at  law  be- 
tween partners  individually,  but  prior  to  a  settlement  of  the 
partnership  business,  one  partner  can  not  maintain  an  action 
at  law  against  his  copartner  with  reference  to  partnership  af- 
fairs.^^     Mr.  Mechem  says :     "The  reason  for  this  rule  is  that 

24  Schnaier  v.  Schmidt,  59  Hun  625,  Furniss,  2  Abb.  Pr.  (N.  Y.)  333,  4 
13  N.  Y.  S.  725  (affd.  128  N.  Y.  683,  E.  D.  Smith  (N.  Y.)  587;  Rogers 
29  N.  E.  149)  ;  First  Nat.  Bank  of  v.  Rogers  (5  Ired.  Eq.),  40  N.  Car. 
Champlain   v.   Wood,    128   N.   Y.   35,  31. 

27  N.  E.  1020 ;  Beacannon  v.  Liebe,  27  Dukes  v.  Kellogg,  127  Cal.  563,  60 

11  Ore.  443,  5  Pac.  273.  Pac.  44.    See  also  Riddle  v.  Whitehill, 

25  Parsons  Partnership,  §§  162,  163.  135  U.  S.  621,  34  L.  ed.  283,  10  Sup. 
See  also  5  Am.  L.  Rev.,  p.  47.  Ct.  924 ;  Burhans  v.  Jefferson,  76  Fed. 

26  Page  V.  Thompson,  33  Ind.  137 ;  25,  22  C.  C  A.  25,  40  U.  S.  App. 
Crosby  v.  Timolat,  50  Minn.  171,  52  302;  Bumpass  v.  Webb,  1  Stew. 
N.  W.  526;  Payne  v.  Freer,  91  N.  (Ala.)  19,  18  Am.  Dec.  34;  King  v. 
Y.  43,   43   Am.   Rep.   640;    Englis   v.  Moore,   72  Ark.  469,  82   S.  W.  494; 


LAW    OF    PARTNERSHIP 


1030 


it  is  ordinarily  impossible  to  determine  whether  the  defendant 
partner  is  indebted  to  the  plaintiff  partner  or  not  until  the  part- 
nership accounts  are  settled  and  the  true  standing  of  the  parties 
ascertained;  and  the  process  and  remedies  afforded  by  a  court  of 


Bailey  v.  Starke,  6  Ark.  191 ;  Byrne 
V.  Byrne,  94  Cal.  576,  29  Pac.  1115, 
30  Pac.  196;  Bean  v.  Gregg,  7  Colo. 
,  499,  4  Pac.  903;  Cole  v.  Fowler,  68 
Conn.  450,  36  Atl.  807 ;  Dewit  v.  Stan- 
iford,  1  Root  (Conn.)  270;  Robin- 
son V.  Green,  5  Harr.  (Del.)  115; 
Price  V.  Drew,  18  Fla.  670;  Miller 
V.  Freeman,  111  Ga.  654,  36  S.  E.  961, 
51  L.  R.  A.  504;  Miller  v.  Andres,  13 
Ga.  366;  Paulk  v.  Creech,  8  Ga.  App. 
738,  70  S.  E.  145;  Haskins  v.  Cur- 
ran,  4  Idaho  573,  43  Pac.  559 ;  Sinde- 
lare  v.  Walker,  137  III.  43,  27  N.  E. 
59,  31  Am.  St.  353 ;  Bowzer  v.  Stough- 
ton,  119  111.  47,  9  N.  E.  208;  Hanks 
V.  Baber,  53  111.  292;  George  v.  Pfeil, 
158  111.  App.  261 ;  Newman  v.  Tiche- 
nor,  88  111.  App.  1 ;  Douthitt  v. 
Douthitt,  133  Ind.  26,  32  N.  E.  715; 
Mahan  v.  Sherman,  7  Blackf.  (Ind.) 
378;  Bond  v.  May,  38  Ind.  App.  396, 
78  N.  E.  260 ;  Mullany  v.  Keenan,  10 
Iowa  224 ;  O'Brien  v.  Smith,  42  Kans. 
49,  21  Pac.  784;  Truitt  v.  Baird,  12 
Kans.  420 ;  Coulson  v.  Ferree,  85  S. 
W.  686,  27  Ky.  L.  451;  Sebastian  v. 
Booneville  Academy  Co.,  56  S.  W. 
810,  22  Ky.  L.  186;  Stone  v.  Mat- 
tingly,  19  S.  W.  402,  14  Ky.  L.  113; 
Reddick  v.  White,  46  La.  Ann.  1198, 
15  So.  487 ;  Perry  v.  Cobb,  88  Maine 
435,  34  Atl.  278,  49  L.  R.  A.  389; 
Wright  V.  Troop,  70  Maine  346 ;  Mor- 
gart  V.  Smouse,  103  Md.  463,  63  Atl. 
1070,  115  Am.  St.  367;  Kennedy  v. 
M'Fadon,  3  Har.  &  J.  (Md.)  194, 
5  Am.  Dec.  434;  Myrick  v.  Dame,  9 
Cush.  (Mass.)  248;  Nickerson  v. 
Spindell,  164  Mass.  25,  41  N.  E.  105 ; 
Couilliard    v.    Eaton,    139    Alass.    105, 


28  N.  E.  579;  Kalamazoo  Trust  Co. 
V.  Merrill,  159  Mich.  649,  124  N.  W. 
597;  Wilcox  v.  Comstock,  37  Minn. 
65,  33  N.  W.  42;  Evans  v.  White 
(Miss.),  31  So.  833;  Hoff  v.  Rogers, 
67  Miss.  208,  7  So.  358,  19  Am.  St. 
301 ;  Springer  v.  Cabell,  10  Mo.  640 ; 
Johnson  v.  Ewald,  82  Mo.  App.  276; 
Croft  V.  Bain,  49  Mont.  484,  143  Pac. 
960;  Boebme  v.  Fitzgerald,  43  Mont. 
226,  115  Pac.  413;  Doll  v.  Hennessey 
Mercantile  Co.,  33  Mont.  80,  81  Pac. 
325 ;  Younglove  v.  Liebhardt,  13  Nebr. 
557,  14  N.  W.  526;  Wicks  v.  Lipp- 
man,  13  Nev.  499;  Blaisdell  v.  Ladd, 
14  N.  H.  129 ;  Davis  v.  Minch,  80  N. 
J.  L.  214,  76  Atl.  328;  Gulick  v. 
Gulick,  14  N.  J.  L.  578;  Willey  v. 
Renner,  8  N.  Mex.  641,  45  Pac.  1132; 
Lasky  v.  Coverdale,  84  Misc.  34,  145 
N.  Y.  S.  994 ;  Vickery  v.  Stemm,  140 
N.  Y.  S.  1007;  Weiss  v.  Weiss,  75 
Misc.  644,  133  N.  Y.  S.  1021 ;  Mitchell 
v.  Tonkin,  109  App.  Div.  165,  95  N. 
Y.  S.  669;  Murray  v.  Bogert,  14 
Johns.  (N.  Y.)  318,  7  Am.  Dec.  466; 
Graham  v.  Holt,  3  Ired.  L.  (N.  Car.) 
300;  Devore  v.  Woodrufif,  1  N.  Dak. 
143,  45  N.  W.  701 ;  Kunneke  v.  Mapel, 
60  Ohio  St.  1,  53  N.  E.  259;  Oglesby 
V.  Thompson,  59  Ohio  St.  60,  51  N. 
E.  878 ;  Cobb  v.  Martin,  32  Okla.  588, 
123  Pac.  422;  Wilson  v.  Wilson,  26 
Ore.  251,  38  Pac.  185 ;  Ozeas  v.  John- 
son, 4  Dall.  (Pa.)  434,  1  L.  ed.  897, 
1  Binn.  (Pa.)  191;  DowHng  v. 
Clarke,  13  R.  I.  134 ;  Course  v.  Prince, 
1  Mill.  (S.  Car.)  413,  12  Am.  Dec. 
649;  Eddins  v.  Menefee  (Tenn.  Ch. 
App.),  54  S.  W.  992;  Southworth  v. 
Thompson,    10    Heisk.     (Tenn.)     10; 


1031 


ACTIONS    BETWEEN    PARTNERS 


743 


law  are  not  usually  adequate  or  appropriate  to  the  investigation 
of  claims  requiring  such  an  accounting.""^  Even  after  dissolu- 
tion there  is  no  right  to  sue  until  there  has  been  a  settlement,-'* 
although  it  seems  the  parties  after  dissolution  may  consent  to 
an  action  between  them.^°  "This  rule  has  but  few  exceptions; 
most  of  the  so-called  exceptions  being  apparent  only,  and  not 
real.  After  the  partnership  is  practically  at  an  end,  whether  it 
be  a  single  venture  or  otherwise,  the  rule  can  not  apply,  for  the 
parties  are  no  longer  partners.     So  an  action  rhay  be  maintained 


Lockhart  v.  Lytle,  47  Tex.  452 ;  Dan- 
forth  V.  Levin  (Tex.  Civ.  App.),  156 
S.  W.  569 ;  Jungk  v.  Reed,  9  Utah  49, 
33  Pac.  236;  Beede  v.  Fraser,  66  Vt. 
114,  28  Atl.  880,  44  Am.  St.  824; 
Judd  v.  Wilson,  6  Vt.  185 ;  Summer- 
son  V.  Donovan,  110  Va.  657,  66  S. 
E.  822,  19  Ann.  Cas.  253 ;  Wright  v. 
Michie,  6  Grat.  (Va.)  354;  Stevens 
V.  Baker,  1  Wash.  Ten  315;  Smith 
V.  Putnam,  107  Wis.  155,  82  N.  W. 
1077,  83  N.  W.  288;  Lower  v.  Den- 
ton, 9  Wis.  268;  Mitchell  v.  Gorm- 
ley,  9  Ont.  139  (affd.  14  Ont.  App. 
55)  ;  Wood  v.  Woad,  L.  R.  9  Exch. 
190 ;  Milburn  v.  Codd,  7  B.  &  C.  419, 
14  E.  C.  L.  419. 

28  Mechem  Partnership,  §  133.  See 
cases  cited  in  preceding  section,  notes 
18,  24. 

29  Philips  V.  Lockhart,  1  Ala.  521; 
De  Jarnette  v.  McQueen,  31  Ala.  230, 

68  Am.  Dec,  164;  Calvert  v.  Mar- 
low^,  6  Ala.  337;  Ross  v.  Cornell,  45 
Cal.  133;  Gleason  v.  White,  34  Cal. 
258 ;  Price  v.  Drew,  18  Fla.  670 ;  Mil- 
ler V.  Andres,  13  Ga.  366;  Crossley 
v.  Taylor,  83  Ind.  337 ;  Funk  v.  Ryan, 
4  111.  322;  Davenport  v.  Gear,  2  111. 
495 ;  Lang  v.  Oppenheim,  96  Ind.  47 ; 
Powell  V.  Bennett,  4  Ind.  App.  112, 
29  N.  E.  926;  O'Brien  v.  Smith,  42 
Kans.  49,  21  Pac.  784;  Riarl  v.  Wil- 
helm,  3  Gill  (Md.)  356;  Williams  v. 
Henshaw,    12    Pick.    (Mass.)    378,   23 

1? — Row.  ON  Partn. — Vol.  2 


Am.  Dec.  614;  Haskell  v.  Adams,  7 
Pick.  (Mass.)  59;  Gardiner  v.  Fargo, 
58  Mich.  72,  24  N.  W.  655;  Miner 
v.  Lorman,  56  Mich.  212,  22  N.  W. 
265;  White  v.  Waide,  Walk.  (Aliss.) 
263;  Bond  v.  Bemis,  55  Mo.  524 
Bender  v.  Markle,  37  Mo.  App.  234 
Ross  V.  Carson,  32  Mo.  App.  148 
Harris  v.  Harris,  39  N.  H.  45;  Be- 
langer  v.  Dana,  52  Hun  39,  4  N.  Y.  S. 
776,  22  N.  Y.  St.  218 ;  Knight  v.  Hin- 
ton,  11  Cin.  Wkly.  Law  Bui.  199,  9 
Ohio  Dec.  (Reprint)  204;  Neil  v. 
Greenleaf,  26  Ohio  St.  567;  Masters 
v.  Freeman,  17  Ohio  St.  323 ;  Kutz 
V.  Dreibelbis,  126  Pa.  St.  335,  24  W. 
N.  C.  (Pa.)  67;  Leidy  v.  Messinger, 
71  Pa.  St.  177;  Ferguson  v.  Wright, 
61  Pa.  St.  258,  7  Phila.  (Pa.)  92; 
Ozeas  V.  Johnson,  4  Dall.  (Pa.)  434, 
1  L.  ed.  897,  1  Binn.  191;  Rice  v. 
Angell,  73  Tex.   350,   11   S.   W.  338, 

3  L.  R.  A.  769.  Compare  Caswell  v. 
Cooper,  18  111.  532 ;  Lang  v.  Oppen- 
heim, 96  Ind.  47;  Bigham  v.  Tinsley, 
160  Mo.  App.  605,  140  S.  W.  1193 
(adopting  opinion  (1910),  130  S.  W. 
506,  149  Mo.  App.  467)  ;  Bender  v. 
Markle,  37  Mo.  App.  234;  Cobb  v. 
Martin,  32  Okla.  588,  123  Pac.  422; 
Shamburg  v.   Abbott,    112   Pa.   St.  6. 

4  Atl.  518;  Haskell  v.  Vaughan.  5 
Sneed  (Tenn.)  618. 

30  Reeves     v.     White      (Tex.     Civ. 
App.),  161  S.  W.  43. 


§    743  LAW    OF    PARTNERSHIP  1032 

for  the  breach  of  an  agreement  to  enter  into  a  partnership,  or  of 
an  agreement  to  contribute  to  the  capital  stock,  or  in  any  other 
way  assist  in  launching  the  partnership."^^  Equity  may,  how- 
ever, grant  relief  in  an  action  between  the  partners  in  regard  to 
matters  connected  with  the  partnership  business.^^  Judge  Story 
says  f^  *'But,  although,  in  cases  of  the  sort  above  mentioned, 
no  remedy  lies  at  law,  yet  in  equity  an  appropriate  remedy  may 
and  will  be  granted,  wherever  it  is  ex  aequo  et  bono  necessary 
and  proper;  for  in  equity,  there  is  no  difficulty  in  one  partner's 
suing  the  other  partners  for  money  advanced,  or  contributions 
made,  or  liabilities  incurred,  simply  on  the  ground  that  it  has  its 
foundation  in  a  partnership  transaction,  if  in  other  respects  the 
suit  is  unobjectionable,  as  no  technical  difficulty  occurs  in  equity, 
as  to  the  joinder  of  all  the  proper  parties  to  the  suit.  Indeed 
the  ordinary  remedy  now  administered,  in  matters  of  account,  or 
requiring  an  account  between  partners,  is  exclusively  in  equity." 
Under  the  reformed  codes,  where  the  form  of  action  at  law  and 
equity  is  the  same,  there  are  no  greater  rights  of  one  partner  to 
sue  another  than  at  comm.on  law  or  at  equity  and  therefore  in 
order  to  sue  a  copartner  under  the  codes  a  partner  must  state 
facts  sufficient  to  entitle  him  to  equitable  relief  or  bring  his 
cause  within  the  exceptions  to  the  common-law  rule.^* 

§  744.  Matters  outside  partnership. — As  to  matters  which 
are  merely  transactions  between  partners  as  individuals,  not  con- 
nected with  partnership  matters,  such  as  a  sale  by  one  partner 
of  his  individual  property  to  a  copartner,  he  may  of  course  main- 
tain an  action  at  law.^^  One  partner  may  sue  another  at  law  on 
a  matter  outside  the  scope  of  the  partnership  business,^®  or  upon 

31  Miller  v.  Freeman,  111   Ga.  654,  v.  Timolat,  50  Minn.  171,  52  N.  W. 

36  S.  E.  961,  51  L.  R.  A.  504.  526 ;    Russell   v.   Minnesota   Outfit,    1 

32Veith  V.   Ress,   60   Nebr.   52,   82  Minn.  162  (Gil.  136);  Cole  v.  Reyn- 

N.   W.    116;    Sanger   v.   French,    157  olds,  18  N.  Y.  74. 

N.  Y.  213,  51   N.  E.  979.     See  post  ss  Hartzell  v.  Murray,  224  111.  377, 

§  773  et  seq.  79  N.  E.  674 ;  Elder  v.  Hood,  38  111. 

33  Story  Partnership  (5  ed.),  §  222.  533. 

34  Page  V.  Thompson,  33  Ind.  137;  36  Bull  v.  Coe,  77  Cal.  54,  18  Pac. 
Frye  v.  Sanders,  21  Kans.  26;  Crosby  808,    11    Am.    St.    235;    Arnheim    v. 


1033 


ACTIONS    BETWEEN    PARTNERS 


§  744 


an  item  which  has  been  separated  from  the  partnership  busi- 
ness.^^  Thus  one  partner  may  sue  another  for  money  bor- 
rowed by  the  latter  to  put  into  the  partnership  business.^^  ''Where 
real  estate  held  in  common  is  sold,  and  one  of  the  joint  owners 
retains  possession  of  the  proceeds,  the  fact  that  he  and  the  other 
joint  owner  are  partners  in  the  planting  business  is  no  bar  to 
an  action  by  such  other  joint  owner  for  the  recovery  of  his  share 
of  the  price,  where  it  does  not  appear  that  the  property  was  held 
as  a  partnership  asset."^^  An  action  at  law  may  also  be  main- 
tained after  an  accounting  or  after  the  partnership  has  been  dis- 
solved.'*"  Hence,  if  a  claim,  although  originally  arising  from  the 
partnership  relation,  becomes  an  individual  matter  between  the 
partners,  there  may  be  an  action  thereon  between  them.*^  A 
Kentucky  case  laid  down  the  rule,  that  in  order  for  an  action 
to  lie  between  members  of  a  partnership,  growing  out  of  the 
firm  business,  there  must  have  been  a  settlement  of  partnership 


Gordon,  21  Cal.  App,  754,  132  Pac. 
840.  "The  real  test  is  not  solely 
whether  the  action  can  be  tried  with- 
out going  into  the  partnership  ac- 
counts, but  whether  the  defendant 
has  bound  himself  personally  to  the 
plaintifif."  Paulk  v.  Creech,  8  Ga.  App. 
738,  70  S.  E,  145 ;  Mullany  v.  Keenan, 
10  Iowa  224 ;  Soule  v.  Frost,  76  Maine 
119;  Carpenter  v.  Greenop,  74  Mich, 
664,  42  N.  W.  276,  4  L.  R.  A.  241,  16 
Am.  St.  662 ;  Bates  v.  Lane,  62  Mich. 
132,  28  N.  W.  753 ;  Halleck  v.  Streeter, 
52  Nebr.  827,  IZ  N.  W.  219;  Bank 
of  British  North  America  v.  Dela- 
field,  126  N.  Y.  410,  27  N.  E.  797; 
Jennings  v.  Pratt,  19  Utah  129,  56 
Pac.  951 ;  Coffin  v.  Mcintosh,  9  Utah 
315,  34  Pac.  247. 

•''^  WilHams  v.  Henshaw,  11  Pick. 
(Mass.)  79,  22  Am.  Dec.  366;  George 
V.  Benjamin,  100  Wis.  622,  l(y  N.  W. 
619,  69  Am.  St.  963.  Compare  Mc- 
Mahon  v.  Rauhr,  47  N.  Y.  67  (revg. 
3  Daly  (N.  Y.)  116). 
I    38  Bull  V.  Coe,  n  Cal.  54,  18  Pac. 


808,  11  Am.  St.  235;  Crater  v.  Bin- 
inger,  45  N.  Y.  545.  A  contribution 
of  capital  to  a  firm  does  not  consti- 
tute a  loan  to  the  other  member 
thereof.  The  title  to  the  money  or 
property  passes  to  the  firm  from  the 
partner  advancing  it  and  he  must  look 
for  reimbursement  to  the  success  of 
the  partnership  venture.  Armstrong 
V.  Hollen,  58  Ore.  534,  115  Pac.  423. 

39  Succession  of  Alexander,  130  La. 
7,  57  So.  534  (syllabus  by  the  court). 

40  Johnson  v.  Peck,  58  Ark.  580,  25 
S.  W.  865 ;  Glade  v.  White,  42  Nebr. 
ZZd,  60  N.  W.  556 ;  Huflfman  v.  Huff- 
man, (iZ  S.  Car.  1,  40  S.  E.  963. 
"Where  nothing  is  left  to  be  done 
save  the  payment  of  an  agreed  bal- 
ance, there  can  be  no  necessity  of  a 
resort  to  equity,  at  least  in  the  ab- 
sence of  insolvency  on  the  part  of  the 
defendant."  Schmidt  v.  Mertes,  145 
Wis.  468,  130  N.  W.  474. 

4iBeede  v.  Eraser,  66  Vt.  114,  28 
Atl.  880,  44  Am.  St.  824. 


§    745  LAW    OF    PARTNERSHIP  1034 

accounts,  or  an  accounting  between  the  parties,  whereby  a  bal- 
ance had  been  struck,  or  whereby  one  partner  was  found  to  be 
indebted  to  the  firm  in  any  sum  on  final  settlement.  Exceptions 
to  the  above  rule  are  recognized  in  the  above  case,  when  the 
transaction  out  of  which  the  liability  arises  is  independent  of 
or  outside  of  the  partnership  business,  or  when  the  partnership 
covers  a  single  venture,  or  but  one  transaction,  so  that  no  ac- 
counting is  necessary.  The  court  further  said  that  the  above 
rule  is  fundamental,  and  that  it  knows  of  no  exceptions,  other 
than  those  stated  above.^^^  The  only  method  recognized  of  arriv- 
ing at  the  state  of  the  accounts  of  the  firm,  by  an  action  in  the 
courts,  is  by  an  accounting,  which  has  been  treated  under  that 
heading. 

§  745.  Partnership  transactions  not  involving  an  account- 
ing.— It  is  often  stated  as  the  rule  that  partners  can  sue  each 
other  at  law  on  claims  connected  with  the  partnership  relation 
but  which  do  not  require  an  accounting.^-  In  most  of  the- sub- 
sequent exceptions  which  are  discussed,  this  element  enters,  and 
it  will  be  found  that  most  of  the  cases  cited  state,  as  one  ground 
for  making  an  exception,  that  an  action  of  such  character  does 
not  necessitate  an  accounting,  as  where  there  is  a  single  trans- 
action, or  an  individual  transaction,  a  balance  struck,  a  fraud 
on  an  individual,  or  a  single  unadjusted  item  of  account. 

4ia  Warring  v.  Arthur,  98  Ky.  34,  252;    Gardner   v.    Cleveland,    9    Pick. 

32  S.  W.  221,  17  Ky.  L.  60S,  citing:  (Mass.)    334;    WhitehiU    v.    Shickle, 

Lawrence   v.    Clark,    9    Dana    (Ky.)  43   Mo.   537;    Stone   v.   Wendover,   2 

257;    Stone  v.    Mattingly,    14   Ky.   L.  Mo.   App.   247;    Halleck   v.    Streeter, 

113,  19  S.  W.  402;  Shearer  v.  Francis,  52  Nebr.  827,  IZ  N.  W.  219;  Wicks 

5  S.  W.  559,  9  Ky.  L.  556.  v.    Lippman,    13    Nev.    499 ;    Reid    v. 

42  Robinson  v.  Bullock,  58  Ala.  618;  McQuesten,  61  N.  H.  421 ;  Reeves  v. 

Durden    v.    Cleveland,    4    Ala.    225;  GofiF,    3    N.    J.    L.    609;    Howard    v. 

Huyck  v.  Meador,  24  Ark.  191 ;  Bull  France,  43  N.  Y.  593 ;  Esdaile  v.  Wuy- 

V.  Coe,  n  Cal.  54,  18  Pac.  808,  11  Am.  tack,  25  Abb.  N.  Cas.  474,  11  N.  Y. 

St.  235;  Wells  v.   Carpenter,  65   111.  S.  421,  ZZ  N.  Y.   St.  145;  Crater  v. 

447 ;  Berry  v.  De  Bruyn,  11  111.  App.  Bininger,  45  N.  Y.  545  (affg.  54  Barb. 

359 ;  Mullany  V.  Keenan.  10  Iowa  224 ;  (N.    Y.)    155);    Vance    v.    Blair,    18 

Shearer  v.  Francis,  9  Ky.  L.  556,  5  S.  Ohio  532,  51  Am.  Dec.  467;   Wright 

W.   559;    Lane   v.    Tyler,    49    Maine  v.   Cumpsty,  41   Pa.  St.  102;  Hill  v. 


1035  ACTIONS    EETWF.EN    PARTNERS  §    746 

§  746.  Action  on  express  stipulation. — In  a  Massachu- 
setts case^^  the  court  quotes  Mr.  Lindley  i^*  "It  is  said  that 
an  action  at  law  for  damages  for  the  breach  of  an  express  agree- 
ment, entered  into  by  one  partner  in  favor  of  another,  will  only 
lie  where  the  action  can  be  properly  tried  without  going  into 
the  partnership  accounts,  and  the  damages  sought  will  belong 
exclusively  to  the  plaintiff,  and  where  the  plaintiff  will  not  be 
liable  in  any  contingency,  affecting  the  future,  joint  business,  to 
contribute  to  his  own  payment."  The  court  adds :  "But,  with- 
out stopping  to  inquire  whether  this  action  can  be  maintained 
without  violating  these  rules,  it  is  sufficient  to  say  that,  what- 
ever the  nature  of  the  agreement,  it  must  be  one  in  which  the 
defendant  binds  himself  personally  to  the  plaintiff."  Judge  Story 
has  stated  as  an  exception  to  the  general  rule :  "Wherever  there 
is  an  express  stipulation  in  the  partnership  articles,  which  is  vio- 
lated by  any  partner,  an  action  at  law,  either  assumpsit  or  cove- 
nant as  the  case  may  require,  will  ordinarily  lie,  to  recover 
damages  for  the  breach  thereof."**^  The  same  rule  holds  as  to 
any  express  individual  contract  between  partners.**^     It  has  been 

Palmer,   56  Wis.   123,   14  N.  W.  20,  Wilder,  4  Mete.  (Mass.)  556;  Hemen- 

43  Am.  Rep.  703 ;   Smith  v.  Barrow,  way  v.  Burnham,  90  Mich.  227,  51  N. 

2  T.  R.  476;  Windham  v.  Paterson,  W.  276;  Kinney  v.  Robison,  52  Mich. 
1  Stark  144,  2  Rose  S9n.  389,  18  N.  W.  120 ;  Morgan  v.  Nunes, 

43  Ryder  V.  Wilcox,  103  Mass.  24  54  Miss.  308;  Byrd  v.  Fox,  8  Mo. 
(1869).  574;    McAuley   v.    Cooley,    45    Nebr. 

44  Lindley  Partnership,  pp.  731-740.  582,  63  N.  W.  871 ;  Currier  v.  Webster, 

45  Story  Partnership  (7th  ed.),  §  45  N.  H.  226;  Bank  of  British  North 
218.  America  v.  Delafield,   126  N.  Y.  410, 

46  Lyon  V.  Malone,  4  Port.  (Ala.)  27  N.  E.  797;  Crater  v.  Bininger,  45 
497;  Bailey  v.  Starke,  6  Ark.  191;  N.  Y.  545;  Townsend  v.  Goewey,  19 
Wadley  V.  Jones,  55  Ga.  329 ;  Haskins  Wend.  (N.  Y.)  424,  32  Am.  Dec. 
V.  Curran,  4  Idaho  573,  43  Pac.  559;  514;  Moore  v.  Gano,  12  Ohio  300; 
Kellogg  V.  Moore,  97  111.  282;  Leidy  v.  Messinger,  71  Pa.  St.  177; 
Douthit  V.  Douthit,  133  Ind.  26,  32  Lawrence  v.  Mangold,  1  Walk.  (Pa.) 
N.  E.  715;  Powell  v.  Bennett,  4  Ind.  202;  Lockhart  v.  Lytle,  47  Tex.  452; 
App.  112,  29  N.  E.  926;  Truitt  v.  Collamer  v.  Foster,  26  Vt.  757; 
Baird,  12  Kans.  420;  Bunton  v.  Dunn,  Wright  v.  Michie,  6  Grat.  (Va.)  354; 
54  Maine  152;  Roache  v.  Pendergast,  Edwards  v.  Remington,  51  Wis.  336, 

3  Har.  &  J.  (Md.)  33;  Ryder  v.  Wil-  8    N.    W.    193;    Neale    v.    Turton,    4 
cox,     105     Alass.     27;     Rockwell     v.  Bing.  149,  13  E.  C.  L.  149. 


§  747  LAW  OF  rARTXERsriiP  1036 

said,  however,  that  a  "consideration  of  the  statement,  and  of 
the  authorities  cited  to  sustain  it,  will  show  that  the  cases  fall- 
ing within  this  exception  are  of  three  classes  :  ( 1 )  Those  in  which 
the  partnership  is  inchoate  and  has  never  been  launched;  (2) 
those  in  which  the  partnership  is  at  an  end;  and  (3)  those  in 
which  the  stipulation  which  is  violated,  and  for  the  breach  of 
which  the  action  is  brought,  is  one  between  the  partners  indi- 
vidually, and  the  damages  from  which  belong  exclusively  to  the 
other  partner,  and  can  be  assessed  without  an  accounting."^^  The 
parties  may  waive  the  objection,  however,  that  the  suit  is  for  an 
accounting,  where  all  the  partnership  transactions  are  so  completed 
as  to  make  nothing  necessary  but  the  ascertainment  of  the  money 
balance  due  from  certain  of  the  partners  to  others.'*^  Where 
there  was  an  agreement  expressly  to  pay  one  partner  rent  as 
lessor,  he  could  take  summary  proceedings  to  recover  it/^  Some 
cases  have  held  that  a  partner  has  a  right  of  action  where  a 
copartner  agreed  to  make  a  settlement  at  a  future  date  and  failed 
to  perform  his  agreement, ^'^  So  if  there  has  been  a  settlement 
and  a  partner  has  engaged  in  the  contract  of  settlement  to  do 
certain  things,  he  may  be  sued  in  law  for  his  nonperformance, 
by  a  partner  who  has  performed  his  part  of  the  contract.^^ 

§  747.  Action  on  preliminary  agreement. — As  to  agree- 
ments entered  into  by  parties  before  the  partnership  relation  was 
formed,  the  ordinary  rules  that  one  partner  can  not  sue  another 
at  law  do  not  apply.     Thus  it  is  generally  held  that  an  action  at 

47  Miller  V.  Freeman,  111  Ga.  654,  Sachs,  52  Ore.  560,  98  Pac.  163.  See 
36  S.  E.  961,  51  L.  R.  A.  504.  And  also  Blodgett  v.  Miller,  33  Ky.  L. 
compare,    Tevis    v.    Carter,    111    Ky.    682,  110  S.  W.  864. 

938,  23  Ky.  L.  1270,  65  S.  W.  17.  See        si  Qeise  v.  Ragan,  80  Ga.  732,  6  S. 

also  Eastman  v.  Dunn,  34  R.  I.  155,     E.  697;   Meredith  v.  Ewing,  85  Ind. 

83  Atl.   1057.  410;    Martin    v.    Good,    14   Md.   398, 

48  Smith  V.  Putnam,  107  Wis.  155,  74  Am.  Dec.  545 ;  Ferguson  v.  Baker, 
82  N.  W.  1077,  83  N.  W.  288.  116  N.  Y.  257.  22  N.  E.  400;  Lippin- 

49  Mulligan  v.  Kraus,  88  Misc.  538,  cott  v.  Low,  68  Pa.  St.  314 ;  Jewell 
151  N.  Y.  S.  401.  V.  Ketchum,  63  Wis.  628,  23  N.  W. 

soHolyoke  v.  Mayo,  50  Maine  385;     709;  Thornbury  v.  Bevill,  6  Jur.  407, 
Gilbert  v.  Howard  Mach.  Co.,  147  N.     1  Y.  &  Coll.  554. 
Car.  308,  61   S.   E.   176;   Tiernein  v. 


1037  ACTIONS    BETWEEN    PARTNERS  §    747 

law  will  lie  against  a  partner  for  noncompliance  with  an  agree- 
ment for  launching  a  partnership.^"  As  said  in  one  case  :"^  "An 
action  can  not  be  maintained  by  one  partner  against  another  for 
a  partial  accounting,  but  he  must  either  sue  for  a  complete  settle- 
ment and  winding  up  of  the  partnership  matters,  or  to  recover 
a  balance  struck  and  agreed  upon  between  them.  *  *  =i<  This 
is  a  correct  statement  of  the  general  rule.;  but  it  has  no  application 
to  this  case,  which  comes  within  the  exceptions.  *  *  *  This 
is  not  an  action  for  a  partial  adjustment  and  statement  of  part- 
nership dealings,  but  it  is  an  action  to  recover  damages  because 
the  defendant  refused  and  failed  to  comply  with  his  preliminary 
agreement  and  the  terms  upon  which  the  partnership  was  to  be 
formed;  and,  if  said  partnership  was  formed,  then  for  damages 
because  the  defendant  failed  to  do  and  perform  what  he  agreed 
to  do  before  it  was  formed."  Also,  if  this  preliminary  agree- 
ment contains  certain  individual  covenants  binding  the  parties 
to  do  certain  things  before  the  relationship  begins,  and  made  a 
condition  precedent  to  its  formation,  an  action  at  law  will  lie 
for  their  breach.^*  For  example,  where  two  persons  contem- 
plated entering  into  a  milling  partnership,  and  one  was  to  repair 

52HalIer  v.  Willamowicz,  23  Ark.  v.  Gill,  5  J.  J.  Marsh.  (Ky.)  242,  20 
566;  Murrell  v.  Murrell,  33  La.  Ann.  Am.  Dec.  255;  Clay  v.  Grubbs,  1  Litt. 
1233;  Murphy  v.  Crafts,  13  La.  Ann.  (Ky.)  222;  Gusdorf  v.  Schleisner,  85 
519,  71  Am.  Dec.  519;  Phillips  v.  Md.  360,  37  La.  Ann.  170;  Wads- 
Reeder,  18  N.  J.  Eq,  95;  Herrick  v.  worth  v.  Manning,  4  Md.  59;  Dun- 
Ames,  8  Bosw.  (N.  Y.)  115;  Glover  ham  v.  Gillis,  8  Mass.  462;  Capen  v. 
V.  Tuck,  24  Wend.  (N.  Y.)  153;  Barrows,  1  Gray  (Mass.)  376;  Cook 
Marsh's  Appeal,  69  Pa.  St.  30,  8  Am.  v.  Canny,  96  Mich.  398,  55  N.  W. 
Rep.  206;  Campbell  v.  Campbell,  7  987;  Glover  v.  Tuck,  24  Wend.  (N. 
CI.  &  F.  166.  Y.)    153;    Townsend   v.    Goewey,    19 

53  Owen  V.   Meroney,    136   N.   Car.  Wend.  (N.  Y.)  424,  32  Am.  Dec.  514; 

475,  48   S.  E.  821,   103  Am.   St.  952,  Duncan  v.  Lyon,  3  Johns.  Ch.  (N.  Y.) 

1  Ann.  Gas.  834.  351,  8  Am.  Dec.  513;  Halliday  v.  Car- 

5*  Robinson  v.  Bullock,  58  Ala.  618;  man,  6  Daly  (N.  Y.)  422;  Vance  v. 
Scott  v.  Campbell,  30  Ala.  728;  Boyd  Blair,  18  Ohio  532.  51  Am.  Dec.  467; 
V.  Mynatt,  4  Ala.  79;  Grigsby  v.  McArthur  v.  Ladd,  5  Ohio  514;  Kin- 
Nance,  3  Ala.  347;  Bumpass  v.  Webb,  loch  v.  Hamlin,  2  Hill  Eq.  (S.  Car.) 
1  Stew.  (Ala.)  19,  18  Am.  Dec.  34;  19,  27  Am.  Dec.  441;  Terrill  v.  Rich- 
Truitt  V.  Baird,  12  Kans.  420 ;  Thomas  ards,  1  Nott  &  McC.  (S.  Car.)  20; 
V.   Pyke,   4   Bibb.    (Ky.)    418;    Dana  Cocke  v.  Evans,  9  Yerg.  (Tenn.)  287; 


§    748  LAW    OF    TARTXERSHIP  1038 

a  road,  build  a  dam  and  ferry  and  furnish  money  to  equip  a  mill, 
but  failed  to  do  so,  an  action  by  his  copartner  for  damages  would 
lie." 

§  748.  Partnership  for  single  trarlsaction. — Where  the  as- 
sociation as  partners  is  for  a  single  transaction,  one  partner  at 
its  close  may  maintain  an  action  at  law  against  the  other  for  his 
share  of  the  profits  and  a  formal  accounting  is  unnecessary.^*' 
Such  a  relationship  is  not  exactly  similar  to  other  forms  of 
partnership,  it  being  a  joint  adventure  rather.^^ 

§  749.  Action  on  agreement  for  contribution  to  partner- 
ship fund. — The  rule  being  established,  in  general,  that  a  suit 
can  only  be  maintained  at  law  between  partners  when  one  part- 
ner has  bound  himself  personally  to  the  other  individually  rather 
than  as  a  member  of  the  firm,  the  more  difficult  question  as  to 
what  constitutes  individual  indebtedness  arises.  For  example, 
can  suit  be  maintained  by  one  partner,  at  law,  for  contributions 
to  the  partnership  funds ;  another  partner  having  agreed  to  fur- 
nish said  funds  and  failed  to  do  so?  As  said  in  one  case: 
"The  agreements  *  *  *  for  contribution  to  the  partnership 
funds  and  property  which  each  is  to  make,  are  binding  by  name 
on  each,  and  would  no  doubt  be  classed  with  those  express  agree- 

Looney    v.    Gillenwaters,    11    Heisk.  v.  Fox,  8  Mo.  574 ;  Rankin  v.  Fair- 

(Tenn.)    133;  Merriwether  v.  Harde-  ley,  29  Mo.  App.  587;  McCormick  v. 

man,  51  Tex.  436;  Hunt  v.  Reilly,  SO  Largey,  1  Mont.  158;  Jaques  v.  Hulit, 

Tex.  99 ;  Venning  v.  Leckie,  13  East  16  N.  J.  L.  38 ;  Foster  v.  Vanauken, 

7,  12  R.  R.  292.  4  N.  J.  L.  98 ;  Burleigh  v.  Bevin,  22 

^5  Owen   V.   Meroney,    136   N.   Car.  Misc.   38,   48   N.    Y.    S.    120 ;    Musier 

475,  48  S.  E.  821,   103  Am.   St.  952,  v.  Trumpbour,  5  Wend.  (N.  Y.)  274 

1  Ann.  Cas.  834.  Kutz  v.   Dreibelbis,    126  Pa.   St.  335 

=«\Vann   v.   Kelly,  2   McCray    (U.  17  Atl.  609,  24  W.  N.  C.   (Pa.)   67 

S.)  628;  Myers  v.  Winn,  16  111.  135;  Hamilton  v.  Hamilton,  18  Pa.  St.  20 

Crossley    v.     Taylor,     83     Ind.    ZZ7 ;  Fry  v.  Potter,  12  R.  I.  542 ;  Coffin  v 

Clarke  v.  Mills,  36  Kans.  393.  13  Pac.  Mcintosh,  9  Utah  315,  34  Pac.  247 

569 ;  Pettingill  v.  Jones,  28  Kans.  749 ;  Robson   v.   Curtis,    1    Stark   78.   2    E. 

White  V.  Jouett,  147  Ky.  197,  144  S.  C.  L.  39;  Bovill  v.  Hammond,  6  B.  & 

W.   55;   Lawrence   v.   Clark,   9  Dana  C.  149,  13  E.  C.  L.  149. 
•(Ky.)  257,  35  Am.  Dec.  133;  Jenkins         "Price  v.  Drew,  18  Fla.  670;  Hal- 

V.   Howard,  21    La.   Ann.   597;    Byrd  sted  v.  Schmelzel,  17  Johns.   (N.  Y.) 


1039  ACTIONS    IIETWEEX    PARTNERS  §    749 

ments  which  may  be  the  foundation  of  an  action."^^  In  this 
case,  the  court  decided  against  the  plaintiff,  but  without  repudi- 
ating the  general  rule  recognized  by  it  and  quoted  above.  "In 
the  opinion  of  the  court,"  it  was  said,  "upon  the  case  stated  in 
this  declaration,  no  action  at  law  can  be  maintained.  If  the 
declaration  could  be  taken  as  alleging  an  entire  repudiation  by 
the  defendant  of  the  contract  and  of  the  relation  of  partner- 
ship, with  a  claim  of  damages  for  such  a  breach  of  the  contract, 
instead  of  compensation  for  services  in  conducting  the  business, 
and  for  a  share  of  its  profits,  such  an  action  might  be  main- 
tainable. We  do  not  so  understand  its  allegations.  A  failure 
and  refusal  by  the  defendant  to  perform  his  promise  and  agree- 
ment is  indeed  charged  together  with  an  exclusion  of  the  plain- 
tiff, and  a  refusal  to  acknowledge  that  he  has  any  rights  under 
the  contract.  But  it  also  alleges  a  refusal  to  make  the  annual 
settlement  of  accounts  and  annual  payments,  according  to  the 
contract,  and  sets  forth  a  continuance  of  the  business  upon  the 
premises  and  with  the  tools  and  appliances  of  the  plaintiff,  with 
large  profits  therefrom  from  a  participation  in  which  he  has 
been  excluded.  The  remedy  in  such  cases  is  in  equity,  where 
the  power  to  investigate  accounts,  to  compel  specific  perform- 
ance, and  to  restrain  breaches  of  duty  for  the  future,  affords 
the  only  relief  which  can  be  had."  In  another  case^^  two  part- 
ners expressly  agreed  with  a  third  partner  that  they  would 
pay  him  certain  advances  to  the  capital  made  by  him  for  them. 
"Under  those  circumstances,"  said  the  court,  "the  money  so  ad- 
vanced becomes  the  debt  of  the  promisors,  recoverable  by  direct 
action  therefor,  without  dissolution  of  partnership  or  adjust- 
ment of  partnership  accounts."^"  In  a  Wisconsin  case,''^  quoted 
and  approved  in  the  above  case,  it  is  said :   "Where  there  is  an 

80;   Leidy  v.   Messinger,   71    Pa.    St.  ^^Haskins  v.  Curran,  4  Idaho  573, 

177;  Sprout  v.  Crowley,  30  Wis.  187.  43  Pac.  559   (1895). 

See  ch.  30.  eoQting:   2   Lindl.    Partnership,   p. 

58  Ryder  v.  Wilcox,  103  Mass.  24;  1350,  latter  part  of  note  2,  T.  Parsons 

citing  Venning  v.  Leckie,  13  East  7,  Partnership,  285  et  seq. 

12  Rev.  Rep.  292 ;  Brown  v.  Tapscott,  ^i  Sprout  v.  Crowley,  30  Wis.  187. 

6  M.  &  W.  119,  9  L.  J.  Ex.  139.  See  also   Gauger   v.   Pautz,   45   Wis, 


§    749  LAW    OF    PARTNERSHIP  1040 

express  agreement  by  one  partner  to  repay  to  the  other  his  share 
of  advances  made  by  the  latter  on  account  of  partnership  busi- 
ness, the  amount  of  such  share  becomes  thereby  the  debt  of  the 
partner  who  has  thus  agreed  to  pay  the  same,  which  may  be 
recovered  in  an  action  brought  directly  therefor,  without  any 
regard  to  the  partnerships  existing  between  the  parties  or  the 
state  of  the  firm  accounts,"  It  is  thus  seen  that  a  suit  at  law 
may  be  maintained  by  a  partner  against  his  copartner  upon  a 
contract  to  contribute  to  the  firm  capital,  even  when  there  are 
other  differences  between  them,  provided  the  contract  was  per- 
sonal between  the  partners  themselves,  and  this  without  violat- 
ing the  general  rule  regarding  remedies.""  The  reason  is  very 
apparent,  inasmuch  as  the  contract  is  personal  between  them, 
and  does  not,  primarily  affect  their  partnership  relations,  as  such. 
The  only  difficulty  arises  in  the  application  of  this  rule  to  the 
various  agreements  as  to  whether  they  are  personal,  and  if  the 
affairs  of  the  whole  firm  are  involved  and  an  accounting  becomes 
necessary  there  can  be  no  recovery/^  This  exception  to  the 
rule  that  no  actions  will  lie  between  partners,  while  well 
founded  and  logical,  may,  nevertheless,  work  hardships,  as  there 
might  be,  for  example,  two  men  in  partnership,  one  of  whom 
may  have  contributed  his  capital,  but  who  has  become  deeply 
indebted  to  the  firm.  The  other  partner  may  not  have  paid  in 
his  capital,  yet,  upon  an  accounting,  may  have  a  large  amount 
due  him,  by  reason  of  his  partner's  withdrawals,  yet  his  only 
remedy  would  be  an  equitable  accounting,  whereby  he  might  not 

449;  Webb  v.  Butler   (Ala.),  68  So.  rier  v.  Rowe,-  46  N.  H.  72;   Currier 

369.  V.    Webster,   45    N.    H.   226;    Reeves 

c2Griggsby  v.   Nance,  3  Ala.  347;  v.   Goff,  3  N.  J.  L.   194;   Gordon  v. 

Bumpass    v.    Webb,    1    Stew.    (Ala.)  Titus,  66  Barb.  (N.  Y.)  275 ;  Gordon 

19,  18  Am.  Dec.  34;  Bull  v.  Coe,  11  v.  Boppe,  55  N.  Y.  665;  Ridgway  v. 

Cal.  54,  18  Pac.  808,  11  Am.  St.  235;  Kleinert,    15    Leg.    Int.    (Pa.)     117; 

Wright  V.    Eastman,   44   Maine   220;  Venning   v.    Leckie,    13    East    71,    12 

Wetherbee  v.   Potter,  99  Mass.  354;  Rev.   Rep.   292;    Helme   v.    Smith,   7 

Williams     v.     Henshaw,      11      Pick.  Bing.  709,  20  E.  C.  L.  316. 
(Mass.)  79,  22  Am.  Dec.  Z(A\  Cinna-        es  Currier  v.  Rowe,  46  N.  H.  12. 
mond  T.  Greenlee,  10  Mo.  578;  Cur- 


1041  ACTIONS    BETWEEN    PARTNERS  §    750 

be  enabled  to  set  up  his  rights  as  a  counterclaim  to  his  partner's 
suit  at  law  for  contribution. 

§  750.  Action  on  personal  promises  of  pay  for  services. 
— Often  one  partner  will  give  attention  to  the  firm  business, 
greater  in  time  or  value  than  the  other  partner  gives,  and  the 
question  may  arise  as  to  whether  or  not  he  may  commence  a 
suit  at  law  against  his  copartner  therefor.  We  have  heretofore 
seen  that,  as  a  general  rule,  in  the  absence  of  a  specific  contract 
therefor,  he  can  not  recover.  What,  then,  if  there  is  a  contract 
for  compensation  therefor?  If  the  contract  is  simply  a  part- 
nership contract,  recovery  may  be  had  in  equity  against  the 
firm,  but  not  at  law,  as  he  would  then  be  both  plaintiff  and 
one  of  the  defendants,  which  is  against  the  policy  of  the  law. 
If,  on  the  other  hand,  one  partner  personally  obligates  himself 
to  his  copartner  to  pay  him  for  his  services,  and  the  contract 
is  valid  on  other  grounds,  it  may  be  enforced  by  an  action  at 
law  between  the  contracting  partners.  The  law  on  this  ques- 
tion, and  the  basis  thereof,  is  similar  to  that  upon  the  question 
of  agreements  for  contribution  to  firm  capital.  In  the  case  be- 
fore quoted,*^*  the  court  said :  "The  principles  we  are  consider- 
ing are  illustrated  in  the  case  of  Paine  v.  Thacher,*'^^  where 
it  was  held  that,  if  one  partner  promises  another  partner  to 
pay  him  a  compensation  for  personal  attention  to  the  business 
of  the  concern,  this  promise  may  be  enforced  at  law,  not- 
withstanding the  existence  of  the  partnership  and  written  arti- 
cles providing  for  such  payment.  Nelson,  C.  J.,  says,  in  this  that 
the  item  for  services  had  been  adjusted,  and  there  was  an  express 
promise  to  pay  it,  and  the  compensation  was  to  be  contributed  as 
a  part  of  the  capital,  to  be  furnished  by  the  defendant  in  lieu 
of  personal  attention.  It  is  plain  that  there  can  be  no  recovery 
at  law  for  work  and  labor  for  the  firm  or  for  contribution  to  its 
funds,  in  the  absence  of  an  express  agreement  of  the  defendant ; 
and  the  plaintiff  does  not  aid  his  case  by  alleging  a  willingness 

64  Ryder  V.   Wilcox,   103   Mass.   24        f+^ZS  Wend.  (N.  Y.)  450. 
(1869). 


§    750  LAW    OF    PARTNERSHIP  1042 

to  perform,  and  a  prevention  by  the  defendant.  The  rights  of 
the  parties  are  regulated  by  the  general  principles  of  the  law  of 
partnership,  when  not  changed  by  special  agreement."  In  an- 
other case  it  was  said  f^  "The  plaintiff  and  defendant,  with 
several  others,  were  associated  together  in  business — they  were 
partners  in  trade.  If  the  contract  which  gave  rise  to  this  action 
was  entered  into  by  such  of  the  members  of  the  concern  as  were 
present  in  their  individual  characters,  if  it  was  a  personal  con- 
tract, then  the  plaintiff,  under  the  pleadings  in  the  cause,  would 
be  entitled  to  recover ;  as  there  is  nothing  to  prevent  one  partner 
from  suing  another  on  a  mere  private  undertaking.  But  if  the 
undertaking  by  the  defendant  and  the  other  partners  present  was 
not  merely  personal,  but  on  account  of  the  copartnership,  the 
plaintiff  is  not  entitled  to  recover;  on  the  general  principle,  that 
one  partner  can  not  maintain  an  action  against  his  copartners 
for  work  and  labor  done,  etc.,  on  account  of  the  partnership. 
And  we  think  that  the  engagement  by  the  defendant  and  the 
others  of  the  concern  who  were  present  to  give  the  plaintiff  five 
hundred  dollars  for  going  abroad  on  the  business  of  the  concern, 
in  which  he,  as  a  partner,  was  equally  interested  as  the  other 
partners,  was  not  a  private  individual  contract,  but  an  under- 
taking on  account  of  the  concern.  The  same  engagement  entered 
into  with  a  stranger  would  have  been  binding  on  the  firm;  and 
the  present  plaintiff,  as  a  member  of  that  firm,  must  have  con- 
tributed his  proportionate  part  of  the  sum  contracted  to  be  paid. 
And  what  is  there  in  the  mere  circumstance  of  his  being  em- 
ployed as  the  agent  to  transact  the  business  required  to  be  done 
in  the  place  of  a  stranger,  to  give  to  the  same  terms  an  entirely 
different  meaning  and  character,  and  to  turn  into  a  separate 
individual  undertaking  on  the  part  of  some  of  the  partners  a 
contract  which  in  the  case  of  another  would  have  been  considered 
as  made  on  account  of  and  binding  upon  the  firm?  We  can  per- 
ceive nothing.  The  services  rendered  were  for  and  on  account 
of  the  firm,  and  the  compensation  for  those  services  to  be  paid 

csCausten  v.   Burke,  2  Har.  &  G.     (Md.)  295,  18  Am.  Dec.  297. 


.1043  ACTIONS    BETWEEN    PARTNERS  §    751 

by  the  firm,  and  his  just  proportion  of  that  compensation  to  be 
borne  by  the  plaintiff,  as  one  of  the  firm.  He  could  not  sue  the 
firm  of  which  he  was  himself  a  member,  nor  can  he  sustain  this 
suit  against  one  of  his  copartners  for  services  rendered  the 
firm." 

§  751.     Action  upon  account  stated  or  balance  due. — It  has 

been  repeatedly  held  by  our  courts  that  when  an  account  has 
been  reached  between  the  partners,  whereby  one  partner  becomes 
indebted  to  another  partner,  an  action  at  law  may  be  maintained 
thereon  and  after  an  accounting  and  an  adjustment  of  the  rights 
and  liabilities  growing  out  of  the  partnership  one  partner  may 
sue  another  for  a  balance  due.^'^  An  Illinois  case*'^  holds  that, 
on  the  settlement  of  partnership  matters,  where  there  is  a  dis- 
puted item  which  one  of  the  partners  alleges  he  has  paid  to  a 
third  person  for  the  other  partner,  and  agrees  to  pay  it  to  him 
if  the  third  person  does  not,  and  a  settlement  is  made  on  that 
basis,  the  item  being  charged  to  the  partner  for  whom  it  was 
claimed  to  have  been  paid,  this  partner  can  afterward  maintain 
an  action  at  law  against  the  partner  making  the  representation, 
if  it  be  shown  that  he  did  not,  in  fact,  so  pay  the  said  money 
to  the  third  person  as  represented.  The  same  principle  was  in- 
volved, and  the  same  general  conclusion  was  reached  in  a  Missouri 
case,'^®  in  which  the  facts  were  as  follows:     There  had  been  a 

esDouthit  V.  Douthit,   133  Ind.  26,  Ginty  v.  Orr,   110  Mo.  App.  336,  85 

32  N.  E.  715 ;  Halderman  v.  Haider-  S.  W.  955 ;  Nims  v.  Bigelow,  44  N. 

man,  Hemp.  559,  Fed.  Cas.  No.  5909;  H.  376;  Jaques  v.  Hulit,  16  N.  J.  L. 

McGehee  v.  Dougherty,  10  Ala.  863;  38;  Mackey  v.  Auer,  8  Hun  (N.  Y.) 

Downs   V.    Short,   6   Pennew.    (Del.)  180;    Knerr  v.   Hoffman,   65    Pa.    St. 

624,  66  Atl.  365;  Purvines  v.  Cham-  126;  Summerson  v.  Donovan,  110  Va. 

pion,   67   111.   459;    Hanks   v.    Baber,  657,  66  S.  E.  822,  19  Ann.  Cas.  253; 

53   111.  292;   Thompson  v.   Smith,  82  Smith   v.   Putnam,    107   Wis.    155,   82 

Iowa  598,  48  N.  W.  988 ;  Wycoff  v.  N.  W.  1077,  83  N.  W.  288 ;  Logan  v. 

Purnell,    10    Iowa    332 ;    Williams    v.  Trayser,  77  Wis.  579,  46  N.  W.  877 ; 

Henshaw,  11  Pick.  (Mass.)  79,  22  Wray  v.  Milestone,  5  Mees.  &  W.  21. 
Am.  Dec.  366 ;  Fanning  v.  Chadwick,         ^"^  Adams  v.  Funk,  53  III.  219,  cited 

3    Pick.    (Alass.)    420,    15    Am.    Dec.  in  Glade  v.  White,  42  Nebr.  336,  60 

233;  Holman  v.  Nance,  84  Mo.  674;  N.  W.  556  (1894). 
Scott   V.    Caruth,   SO   Mo.    120;    Mc-        ^s  Russell  v.  Grimes,  46  Mo.  410. 


§    752  LAW    OF    PARTNERSHIP  1044 

partnership  accounting  by  action,  in  which  the  debts  due  the  firm 
were  divided  between  the  partners.  Thereafter  it  was  ascer- 
tained that  one  of  the  partners  had  collected  a  portion  of  certain 
notes  payable  to  the  firm,  which  had  been  turned  in  to  the  other 
partner  at  their  face.  The  court  said :  "The  petition  so  far  does 
not  seek  to  settle  the  partnership  accounts,  nor  does  it  attack  the 
settlement  already  made.  It  simply  charges  the  defendant  with 
having  received  money  upon  claims  which,  by  the  settlement,  be- 
came the  individual  property  of  the  plaintiff;  and  the  plaintiff ~ 
then  acquired  a  separate  property,  not  only  in  the  balance  due 
upon  those  claims,  but,  as  against  his  partner,  to  their  full 
amount,"  It  was  held  that  an  action  at  law  could  be  maintained 
by  the  injured  partner  against  his  copartner.*''' 

§  752.  Action  on  promissory  notes. — If  partners  agree 
upon  certain  differences  between  them,  and  one  gives  therefor 
a  promissory  note  to  his  copartner,  he  may  be  sued  thereupon  by 
his  copartner,  in  an  action  at  law,  regardless  of  the  condition  of 
the  accounts  of  the  firm,  as  the  giving  of  the  note,  upon  the  ag-ree- 
ment,  is  of  the  same  efifect  as  any  account  stated,  as  far  as  it 
extends.  As  Chief  Justice  Marshall  says  'J^  "It  is  alleged  that 
at  law,  one  partner  can  sue  another  on  a  claim  growing  out  of 
the  partnership  in  no  other  case  than  for  a  general  balance  on 
a  stated  account.  The  terms  in  which  this  proposition  has  been 
laid  down  are,  perhaps,  too  general.  *  *  *  The  principle  that 
a  company  can  not  sue  its  members  does  not  apply  to  the  case ; 
nor  does  the  principle  that  a  partner  can  not  sue  a  partner  on 
a  partnership  transaction  apply  to  any  case  where  a  note  in 
writing  is  given  for  money,  not  to  a  firm,  but  to  an  individual 
member."  So  it  would  appear  that  an  action  at  law  is  main- 
tainable by  one  partner  against  another  upon  a  promissory  note 
executed  by  the  one  to  the  other,  involving  particular  items  or 
transactions  of  the  partnership  business,  upon  the  ground  that 
the  giving  of  the  note  is  an  isolation  or  separation  of  the  par- 
es Ross  V.  West,  2  Bosw.  (N.  Y.)  ^oVan  Ness  v.  Forrest,  8  Cranch 
360;  Crosby  v.  Nichols,  3  Bosw.  (N.  (U.  S.)  33. 
Y.)  450;  Wicks  v.  Lippman,  13  Nev. 
499. 


1045  ACTIONS    BETWEEN    PARTNERS  §    753 

ticular  matter  from  the  general  partnership  account,  and  that 
an  accounting  and  final  settlement  of  the  partnership  affairs  is 
not  necessarily  involved  in  such  action;  that  the  execution  of 
the  note  is  such  an  acknowledgment  of  isolation  or  elimination 
of  the  particular  transaction  from  the  general  partnership  ac- 
count as  that  the  maker  will  be  estopped  at  law  from  questioning 
the  holder's  right  of  action  thereon. '^^  NuuK^rous  other  cases 
also  hold  that  one  partner  may  sue  another  partner  upon  such  a 
note.'^^  There  are  some  cases''^  holding  that  a  note  given  by  one 
partner  to  another  in  settlement  of  certain  partnership  affairs, 
before  a  final  settlement  of  the  partnership,  is  but  a  nudum 
pactum  and  can  not  be  sued  upon  by  law,  but  the  general  rule 
is  as  is  stated  above,  namely,  that  such  suit  may  be  maintained. 
Of  course,  circumstances  might  be  such  that  a  court  of  equity 
would  enjoin  the  suit  upon  the  note,  but  this  involves  a  very 
different  question  from  the  one  under  discussion,  and  expressly 
recognizes,  rather  than  denies  the  legal  right  to  sue  upon  the 
note,  at  law,  by  restraining  this  right  upon  equitable  grounds.'^* 

§  753.  Action  for  damages  for  breach  or  abandonment  of 
partnership  agreement. — A  question  of  considerable  impor- 
tance arises,  as  to  the  right  of  one  partner  to  sue  another  partner 
in  an  action  at  law,  for  a  breach  of  the  partnership  agreement. 
The  subject  may  be  divided  into  two  parts:  (1)  Where  the 
breach  goes  to  the  whole  agreement;  (2)  where  the  breach  goes 
only  to  some  particular  covenant  or  covenants  in  the  agreement. 
In  the  first  case,  it  has  been  held,^^  probably  in  accord  with  the 
prevalent  rule,  that :    "If  the  declaration  could  be  taken  as  alleg- 

71  Wilson  V.  Wilson,  26  Ore.  251,  (Miss.)   212,  45  Am.  Dec.  278.     See 
38  Pac.  185.  also  1  Coll.  Partnership,  257. 

72  Scott  V.  Campbell,  30  Ala.  728;        ^s  Stafford   v.    Fargo,    35    111.    481; 
Griggsby  v.  Nance,  3  Ala.  347 ;  Sturges  Martin  v.  Stubbings,  20  111.  App.  381 ; 
V.    Swift,    32    Miss.    239;    Merrill    v.  Sewell  v.  Cooper,  21  La.  Ann.  582. 
Green,  55  N.  Y.  270;  Wilson  v.  Wil-         ^4  Wilson   v.   Wilson,   26   Ore.  251, 
son,  26  Ore.  251,  38  Pac.  185;  Bon-  38  Pac.  185. 

naffe    v.    Fenner,    6    Smedes    &    M.        "Ryder  v.   Wilcox,   103   Mass.  24 

(1869). 


§    7SZ  LAW    OF    rARTNERSHIP  1046 

ing  an  entire  repudiation  by  the  defendant  of  the  contract  and 
of  the  relation  of  partnership,  with  a  claim  of  damages  for  such 
a  breach  of  the  contract,  instead  of  compensation  for  services  in 
conducting  the  business,  and  for  a  share  of  the  profits,  such  an 
action  might  be  maintainable."  As  to  the  second  division  of  the 
question,  the  same  case  approves  the  principle  propounded  in 
another  case'^*'  that :  "An  action  to  recover  damages,  brought 
by  one  partner  against  his  copartner,  for  neglect  of  partnership 
business,  could  not  be  maintained  while  the  affairs  of  the  firm 
remain  unsettled,  although  it  was  expressly  agreed  that  each 
partner  should  devote  his  whole  time  to  the  partnership  busi- 
ness.""^ The  difference  in  the  two  cases  may  be  easily  distin- 
guished, upon  investigation,  as  suit  upon  the  first  proposition 
does  not  involve  an  accounting,  nor  does  it  touch  the  question  of 
a  party  being  both  plaintiff  and  defendant,  but  is  rather  a  suit 
for  a  breach  of  a  personal  agreement  between  the  parties,  and 
corresponds  more  closely  to  suits  for  contribution  to  capital  or 
personal  agreements  for  compensation  for  services,  between  the 
■parties,  while  a  suit  upon  the  second  proposition  does  involve 
an  accounting  of  the  partnership  affairs,  and  is  a  partnership 
affair,  rather  than  a  personal  matter  between  the  partners.  As 
said  in  one  case  :^^  "There  do  not  seem  to  be  any  special  rules 
of  law  applicable  to  covenants  contained  in  partnership  articles 
and  not  to  other  covenants:  and  we  may  therefore  say,  without 
discussion,  that  an  action  will  lie  for  a  breach  of  covenant,  no 
matter  in  what  instrument  the  covenant  be  found.  We  may 
further  af^rm  that  no  rule  of  law  declares  that  the  breach  of  a 
covenant  contained  in  partnership  articles  shall  be  compensated 
only  by  nominal  damages.  The  measure  of  damages  must  depend 
upon  the  nature  of  the  obligation,  and  the  extent  of  the  injury 

■^^Capen     v.      Barrows,      1      Gray  51    L.   R.    A.   504;   Holmes   v.   Hig- 

(Mass.)  376.  gins,   1   B.  &  C.  74,  2  D.  &  R.  196, 

"7  See  also  Fanning  v.  Chadwick,  3  1  L.  J.  (O.  S.)  K.  B.  47. 
Pick.   (Mass.)  420,  15  Am.  Dec.  233;         ^s  Bagley  v.    Smith,   10  N.  Y.  489, 

Williams     v.      Henshaw,      11      Pick.  19    How.    Pr.    1,    61    Am.    Dec.    756, 

(Mass.)  79,  22  Am.  Dec.  366;  Miller  Seld.  notes  109. 
V  Freeman,  111  Ga.  654,  36  S.  E.  961, 


1047  ACTIONS    BETWEEN    PARTNERS  §    754 

in  this  as  In  all  other  cases  of  broken  covenants."  So  one  partner 
may  sue  another  at  law  in  assumpsit  for  a  wrongful  dissolution 
brought  about  by  a  partner's  bad  faith/''  even  though  an  action 
of  account  or  bill  in  equity  was  necessary  in  order  to  settle  the 
partnership  accounts,  or,  for  an  abandonment  or  repudiation  of 
the  contract  and  relationship  f°  or  premature  dissolution.^^  It 
has  been  denied,  however,  that  one  partner  is  liable  in  tort  for  a 
bad  faith  termination  of  the  partnership  agreement.* 


82 


§  754.  Action  upon  one  item  unadjusted. — Oftentimes 
there  is  an  association  of  individuals  for  the  performing  of  a 
single  transaction,  and  in  case  of  differences  among  them,  in  set- 
tlement of  this  transaction,  it  becomes  of  importance  as  to  what 
remedy  to  pursue  in  establishing  their  respective  rights  under 
the  association  agreement.  The  right  to  sue  at  law  was  recog- 
nized,^^ where  the  plaintiff  sued  the  defendants,  in  an  action  at 
law,  for  one-third  of  the  commissions  received  upon  the  sale  of 
a  certain  mining  property,  the  plaintiff  claiming  that  there  was 
an  agreement  between  himself  and  the  defendants  that  each 
should  receive  one-third  of  the  commissions  received  by  reason 
of  the  sale.  Defendants  claimed  that  the  complaint  showed  that 
there  was  a  partnership  between  the  parties  to  the  suit,  and  that, 
if  such  were  the  case,  a  suit  for  an  accounting  would  be  the 
proper  remedy.  The  court  held  that  under  the  circumstances 
of  the  case,  there  was  a  partnership  between  the  parties,  and 
further,  that  even  "if  there  was  a  partnership,  there  being  but 
one  item  unadjusted,  the  kind  of  action  brought  by  the  plain- 

79McColIum   V.    Carlucci,    206    Pa.  Am.  Dec.  756,  19  How.  Pr.  1,  Seld. 

312,  55  Atl.  979,  98  Am.  St.  780.  notes  109 ;  Westwood  v.  Cole,  120  N. 

.     80  Taylor  v.   Nelson,  26   Cal.   App.  Y.   S.  884;   Haganaers  v.  Herbst,  30 

681,  147  Pac.  1189;  Tichenor  v.  Neu-  App.  Div.  546,  52  N.  Y.  S.  360  (afifd. 

man,  186  111.  264,  57  N.  E.  826 ;  Child  164  N.  Y.  603,  58  N.  E.  1088)  ;  Ad- 

V.    Swain,   69   Ind.   230 ;    Wadsworth  dams  v.  Tutton,  39  Pa.  St.  447. 

V.    Manning,    4    Md.    59;    Jewett    v.  82  preund  v.  Murray,  39  Mont.  539. 

Brooks,  134  Aliass.  505;  Terry  v.  Car-  104  Pac.  683,  25   L.   R.  A.    (N.   S.) 

ter,  25  Miss.  168.  959. 

81  Karrick    v.    Hannaman,    168    U.  83  Mason  v.  Sieglitz,  22  Colo.  320, 

S.  328,  42  L.  ed.  484,  18  Sup.  Ct.  135;  44  Pac.  588  (1896).   . 
Bagley   v.    Smith,   10   N.   Y.  489,  61 

16 — Row.  ON  Partn. — Vol.  2 


§    754  LAW    OF    rAKTNERSHIP  1048 

tiff  would  lie  at  common  law;  and  under  the  code,  there  being 
but  one  form  of  civil  action,  if  the  facts  set  up  in  the  complaint 
entitle  the  plaintiff  to  any  kind  of  relief,  if  the  evidence  war- 
rants it,  such  relief  will  be  awarded."^*  So  where  a  partnership 
has  been  dissolved  and  there  has  been  an  account  as  to  every- 
thing but  one  item,  one  partner  may  sue  at  law  with  regard  to 
that  item  since  there  are  no  equities  to  be  adjusted  and  no  need 
for  an  accounting.^^  "Nor  is  it  necessary  that  this  (the  balance 
due)  should  be  a  fixed,  ascertained  balance,  as  a  result  of  a  set- 
tlement of  the  accounts  of  the  firm  between  the  partners.  It  is 
enough  if  it  appear  that  the  firm  is  dissolved  and  that  there  are 
no  outstanding  debts  due  to  or  from  the  copartnership,  so  that 
the  action  of  assumpsit  to  recover  the  balance  due  one  of  the  firm 
will  effect  a  final  settlement  between  the  partners."^®  An  express 
promise  to  pay  such  balance  is  unnecessary  for  an  action  may 
be  brought  on  an  implied  promise.^^  This  rule  has  been  applied 
after  dissolution  in  cases  where  a  partner  paid  partnership  debts  f^ 
where  one  partner  appropriated  to  his  own  use  a  specific  sum 

S4  Citing:   Wann   v.    Kelly,    5    Fed.  Ann.    113;    Shattuck   v.    Lawson,    10 

584,    2    McCrary,    628;    Pettingill    v.  Gray      (Mass.)      405;      Cockrell     v. 

Jones,  28  Kans.  749;  Sikes  v.  Work,  Thompson,  85  Mo.  510;  Byrd  v.  Fox, 

6  Gray  (Mass.)  433;  Buckner  V.  Ries,  8    Mo.   574;   Jackson   v.    Powell,    110 

34  Mo.  357;  Meason  v.  Kaine,  63  Pa.  Mo.  App.  249,  84  S.  W.  1132;  Lord 

St.  335 ;  Galbreath  v.  Moore,  2  Watts  v.  Peaks,  41  Nebr.  891,  60  N.  W.  353 ; 

(Pa.)   86.  Gibson  v.  Moore,  6  N.  H.  547;  Ar- 

s^Cookes   V.    Lymperis,    178    Mich,  nold  v.  Arnold,  90  N.  Y.  580.     And 

299,  144  N.  W.  514;  Dorwart  v.  Ball,  compare    Halsted    v.    Schmelzel,    17 

71  Nebr.  173,  98  N.  W.  652,  8  Ann.  Johns.  (N.  Y.)  80;  Brown  v.  Agnew, 

Cas.     766;     Hutchinson     v.     Murray  6  Watts  &  S.   (Pa.)   235;  Sawyer  v. 

(Tex.    Civ.   App.),    169    S.   W.   640;  Proctor,  2  Vt.  580. 

Robson  V.  Curtis,  1  Stark.  78;  Heffer-  ss  Sikes  v.  Work,  6  Gray   (Mass.) 

nan  v.  Sheridan,  11  Quebec  K.  B.  3.  433. 

See  also  Mason  v.  Sieglitz,  22  Colo.  ^'^  Purvines    v.    Champion,    67    111. 

320,  44  Pac.  588;  Benton  v.  Hunter,  459;    Fanning   v.   Chadwick,   3    Pick. 

119  Ga.  381,  46  S.  E.  414;  Purvines  (Mass.)  420,  15  Am.  Dec.  233. 

V.    Champion,    67    111.    459 ;    Erret    v.  ^®  Farwell   v.    Tyler,    5    Iowa    535 ; 

Pritchard,    121    Iowa  496,   96  N.   W.  Cockrell  v.  Thompson,  85    Mo.  510; 

963;   Farwell  v.   Tyler,  5   Iowa  535;  Brown  v.  Agnew,  6  Watts  &  S.  (Pa.) 

Pritchard    v.    Ford,    1    J.    J.    Marsh.  235. 
(Ky.)  543;  Moran  v.  LeBlanc,  6  La. 


1049  ACTIONS    BETWEEN    PARTNERS  §    755 

of  partnership  money;-''  where  a  partner  advanced  more  than 
his  share  of  money  to  pay  firm  debts;''"  where  there  was  no 
accounting  as  to  a  partnership  note;''^  and  where  there  had 
been  errors  or  omissions  in  the  settlement."^  So  if  the  partners 
separate  an  item  before  dissolution  and  adjust  it,  it  has  been 
held  an  action  at  law  may  be  maintained  on  such  matter."^ 

§  755.  Assumpsit. — Many  of  the  cases  which  have  been 
cited  in  which  partners  have  been  allowed  to  sue  each  other 
at  law  fall  under  the  common-law  action  of  assumpsit. °*  It 
was  said  in  a  leading  case:"^  "It  is  true,  however,  that  there 
are  cases  in  which  one  partner  has  been  allowed  to  maintain 
assumpsit  against  another.  But  upon  examination  of  such  cases, 
it  will  be  found,  as  we  apprehend,  either  that  the  subject-matter 
of  the  suit  had  never  properly  belonged  to  the  partnership  con- 
cern, as  in  the  case  of  Smith  v.  Barrow,''^^  or  that,  if  it 
ever  had  belonged  to  the  partnership  concern,  there  had  been 
some  distinct  and  explicit  act  of  the  parties,  by  which  distinct 
and  separate  interests  and  liabilities  had  been  created,  as  in  the 
case  of  Foster  v.  Allanson,^^^  and  Wight  v.  Hunter  ;^^° 
and  it  may  be  that  where  the  partnership  embraces  a  single 
transaction,  the  general  rule  would  not  apply.  But  we  have 
found  no  case  of  a  multifarious  partnership,  in  which,  while  the 
accounts  of  the  partnership  remain  unsettled,  one  partner  has 
been  allowed  to  recover  from  another,  in  an  action  at  law,  either 
an  alleged  excess  received  by  the  defendant  of  a  particular  debt 
due  to  the  firm,  or  the  alleged  excess  paid  by  the  plaintiff,  in 
discharge  of  a  debt  due  by  the  firm,  unless  the  particular  debt 

s9Erret  v.  Pritchard,  121  Iowa  496,  Gibson  v.  Moore,  6  N.  H.  547;  Neil 

96  N.  W.  963.  V.  Greenleaf,  26  Ohio  St.  567. 

tto  Wheeler  v.  Arnold,  30  Mich.  304.  «*  Holmes  v.  Hunt,   122  Mass.  505, 

5'i  Whetstone  v.  Shaw,  70  Mo.  575.  23  Am.  Rep.  381.     See  cases  cited  in 

^2  Donahue    v.    McCosh,    70    Iowa  preceding  sections. 

733,  30  N.  W.  14;  Fanning  v.  Chad-  ^^  Lawrence  v.  Clark,  9  Dana  (Ky.) 

wick,   3   Pick.    (Mass.)    420,    15   Am.  257,  35  Am.  Dec.  133. 

Dec.  233;  Jackson  v.  Powell,  110  Mo.  05a2  T.  R.  476. 

App.  249.  05b  2  T.  R.  479. 

»3  Holyoke  v.  Mayo,  50  Maine  385  ;  ^^c  i  East  20. 


§    755  LAW    OF    PARTNERSHIP  1050 

had,  in  each  case,  been  separated  by  mutual  act  of  the  parties, 
from  its  connection  with  their  general  joint  concerns.  And  we 
do  not  perceive  any  solid  ground  for  distinguishing  between  the 
sole  payment  of  a  partnership  debt  by  any  partner,  out  of  his 
private  means,  and  the  reception  and  appropriation  of  an  entire 
partnership  debt  by  one  partner  for  his  private  use.  As  between 
the  partners,  the  duty  of  contribution,  in  the  first  case,  as  well 
as  the  right  of  participation  in  the  latter,  depends  upon  the  state 
of  the  accounts  between  them;  and  for  the  ascertainment  and 
settlements  of  those  accounts,  if  they  extend  beyond  the  single 
transaction,  the  action  of  assumpsit  is  not  the  appropriate  rem- 
edy, nor  a  jury  the  proper  tribunal.  Accordingly,  we  find  it  laid 
down  in  Chitty  on  Pleadings,''^'^  'that  in  case  of  a  general  unset- 
tled account  between  partners,  one  who  has  been  compelled  to  pay 
the  whole  of  a  creditor's  demand  can  not  sue  his  copartner  at  law.' 
For  this  position,  which  is  obviously  supported  by  the  same  rea- 
sons on  which  the  well-established  general  rule  is  founded,  he  re- 
fers to  the  case  of  Robson  v.  Curtis,^^^  by  which  the  position  is 
fully  sustained.  Without  going  into  the  account  between  the  part- 
ners, it  is  impossible  to  say  that  the  defendant  is  debtor  to  the 
plaintiff.  To  say  that  the  plaintiff  having  shown  himself  in  ad- 
vance to  the  firm  in  this  particular  transaction,  it  is  incumbent  on 
the  defendant  to  show,  if  he  can,  that  by  reason  of  similar  ad- 
vances on  his  part,  or  otherwise,  he  is  still  not  indebted  to  the  plain- 
tiff, would  be  to  make  a  settlement  of  the  accounts  in  this  action; 
while,  on  the  other  hand,  it  would  be  obviously  unjust,  and 
might,  in  many  instances,  lead  to  great  hardships,  as  it  certainly 
would  violate  the  generally  received  principles  on  the  subject,  to 
allow  one  partner,  whenever  he  might  pay  a  particular  demand 
against  his  firm,  to  enforce  contribution  by  action  at  law,  with- 
out allowing  the  defendant  to  show  that,  notwithstanding  such 
payment,  he  owes  the  plaintiff  nothing.  We  do  not  perceive 
any  safe  ground  for  distinguishing  a  compulsory  from  a  volun- 
tary payment,  as  to  the  right  which  the  one  or  the  other  should 

"■^d  Vol.    I,    p.    45,    Springfield    ed.,        ^'>^  1  Stark.  78. 
1833. 


1051  ACTIONS    BETWEEN    PARTNERS  §    756 

confer  upon  a  partner."  The  rule  in  general  is  that  assumpsit 
will  not  lie  where  an  accounting  is  necessary  to  determine  the 
amount  due.°® 

§  756.  Action  for  damages  for  fraud  of  partners. — In  case 
of  fraud  by  one  partner  in  the  partnership  matters,  can 
another  maintain  an  action  at  law  against  him  therefor? 
The  question  is  decided,  very  generally  in  the  affirmative  by  our 
courts.  *Tt  may  be  laid  down  as  a  general  rule,  that  before  one 
partner  can  sue  another  at  law,  the  settlement  of  the  firm  must 
be  complete,  and  his  right  to  recover  only  arises  after  a  settle- 
ment of  all  partnership  business.  *  *  *  Among  the  excep- 
tions to  the  general  rule  is  the  right  of  one  partner  to  maintain 
an  action  against  another  for  the  destruction  of  the  joint  prop- 
erty, or  its  wrongful  conversion.'"'^  In  a  case^^  where  a  settle- 
ment was  arrived  at  between  the  partners,  upon  the  basis  of  the 
accounts  as  shown  in  the  partnership  books  which  were  kept  by 
one  of  the  partners,  it  later  developed  that  the  partner  had 
improperly  kept  the  said  books,  and  had  not  charged  himself 
thereon  v/ith  certain  amounts  of  money  drawn  by  him.  The 
defrauded  partner  commenced  a  suit  at  law,  against  his  partner's 
bondsmen  for  the  money  received  by  the  guilty  partner,  and  not 
accounted  for.  The  parties  so  sued  defended  the  suit  upon  the 
ground  that  no  suit  at  law  could  be  maintained  between  the  part- 
ners until  a  settlement  had  been  had  between  them.  The  court 
held,  however,  "that  there  was  just  such  a  settlement  and  an 
adjustment  of  the  liability  of  each  upon  a  false,  misleading  basis 
furnished  by  the  partner,  for  the  faithful  performance  of  whose 
duties  in  that  very  respect  the  plaintiff's  in  error  were  liable. 
This  action  was  not  to  wind  up  a  partnership,  but  was  for  the 
failure  of  one  partner  to  perform  certain  duties  as  he  had  con- 
tracted with  another  person  to  do  them.  True,  these  duties  per- 
tained to  partnership  affairs  between  the  contracting  parties ;  the 

^6  Bartlett      v.      Parks,      1      Cush.  Lucas  v.  Wasson,  3  Dev.    (N.  Car.) 

(Mass.)   82.  398;  Coll.  Partnership,  382. 

98  Newby  v.  Harrell,  99  N.  Car.  149,  ^^  McAuley  v.  Cooley,  45  Nebr.  582, 

5   S.   E.   284,   6  Am.    St.   503,   citing  62,  N.  W.  87  (1895). 


§    756  LAW    OF    I'ARTXERSIIIP  1052 

undertaking  in  this  respect  was  none  the  less  that  of  Bentley  (the 
defrauding  partner)  individuall}^  and  for  the  faithful  perform- 
ance of  such  individual  undertaking  plaintiffs  in  error  (bonds- 
men) were  Hable."  Inasmuch  as  the  above  case  seems  to  deal 
chiefly  with  the  duty  of  the  bondsmen,  it  might  seem  at  first  view 
that  a  different  principle  were  involved,  but  such  is  not  the  case, 
as  the  partner  for  whom  the  parties  sued  were  responsible,  would 
also  have  been  equally  liable  and  in  the  same  suit,  at  least  in 
most  states,  as  were  the  bondsmen,  for  it  is  generally  held  that 
after  dissolution  one  partner  is  liable  in  an  action  at  law  in  the 
nature  of  deceit  for  damages  sustained  by  his  copartner  because 
of  his  fraud  in  the  settlement,^  or,  in  some  jurisdictions  he  may 
recover  in  assumpsit."  Neil,  J.,  of  Tennessee,^  in  a  very  scholarly 
opinion,  shows  a  very  deep  insight  into  the  question.  "But," 
said  he,  "is  a  partner  responsible  for  a  fraudulent  conversion  of 
stocks  belonging  to  the  firm  within  this  rule  ?  We  see  no  reason 
why  he  should  not  be.  If  his  wrongful  act  amounts  to  a  fraud- 
ulent conversion,  within  the  technical  meaning  of  that  term,  the 
effect  upon  those  injured  by  his  act  is  the  same  as  if  he  were 
not  a  partner,  and  the  legal  quality  of  the  act  is  the  same,  inas- 
much as  to  hold  the  act  complained  of  a  fraudulent  conversion 
necessarily  is  tantamount  to  saying  that  his  relation  of  partner 
did  not,  under  the  circumstances,  justify  his  act.  But  under 
what  circumstances  is  a  partner  liable  for  a  conversion — that  is 
to  say,  a  fraudulent  conversion?  *It  is  not,  as  I  understand  it,' 
said  the  Master  of  the  Rolls  in  Ex  parte  Harris,^"^  'necessary  for 
the  joint  estate  to  prove  more  than,  in  the  words  of  Lord  Eldon, 
that  the  overdrawing  was  made  for  private  purposes,  against 
the  prohibition,  either  express  or  implied,  in  the  partnership 
agreement,  without  the  knowledge,  consent,  privity,  or  subse- 

1  Farnsworth  v.  Whitney,  74  Maine  ^  Adams  v.  Funk,  53  111.  219.     Con- 

370;  Russell  v.  Grimes,  46  Mo.  410;  tra:  Chase  v.  Garvin,  19  Maine  211. 

McAuley  v.  Cooley,  45  Nebr.  582,  63  s  Morris   v.   Wood    (Tenn.),   35   S. 

N.  W.  871;  Binney  v.  Delmar,  17  N.  W.  1013  (1896). 

Y.  S.  524,  43  N.  Y.  St.  533;  Crockett  3a  2  Ves.  &  B.  210. 
V.  Burleson,  60  W.  Va.  252,  54  S.  E. 
341,  6  L.  R.  A.  (N.  S.)  263n. 


1053  ACTIONS    BETWEEN    PARTNERS  §    757 

quent  approbation  of  the  other  partners.  That  is  all  that  is  neces- 
sary to  be  proved ;  but,  if  that  be  shown,  it  is  prima  facie  a  fraud- 
ulent appropriation,  within  the  rule.'  "  In  the  same  case  the  court 
quotes  from  and  approves  Mr.  T.  Parsons'  statement,  as  follows  :* 
"The  fraud  may  be  constructive  only,  and  any  act  would  be  so 
which  violated  the  articles  of  agreement  of  the  partners,  or  ab- 
stracted or  appropriated  property  or  funds  by  the  act  of  one 
partner  only,  without  the  authority,  consent  or  knowledge  of 
the  others."  It  may  safely  be  stated  that  the  principles  laid 
down  in  the  above  cases  and  texts  are  very  general,  if  not  prac- 
tically universal,  both  in  the  courts  of  England  and  the  United 
States,  and,  further,  that  the  rule  is  of  ancient  origin.^ 

§  757.  Partition  and  suits  involving  real  estate. — One 
partner  has  no  right  to  bring  an  action  against  his  copartner 
for  partition  of  partnership  real  estate,  until  the  creditors  have 
been  paid  and  partnership  accounts  have  been  adjusted."  But 
there  are  a  few  cases  which  seem  to  hold  a  contrary  rule,'^  and 
if  real  estate  held  by  partners  is  not  partnership  property,  they 
may  have  a  partition.^  The  general  rule  holds  that  partners  in 
dealing  in  real  estate  must  wait  rmtil  dissolution  and  settlement 
before  bringing  actions  against  each  other  on  matters  connected 
with  firm  business,^  though  if  the  association  is  for  a  single 

4  Parsons  Partnership,  p.  394.  Raynolds,  54  N.  J.  Eq.  559,  35  Atl. 

^  See  Fuller  v.  Percival,  126  Mass.  536;    Eisner  v.   Eisner,   5   App.   Div. 

381     (as    to    fraudulent    conversion).  117,  38  N.  Y.  S.  671;  Baird  v.  Baird's 

See  also  Weirich  v.  Dodge,  101  Wis.  Heirs,  21   N.  Car.  524,  31  Am.   Dec. 

621,  11  N.  W.  906;  Ex  parte  Smith,  399;    Baldes    v.    Henniges,    7    Kulp. 

1  Glyn  &  J.  74.  (Pa.)  143;  Jones  v.  Smith,  31  S.  Car. 

6  Hughes   V.    Devlin,   23    Cal.   501;  527,  10  S.  E.  340;  Kruschke  v.  Ste- 

Jackson  v.  Deese,  35   Ga.  84;   Mar-  fan,  83  Wis.  ZIZ,  53  N.  W.  679. 

seilles  Land  &  Water  Power  Co.  v.  "^  Jackson  v.  Deese,  35  Ga.  84 ;  Col- 

Aldrich,    86    III.    504 ;    Patterson    v.  lins  v.  Dickinson,  2  N.  Car.  240. 

Blake,    12   Ind.  436;    Pennybacker   v.  ^  Thompson    v.    Holden,    117    Mo. 

Leary,  65  Iowa  220,  21   N.  W.  575 ;  118,  22  S.  W.  905. 

Thomas  v.  Scott,  3  Rob.    (La.)   256;  ^  Reddick    v.    White,    46   La.    Ann. 

Chase  V.  Angell,  148  Mich.  1,  108  N.  1198,    15    So.   487;    Springer    v.    Ca- 

W.   1105,   118  Am.   St.  568;   Holmes  bell,  10  Mo.  640. 
V.  McGee,  27  Mo.  597;  Molineaux  v. 


§    758  LAW    OF    PARTNERSHIP  1054 

transaction,  the  rule  is  relaxed  and  assumpsit  will  lie  between 
the  partners.^* 

§  758.  Tort  actions  between  partners. — Actions  for  dam- 
ages will  lie  between  partners  for  tortious  wrongs  inflicted  by 
a  partner  to  the  person  or  property  of  copartner."  So  damages 
may  be  recovered  for  wrongful  destruction  of  firm  property  ;^^ 
for  detaining  partnership  property  under  a  claim  of  ownership  ;^^ 
for  conversion  of  a  chattel  by  selling  it  in  denial  of  the  partner- 
ship interest;^*  or  where  a  partner  unfairly  attempts  to  acquire 
gain  at  his  copartner's  expense/^ 

§  759.  Trespass,  trover,  and  conversion. — The  right  of 
one  copartner  to  sue  another  in  trespass/"  replevin,^^  or  trover^® 
has  been  denied.  It  is  held  that  a  partner  can  not  maintain 
an  action  of  trespass  against  copartners  for  conspiracy  directed 
against  and  affecting  the  affairs  of  a  partnership  which  has  not 
been  settled  or  adjusted/^  It  was  said  in  one  leading  case  :^° 
"But  if  it  be  said  that  whether  or  not  the  goods  were  in  fact 
sold  by  the  partner  Thomas  Montjoy,  was  a  question  proper 
for  the  decision  of  the  jury,  and  that  as  the  instructions  asked 
were  not  hypothecated  on  the  opinion  of  the  jury  as  to  that 
fact,  it  was  proper  in  the  court  to  refuse  the  instructions,  it  is 
answered  that  if  the  goods  were  not  sold,  the  defendant,  Thomas 

10  Meason  v.  Kaine,  63  Pa.  St.  335 ;  "  Weiss    v.    Weiss,    75    Misc.   644, 

Finlay   v.    Stewart,    56   Pa.    St.    183;  133  N.  Y.  S.   1021. 

Brubaker  v.  Robinson,  3  Pen.  &  W.  is  "White    v.    Jouett,    147    Ky.    197, 

(Pa.)    295;    McFadden   v.   Erwin,   2  144  S.  W.  55. 

Whart.    (Pa.)    Z1.  le  Montjoy    v.    Holden,    Litt.    Sel. 

"Haller  v.  Willamowicz,  23  Ark.  Cas.   (Ky.)  447,  12  Am.  Dec.  331. 

566;    Newby  v.   Harrell,   99  N.    Car.  i^  Buckley  v.   Carlisle,  2   Cal.  420; 

149,  5  S.  E.  284,  6  Am.  St.  503;  Reg.  Azel  v.  Betz,  2  E.  D.  Smith  (N.  Y.) 

V.   Mallinson,   16  Q.   B.  367,   15  Jur.  188. 

746.  18  Mason    v.    Tipton,    4    Cal.    276; 

12  Montjoy    v.    Holden,    Litt.    Sel.  Smith   v.   Book,  5  U.   C.   Q.   B.    (O. 

Cas.    (Ky.)    447,    12   Am.    Dec.    331;  S.)   556. 

Taylor  v.  Brown,  17  U.  C.  C.  P.  387.  i^  Lachmann    v.    Benson,     167    111. 

i3Rathwell  v.   Rathwell,  26  U.   C.  App.  85. 

Q.  B.  179.  20  Montjoy    v.    Holden,    Litt.    Sel. 

(Cas.   (Ky.)  447,  12  Am.  Dec.  331. 


1055  ACTIONS    BETWEEN    PARTNERS  §    759 

Montjoy,  must,  as  partner,  have  held  an  equal  interest  in  them 
with  the  plaintiff,  Holden,  and  can  not  have  been  liable  to  the 
action  of  Holden  for  the  taking  of  the  goods.  He  might,  per- 
haps, have  been  liable  if  the  goods  had  been  actually  destroyed, 
but  there  is  no  evidence  of  any  destruction,  and  it  is  well  settled 
that  unless  the  goods  held  in  common  be  actually  destroyed,  an 
action  of  trespass  or  trover  can  not  be  maintained  by  one  tenant 
in,  common,  joint-tenant  or  partner,  against  another."^^  A  New 
York  case  how^ever  allowed  one  partner  to  sue  another  in  trover 
who  sold  all  the  partnership  property  wrongfully  without  the 
other  partner's  consent  on  the  theory  that  such  action  lies  be- 
tween tenants  in  common,  and  that  partners  are  tenants  in  com- 
mon. ^^  The  rule  that  trover  will  lie  between  tenants  in  common 
is  settled  in  New  York,  and  some  other  American  jurisdictions,"^ 
but  the  proposition  that  partners  are  tenants  in  common,  does 
not  seem  to  be  based  on  a  sound  foundation.'* 

§  760.  Actions  between  partners  after  dissolution.  — 
Where  on  retirement  of  a  partner  the  debts  of  the  old  firm  have 
been  assumed  by  a  new  firm  or  by  a  partner  in  the  old  firm  or 
the  remaining  partners,  and  there  is  a  breach  of  the  contract 
to  pay  for  the  retiring  partner's  share  in  the  firm  property,  or 
of  the  agreement  to  save  him  from  harm  in  connection  with 
the  firm's  debts,  such  retiring  partner  may  sue  the  other  party 
or  parties  to  the  contract  of  assumption,  or  of  purchase.^^    A 

211    Chitty    Pleading,    156.    Buller's  Ga.    887,    45    S.    E.    240;    Tucker    v. 

Nisi  Prins  34,  35,  2  Saund.  47,  f.  g.  Murphey,  114  Ga.  662,  40  S.  E.  836; 

note  1,  Wat.  Part.  148.  McGilvery  v.  McGilvery,  23  Idaho  116, 

22  Weiss  V.  Weiss,  133  N.  Y.  S.  128  Pac.  978;  Teed  v.  Parsons,  100 
1021.  111.  App.  342    (revd.  202  111.  455,  66 

23  Wheeler  v.  Wheeler,  33  Maine  N.  E.  1044);  Jackson  v.  Hart,  12 
347;  Delaney  v.  Root,  99  Mass.  546,  Ind.  605;  Nichols  v.  Prince,  8  Allen 
97  Am.  Dec.  52;  White  v.  Osborn,  (Mass.)  404;  Scovill  v.  Kinsley,  13 
21  Wend.  (N.  Y.)  72;  Osborn  v.  Gray  (Mass.)  -5;  Berridge  v.  Slaw- 
Schenck,  83  N.  Y.  201.  son,  94  Mich.  484,  54  N.  W.  278 ;  Gar- 

24  See  Ch.  11,  §§  291,  292,  293.  diner  v.  Fargo,  58  Mich.  72,  24  N.  W. 

25  Burney  v.  Boone,  32  Ala.  486 ;  655 ;  Osborn  v.  Osborn,  36  Mich.  48 ; 
Meyer  V.  Parsons,  129  Cal.  653,  62  Mclnnis  v.  Casualty  Co.,  113  Minn. 
Pac.   216;    Dickenson   v.    Aloore,    117  156,   129  N.  W.   125,  388;    McCarthy 


§    760  LAW    OF    rxVRTNERSIIIP  1056 

retiring  partner  who  fails  to  perform  or  in  any  manner  breaches 
the  contract  of  dissolution  may  be  sued  by  the  other  party  to 
the  contract.^^  Thus,  where  a  partner  sold  his  interest  in  a  firm 
to  a  copartner,  and  agreed  not  to  engage  again  in  similar  busi- 
ness, the  copartner  and  a  third  person  who  purchased  such  inter- 
est were  proper  plaintiffs  in  an  action  for  the  breach  of  the 
contract  not  to  engage  in  business.'^  If  a  bond  has  been  given 
the  retiring  partner  to  secure  him  against  the  payment  of  firm 
debts,  it  has  been  held  that  in  an  action  on  such  bond,  the 
court  should  provide  that  he  must  satisfy  firm  debts  from  the 
money  received."^  Where  a  partnership  sold  its  business  and 
property  to  another  partnership  having  a  common  member  with 
the  selling  partnership,  it  was  held  that  a  cause  of  action  for  the 
payment  of  indebtedness  of  the  selling  partnership  by  the  pur- 
chasing partnership  was  in  the  latter  firm,  and  not  in  one  of  the 
partners,  who  was  not  a  member  of  both  firms,  in  the  absence  of 
dissolution  of  the  purchasing  partnership,  or  in  case  of  equitable 
accounting,  and  that  where  a  member  of  the  selling  firm  collected 
debts  which  had  been  transferred  to  the  purchasing  firm,  and  ap- 
propriated the  proceeds  to  his  own  use,  the  purchasing  firm  was 
the  proper  plaintiff.^^  Where  defendant,  a  partner  with  the  plain- 
tiff in  the  grocery  business,  purchased  secretly  with  others  the 
premises  on  which  the  business  was  conducted,  dissolved  the  firm, 
and  ousted  the  plaintiff  from  the  premises  and  started  another 
grocery  firm  the  plaintiff  could  maintain  an  action  for  damages 

V.  Donnelly,  90  Minn.  104,  95  N.  W.  70  Ind.  464;  Downs  v.  Woodson,  16 

760;  Meyer  v.  Shamp,  26  Nebr.  729,  S.  W.   152,  25  Ky.  L.  566;   Bank  of 

42  N.  W.  757;  Huffman  v.  Huffman,  British   North   America  v.    Delafield, 

dZ  S.  Car.  1,  40  S.  E.  963;  Allen  v.  126  N.  Y.  410,  27  N.   E.  797    (affg. 

Cooley,  53  S.  Car.  414,  31  S.  E.  634 ;  12    N.    Y.    S.    440)  ;    Reddington    v. 

Brazee  v.  Woods,  35  Tex.  302;  Bin-  Franey,    131    Wis.    518,    111    N.    W. 

yon  V.  Smith,  50  Tex.  Civ.  App.  398,  725. 

112  S.  W.  138;  Gaisell  v.  Johnston,  68  2r  DuBois  v.  Padgham,  18  Cal.  App. 

Wash.    470,    123    Pac.    783 ;    Dyer    v.  298,  123  Pac.  207. 

Dyer,  138  Ga.  159,  74  S.  E.  1030.   Com-  ^s  Wilson    v.    Stilwell,    9   Ohio    St. 

pare  Frank  v.  Beswick,  44  U.  C.  Q.  467,  75  Am.  Dec.  477. 

B.  1.  29  Callaway    v.    Pearson,    139    Ga. 

26  Kelsey    v.    Hobby,    16    Pet.     (U.  540,  11  S.  E.  816. 
S.)  269,  10  L.  ed.  961 ;  Lee  v.  Davis, 


1057  ACTIONS    BETWEExN"    PARTNERS  §    761 

for  the  loss  of  the  good  will  of  the  business.^"^  Purchasers  of  a 
partner's  interest  may  sue  a  former  partner  for  money  collected 
by  him.^^  "If  one  partner  having  charge  of  the  books  and  busi- 
ness of  the  firm,  by  making  material,  false  and  fraudulent  rep- 
resentations to  the  effect  that  certain  items  of  charge  against 
others  constituted  debts  owing  to  the  firm,  when  in  fact,  some 
of  said  items  had  been  collected  by  him,  and  others  were  false 
charges,  induced  the  other  partner  to  enter  into  a  contract  finally 
settling  and  dissolving  the  partnership,  whereby  the  latter  took 
over  for  value  as  his  individual  property  all  of  said  items  of 
charge,  the  latter  may,  upon  discovery  of  the  fraud,  sue  the 
former  at  law  for  any  damages  occasioned  by  the  deceit."^^ 

§  761.  Attachment  and  garnishment. — Claims  between 
partners  for  an  uncertain  balance  due  from  one  to  the  other 
do  not  carry  the  right  to  garnish  or  attach  firm  property  at  law, 
since  in  such  cases  an  accounting  in  equity  is  necessary  to  ascer- 
tain the  amount  due,^*  but  under  some  statutes  such  right  is 
given.^^  Nor  is  there  a  right  on  claims  arising  out  of  partner- 
ship matters,  to  attach  a  partner's  individual  property."'^  But  if 
a  balance  has  been  struck,  an  attachment  has  been  allowed." 

soDonleavey  v.   Johnston,    24    Cal.  sell,    44    Iowa    556;     Birtwhistle    v. 

App.  319,  141  Pac.  229.  Woodward,  95  Mo.  113,  7  S.  W.  465; 

31  Semple  v.  Burke,  26  N.  Dak.  200,  Treadwell   v.   Brown,   41    N.   H.    12 ; 

144  N.  W.  103.  Girard  &c.  Ins.  Co.  v.  Field,  45   Pa. 

33  Adams    v.    Funk,    53    111.    219;  St.  129,  3  Grant  Gas.  329.     See  also 

Farnsworth    v.    Whitney,    74    Maine  Burnham    v.    Hopkinson,    17    N.    H. 

370.     Compare  Holyoke  v.  Mayo,  50  259. 

Maine  385 ;  Russell  v.  Grimes,  46  Mo.  35  Hansen  v.  Morris,  87  Iowa  303, 

410;  Binney  v.  Delmar,  17  N.  Y.  524,  54  N.  W.  223;  Walsh  v.  Parr,  110  S. 

43  N.  Y.  St.  533 ;  Crockett  v.  Burle-  W.    300,    33    Ky.    L.    242 ;    Goble    v. 

son,  60  W.  Va.  252,  54  S.  E.  341,  6  Howard,   12  Ohio   St.  165 ;   Bingham 

L.  R.  A.  (N.  S.)  263.     See  also  Mc-  v.  Keylor,  19  Wash.  555,  53  Pac.  729. 

Auley   V.    Cooley,    45    Nebr.    582,    63  se  Stone   v.    Boone,   24    Kans.   337; 

N.  W.  871.  Bingham    v.    Keyler,    19    Wash.    555, 

34Newsonn    v.    Ritman,    98    Ala.  53  Pac.  729. 

526.   12   So.  412;   Ives  v,  Vanscoyoc,  s^  Ryon   v.   Wynkoop,    148    Pa.    St. 

81  111.  120;  Levy  v.  Levy,  11  La.  577;  188,  23  Atl.  1002;  Knerr  v.  Hoffman, 

Farwell  v.   Chambers,  62   Mich.  316,  65  Pa.  St.  126. 
28  N.  W.  859.    Compare  Cox  v.  Rus- 


§    7(32_  "LAW    OF    PARTNERSHIP  1058 

§  762.  Arrest  of  partner  in,  civil  action. — It  has  been  held 
that  under  a  statute  permitting  an  arrest  in  a  civil  action  for 
fraud  gives  one  partner  the  right  to  an  order  for  the  arrest  of 
his  copartner,  in  a  case  where  an  action  at  law  by  one  partner 
against  another,  will  lie.^^  The  court  said  in  one  case,  that  as 
an  action  at  law  was  maintainable,  "If  the  facts  bring  the  claim 
within  the  provisions  of  our  statutes  on  arrest  and  bail,  no  reason 
occurs  to  us  why  the  plaintiff  should  be  deprived  of  this  ancillary 
remedy.  The  statute^®^  provides  that  when  a  defendant  has  been 
guilty  of  fraud  in  contracting  the  debt  or  incurring  the  obligation 
for  which  action  is  brought,  or  for  concealing  or  disposing  of 
property,  or  to  recover  damages  for  fraud  or  deceit,  an  order  for 
arrest  may  be  issued;  and  it  has  been  held^*^^  that  such  order  is 
proper  when  there  has  been  fraud  committed  after  contracting 
the  debt,  as  by  concealing  property  or  other  devices  for  de- 
feating the  creditor.  Here  is  an  allegation  and  ample  evidence 
to  sustain  it,  charging  intentional  fraud  throughout  the  entire 
transaction  on  the  part  of  the  defendant,  and  the  judge  below 
has  found  that  these  charges  are  true ;  a  fraudulent  design 
in  having  the  options  drawn  in  the  name  of  the  defendant;  a 
fraudulent  effort  and  purpose  in  concealing  the  sale  from  the 
plaintiff;  false  and  fraudulent  statements  in  procuring  from  the 
plaintiff  a  receipt  in  full,  etc.  We  must  not  be  understood  as 
holding  that  no  right  of  arrest  can  ever  exist  where  the  partner- 
ship has  terminated  and  the  affairs  are  so  complicated  that,  in 
order  to  a  proper  settlement,  an  action  in  the  nature  of  a  bill 
in  equity  for  an  account  is  required.  We  have  only  elaborated 
the  position  that  the  right  of  arrest  may  exist  when  an  action 
of  law  would  lie  with  a  view  of  confining  the  decision  to  the 
points  required  by  the  facts  of  the  case  before  us."^^  But  in 
several  other  cases  the  right  of  a  partner  to  have  his  copartner 

38  Madge  v.  Puig,  12  Hun  (N.  Y.)  ^sb  Citing  Powers  v.  Davenport,  101 

15 ;  Ledford  v.  Emerson,  140  N.  Car.  N.  Car.  286,  7  S.  E.  747. 

288,  52  S.  E.  641,  4  L.  R.  A.  (N.  S.)  so  Ledford  v.  Emerson,  140  N.  Car. 

130n,  6  Ann.  Cas.  107  and  note.  288,  52  S.  E.  641,  4  L.  R.  A.   (N.  S.) 

38a  Code  N.  Car.,  §  291,  4.  130,  6  Ann.  Cas.  107. 


1059 


ACTIONS    BETWEEN    PARTNERS 


763 


arrested   in   an   action    involving   partnership   transactions,    has 
been  denied/'* 

§  763.  Defenses. — Among  defenses  which  may  be  set  up 
in  actions  between  partners  are,  a  contract  subsequent  to  that 
sued  on  by  which  the  property  involved  became  partnership 
property;'*^  satisfaction  of  the  obligation;*-  settlement  barring 
the  action  as  by  arbitration  f'^  division  of  partnership  property  ;*" 
failure  of  consideration;*''  fraud ;*^  failure  to  perform  a  condi- 
tion precedent/*'  But  it  has  been  held  not  a  defense  to  an  ac- 
counting between  the  parties  that  the  original  contract  was  ille- 
gal, as  against  public  policy,  such  as  blockade  running  or  dealing 
with  persons  in  rebellion,  when  the  money  has  passed  into  other 
forms  ;*'^  or  where  the  partners  were  engaged  in  the  unlawful 
sale  of  liquor;*^  or  in  a  business  in  Mexico  which  was  illegal 
there/^  Other  cases  adhere  to  a  contrary  rule  and  have  per- 
mitted a  partner  to  set  up  the  illegality  of  the  contract  in  de- 
fense/° 


4°  Soule  V.  Hayward,  1  Cal.  345 ; 
Hanna  v.  Auter,  4  Rob.  (La.)  221; 
Cary  v.  Williams,  1  Duer  (N.  Y.) 
667;  Smith  v.  Small,  54  Barb.  (N. 
Y.)   223. 

41  Pico  V.  Cuyas,  47  Cal.  180. 

42Trink  v.  Ryan,  4  111.  322;  Grif- 
fith V.  Hill,  7  Blackf.  (Ind.)  324; 
Fletcher  v.  Brown,  7  Humph. 
(Tenn.)  385. 

42a  Madison  v.  Henderson,  86  111. 
App.  113. 

43  Shields  V.  Fuller,  4  Wis.  102,  65 
Am.   Dec.  293. 

44  Durham  v.  Lathrop,  95  111.  App. 
429;  Mullendore  v.  Scott,  45  Ind. 
113;  Coffin  V.  Mitchell,  34  Ind.  293; 
Rogers  v.  Rogers,  1  Hall  (N.  Y.) 
434;  Halliday  v.  Carnan,  6  Daly  (N. 
Y.)  422;  Welch  v.  Miller,  210  Pa. 
204,  59  Atl.  1065;  Lee  v.  Longbot- 
tom,  173  Pa.  St.  408,  34  Atl.  436. 


4"  Powell  V.  Graves,  9  La.  Ann. 
435. 

46Hoile  V.  York,  27  Wis.  209. 

4"  Brooks  V.  Martin,  69  U..  S.  70, 
17  L.  ed.  732;  Wann  v.  Kelley,  2 
McCrary  (U.  S.)  628,  5  Fed.  SS4; 
Wallis  V.  Wheelock,  26  La.  Ann.  246 ; 
Pfeuffer  v.  Maltby,  54  Tex.  454,  38 
Am.  Rep.  631 ;  DeLeon  v.  Trevino, 
49  Tex.  88,  30  Am.  Rep.  101.  Contra : 
Lane  v.  Thomas,  37  Tex.  157;  Bar- 
row V.  Pike,  21  La.  Ann.  14. 

48  McGunn  v.  Hanlin,  29  Mich. 
476;  Howe  v.  Jolly,  68  Miss.  323,  8 
So.  513. 

4^  Hutchinson  v.  Murray  (Tex. 
Civ.  App.),  169  S.W.  640. 

50  McMullen  v.  Hoffman,  174  U.  S. 
639,  43  L.  ed.  1117,  19  Sup.  Ct.  839. 
See  ante,  §§  655,  656. 


§  764 


LAW    OF    rARTNERSHIP 


1060 


§  764.  Set-off  and  counterclaim. — In  an  action  at  law  be- 
tween partners,  where  one  partner  is  seeking  to  recover  from  the 
other  on  an  individual  obligation,  a  debt  or  liability  owing  by 
the  plaintiff  partner  to  the  firm  can  not  be  set  off  against  his 
claim  on  the  defendant  partner  individually.^^  Nor  can  un- 
adjusted partnership  accounts  or  matters  be  set  off  in  a  suit 
between  partners  on  individual  obligations.^"  It  was  said  in  an 
early  case  on  this  question  :^^  "The  sole  question  is  whether  a 
debt  due  from  Francis  to  Robert,  Daniel  and  Richard  Rand,  and 
a  debt  due  from  Daniel  Rand  to  Francis,  are  mutual  debts.  The 
inquiry  carries  its  own  answer  on  the  face  of  it.  The  debts  are 
in  no  sense  mutual.  In  Palmer  v.  Green,^*  a  joint  and  separate 
debt  were  adjudged  not  to  be  mutual  debts,  and  that  they  could 
not  be  set  off  against  each  other ;  and  that  to  authorize  this  pro- 
ceeding, they  must  be  necessarily  due  to  and  from  the  same  per- 
sons in  the  same  capacity.    In  this  case,  the  debt  due  from  one  in- 


siChapin  v.  Streeter,  124  U.  S. 
360,  31  L.  ed.  475,  8  Sup.  Ct.  529; 
Houston  V.  Brown,  23  Ark.  333 ;  In- 
gols  V.  Plimpton,  10  Colo.  535,  16 
Pac.  155 ;  Francis  v.  Rand,  7  Conn. 
221;  Greer  v.  Arlington  Mills  Mfg. 
Co.,  1  Pennew.  Del.)  581,  43  Atl.  609; 
West  V.  Kendrick,  46  Ga.  526;  Tay- 
lor V.  Hardin,  38  Ga,  577;  Interna- 
tional Bank  v.  Jones,  119  111.  407,  9 
N.  E.  885,  59  Am.  Rep.  807 ;  Hilliard 
V.  Walker,  11  111.  644;  Dameier  v. 
Bayor,  68  111.  App.  477  (affd.  167  111. 
547,  47  N.  E.  770);  Thompson  v. 
Lowe,  111  Ind.  272,  12  N.  E.  476.  See 
also  Raymond  v.  Palmer,  41  La.  Ann. 
425,  6  So.  692,  17  Am.  St.  398;  Ash- 
ley V.  Sholars,  22  La.  Ann.  442 ;  Wig- 
gin  V.  Goodwin,  63  Maine  389;  Fes- 
senden  v.  Forest  Paper  Co.,  63  Maine 
175;  Mitchell  v.  Sellman,  5  Md.  376; 
Lesure  v.  Norris,  65  Mass.  (11 
Cush.)  328;  R%ed  v.  Whitney,  7 
Gray  (Mass.)  533;  Stew.art  v.  Ter- 
williger,    177   Mich.   313,    143   N.   W. 


17,  Ann.  Cas.  1915  C,  808;  Sturges 
V.  Swift,  32  Miss.  239;  Pool  v.  De- 
laney,  11  Mo.  570;  Finney  v.  Tur- 
ner, 10  Mo.  207;  Reim  v.  Bissinger, 
75  N.  J.  L.  289,  68  Atl.  88 ;  Compton 
V.  Green,  9  How.  Pr.  (N.  Y.)  228; 
McDowell  V.  Tyson,  14  Serg.  &  R. 
(Pa.)  300;  Walker  v.  Eyth,  25  Pa. 
St.  216;  Roberts  v.  Fitler,  13  Pa.  St. 
265 ;  Flint  v.  Tillman,  2  Heisk. 
(Tenn.)  202;  Wise  v.  Ferguson  (Tex. 
Civ.  App.),  138  S.  W.  816;  Edmon- 
son V.  Thomasson,  112  Va.  326,  71 
S.  E.  536;  Gordon  v.  Ellis,  2  C.  B. 
821,  52  E.  C.  L.  821. 

52  Willis  V.  Barron,  143  Mo.  450, 
45  S.  W.  289,  65  Am.  St.  673 ;  Leabo 
V.  Renshaw,  61  Mo.  292 ;  Benson  v. 
Tilton,  54  N.  H.  174;  Ordiorne  v. 
Woodman,  39  N.  H.  541;  Ives  v. 
Miller,  19  Barb.  (N.  Y.)  196;  Wor- 
ley  V.  Smith,  26  Tex.  Civ.  App.  270, 
63  S.  W.  903. 

53  Francis  v.  Rand,  7  Conn.  221. 

54  6  Conn.  14, 


1061  ACTIONS    BETWEEN    PARTNERS  §    765 

dividual  to  another  individual  is  requested  to  be  set  off  against  a 
debt  due  from  an  individual  to  a  mercantile  compan^^  This  can  not 
be  done."  An  obligation  owing  to  the  defendant  as  an  individual 
may  be  set  off  in  an  action  between  partners  ;^^  or  a  payment  of  a 
partnership  debtf"  or  an  agreed  balance  on  settlement.'^'  After 
dissolution  an  unliquidated  demand  growing  out  of  unsettled 
accounts  may  be  pleaded  as  a  set-off  in  an  action  between  former 
partners;^*  and  a  partner  who  purchases  the  other  partner's 
interest,  may  in  an  action  on  the  purchase-money  note,  recoup 
by  a  claim  for  damages  for  impairing  an  uncompleted  contract 
of  the  firm.^^  But  no  claim  can  be  urged  as  a  set-off  in  an 
action  at  law  which  would  require  a  court  of  law  to  enter  into 
a  partnership  accounting.*"' 

§  765.  Demand  and  laches. — Where  one  partner  sues  his 
copartner  for  conversion  to  his  own  use  of  money  collected  which 
upon  dissolution  he  agreed  should  be  the  property  of  the  partner 
suing,  no  demand  before  action  is  necessary.''^  But,  generally, 
on  a  claim  for  money  received  by  virtue  of  the  partnership  rela- 
tion which  constitutes  each  partner  an  agent  of  the  others,  there 
must  be  a  demand  before  suit.°"  And  if  one  partner  is  to  pay 
the  other  money  before  he  can  obtain  certain  rights,  such  as  pos- 
session upon  purchase  of  a  partner's  interest,  there  must  be  a 
tender  before  action.*^^  Unreasonable  delay  in  bringing  an  action 
may  be  such  laches  as  to  bar  it.'''* 

ssMulIendore  v.  Scott,  45  Ind.  113;  32  N.  E.  715;  Robinson  v.  Williams, 

Cilley  V.   Van   Patten,   58   Mich.  404,  8  Mete.   (Mass.)   454. 

25  N.  W.  326;  Kinney  v.  Robison,  52  c2  Allen     v.     Davis,     13     Ark.     28; 

Mich.  389,  18  N.  W.  120.  Krutz  v.   Craig,   53   Ind.   561;    Dakin 

56  Farwell  v.  Tyler,  5  Iowa  535.  v.  Graves,  48  N.  H.  45. 

"Dana  v.  Barrett,  3  J.  J.   Marsh.  g3  Phillips   v.    Crownfield,    124    Md. 

(Ky.)  6;  Merrill  v.  Green,  55  N.  Y.  App.  443,  92  Ad.  1030.    See  also  as  to 

270  (affg.  66  Barb.  582).  tender    Ramsey   v.    Bird    (Tex.    Civ. 

58  Hendry  v.  Hendry,  32  Ind.  349;  App.),  147  S.  W.  671. 

Irish  V.  Snelson,  16  Ind.  365.  64  ^Vood  v.    Fox,    1    A.   K.   Alarsh. 

59  Durham  v.  Lathrop,  95  111.  App.  (Kj\)    451;    Roby   v.    Colehour,    135 
429.  111.  300,  25  N.  E.  Ill   (affd.  146  U. 

60  George   v.    Pfeil,    158    111.    App.  S.  153,  36  L.  ed.  922,  13  Sup.  Ct.  47)  ; 
2-61.  Wells     v.     Carpenter.     65     111.     447; 

6iDouthit  V.   Douthit,   133  Ind.  26,     Stuart   v.    Harmon,   24   Ky.   L.    1829, 


§    7(j()  LAW    OF    PARTNERSHIP  1062 

§  766.  Venue  and  time  to  sue. — An  action  between  part- 
ners is  governed  as  to  venue  by  the  rules  applicable  to  the  bring- 
ing of  personal  actions  in  the  state  of  the  forum,  even  though 
partnership  realty  is  involved.*'^  The  general  rule  is  that  the 
right  of  a  partner  to  sue  a  copartner  on  a  claim  based  on  a  part- 
nership transaction  does  not  accrue  until  dissolution  of  the  part- 
nership.*^" The  statutes  of  the  various  states  should  be  exam- 
ined in  order  to  ascertain  when  such  an  action  becomes  barred 
by  limitation.^"  Where  a  partner  after  dissolution  buys  a  claim 
against  the  firm  to  set  off  against  a  claim  of  his  copartner,  his 
right  of  action  becomes  barred  when  that  of  the  assignor  would 
have  been  barred.*'* 

§  767.  Parties  and  trial. — In  actions  between  partners  on 
individual  matters,  the  partner  bringing  the  action  sues  as  plain- 
tiff, making  the  partner  or  partners  whom  he  seeks  to  hold 
defendants.*'"  Thus  in  such  cases  as  may  be  commenced  by  one 
partner  against  another,  as,  for  example,  an  action  for  breach 
of  a  contract  of  partnership,  where  the  business  has  not  com- 

72    S.   W.    365;    Compton    v.    Thorn,  sion,    17    La.    Ann.    28;    Forward    v. 

90   Va.  653,    19   S.    E.   451;    Haggart  Forward,  6  Allen  (Mass.)  494;  Clute 

V.     Allan,    2     Grant    Ch.    407.      See  v.    Potter,    ol    Barb.     (N.    Y.)     199; 

Power  V.  Rees,   189  Pa.   St.  496,  42  Logan  v.  Dixon,  1Z  Wis.  533,  41  N. 

Atl.  26.  W.  713. 

^•■^L^man  v.  Lyman,  Fed.  Cas.  No.  ^s  Ahl  v.   Ahl,    186   Pa.    St.   99,   40 

8628,  2  Paine  11;  Jones  v.  Fletcher,  Atl.  405. 

42  Ark.  422;  Black  v.  Black,  27  Ga.  «9  Tillis    v.    Folmar,    145    Ala.    176, 

40;  Godfrey  v.  White,  43  Mich.  171,  39  So.  913,   117  Am.   St.  31;   Robin- 

5   N.   W.  243;   Wells   v.   Collins,    11  son   v.   Bullock,   58   Ala.   618;    Penn 

Lea  (Tenn.)  213.  v.  Stone,  10  Ala.  209;  Bull  v.  Coe,  11 

66  Cole  V.  Fowler,  68  Conn.  450,  Cal.  54,  18  Pac.  808,  11  Am.  St.  235; 
Z6  Atl.  807;  Harris  v.  Matthews,  107  Way  v.  Fravel,  61  Ind.  162;  Thomas 
Ga.  46,  32  S.  E.  903;  Burbank  v.  v.  Pyke,  4  Bibb.  (Ky.)  418;  Caus- 
Oglesby,  35  La.  Ann.  1201;  Baker  ten  v.  Burke,  2  Harr.  &  G.  (Md.) 
V.  Brown,  151  N.  Car.  12,  65  S.  E.  295,  18  Am.  Dec.  297;  Roache  v. 
520;  Smith  v.  Brown,  44  W.  Va.  Pendergast,  3  Harr.  &  J.  (Md.)  Z^; 
342,  30  S.  E.  160;  Storm  v.  Cumber-  Dunham  v.  Gillis,  8  Mass.  462; 
land,  18  Grant  Ch.    (U.  C.)   245.  Berkey  v.  Judd,  22  Minn.  287;   Scott 

67  Patterson  v.  Brown,  22  Ky.  (6  v.  Bryan,  96  N.  Car.  289,  3  S.  E. 
T.    B.    Mon.)    10;    Parker's    Succes-  235;    Masters    v.    Freeman,    17    Ohio 


1063  ACTIONS    BETWEEN    PARTNERS  §    767 

menced  and  no  accounts  are  involved/**  or  where  there  has  been 
a  settlement  and  an  agreed  balance  found/^  the  usual  rule  ap- 
plies, that  all  parties  interested  in  the  relief  asked  must  join  as 
plaintiff,  or,  if  some  refuse  to  so  join,  then  they  must  be  brought 
in  as  parties  defendant.  In  accounting,  or  other  equitable  ac- 
tions between  partners,  the  same  rules  must  in  general  be  ap- 
plied. In  an  action  in  equity  involving  an  accounting  as  to  part- 
nership affairs,  all  the  partners  and  all  other  persons  having  an 
interest  in  the  property  or  whose  rights  are  necessarily  affected 
by  the  controversy,  such  as  assignees,  administrators  or  other 
successors  of  a  partner,  must  be  made  parties,  either  plaintiff  or 
defendant.'^"  A  partner  who  sues  another  at  law  upon  a  claim 
has  the  burden  of  showing  that  his  claim  falls  within  the  excep- 
tions to  the  general  rule  that  no  action  at  law  will  lie  between 
partners.'^  The  rules  of  pleading  and  evidence  in  actions  between 
partners,  so  far  as  they  differ  from  the  ordinary  rules,  will  be 
considered  in  the  chapters  on  pleading  and  evidence.  At  the  trial 
it  is  the  function  of  the  court  to  construe  the  pleadings  and  writ- 
ten agreements  ;^^  and  if  the  facts  are  undisputed,  to  determine 
as  a  matter  of  law  whether  a  partnership  exists.'^^  It  is  the 
province  of  the  jury  to  ascertain  the  facts  where  there  is  con- 
st. 323;  Manufacturing  &c.  Co.  v.  (U.  C)  49;  Bates  Partnership,  § 
Schoolly,  Tapp  (Ohio)  271;  Kerr  930  et  seq. 
V.  Hawthorne,  4  Yeates   (Pa.)   170.  73  Nevills  v.   Moore   Min.   Co.,   135 

70  Vance  v.  Blair,   18  Ohio  532,  51     Cal.  561,  67  Pac.  1054;  Wilt  v.  Bird, 
Am.  Dec.  467.  7   Blackf.    (Ind.)    258;    Boardman   v. 

71  Thompson    v.     Smith,    82    Iowa     Close,  44  Iowa  428  ;  Murdock  v.  Mar- 
598,  48  N.  W.  988.  tin,     12     Sm.     &     M.     (Miss.)     660; 

72Edgell  V.  Felder,  84  Fed.  69,  28     Wright  v.   Cobleigh,  21   N.  H.  339; 
C.    C.    A.    382;    Fortune    v.    Brazier,     Cameron      v.      Bickford,      11      Ont. 

10  Ala.  791 ;  Duck  v.  Abbott,  24  Ind.     App.  52. 

349;   Dixon  v.   Dixon,   19  Iowa  512;  74  Eyeritt    v.     Chapman,    6    Conn. 

Riarl  V.  Wilhelm,  3  Gill   (Md.)   356;  347;    Wadley  v.    Jones,   55    Ga.    329; 

Grahame  v.  Harris,  5  Gill  &  J.  (Md.)  Dorwart  v.  Ball,  71  Nebr.  173,  98  N. 

489;    Wiggin    v.    Cumings,    8    Allen  W.    652;    Whitaker    v.    Bledsoe,    34 

(Mass.)    353;    Montague   v.   Lobdell,  Tex.  401. 

11  Cush.  (Mass.)  Ill;  Burley  v.  75  jjobinson  v.  Green,  5  Harr. 
Harris,  8  N.  H.  233,  29  Am.  Dec.  (Del.)  115;  Gilpin  v.  Temple.  4 
650;  Young  v.  Huber,  29  Grant  Ch.  Harr.  (Del.)   190;  Beecham  v.  Dodd, 

17 — Row.  CN  Partx. — Vol.  2 


§    768  LAW    OF    TARTNERSHIP  1064 

flicting  evidence,  or  where  differing  inferences  may  be  drawn 
from  the  evidence.^*' 

§  768.  Damages  for  breach  of  contract  of  partnership. — 
A  partner  who  wrongfully  brings  about  the  dissolution  of  a  part- 
nership is  liable  to  his  copartners  for  damages  suffered  thereby.^^* 
Damages  may  be  allowed  for  breach  of  a  contract  to  enter  into 
a  partnership,  even  if  at  the  time  of  the  breach  the  partnership 
had  not  been  entered  into,  and  the  measure  of  damages  is  the 
same  as  if  the  business  has  once  been  entered  into/^  It  may 
be  that  the  profitable  employment  of  a  partner's  time  after  exclu- 
sion from  the  business  should  be  considered  for  the  reduction 
of  damages/^  In  such  case  it  seems  exemplary  damages  should 
not  be  allowed.'^^  Where  a  partner  fails  to  make  an  agreed  con- 
tribution to  partnership  funds  of  a  going  concern  the  measure 
of  damages  is  interest  on  the  money  which  was  not  contributed.^'' 

3  Harr.    (Del.)    485;    Bailey  v.   Fer-  79  Am.  St.  428.     Generally  the  meas- 

guson,  39  111.  App.  91 ;  Kingsbury  v.  ure  of  damages  in  an  action  for  the 

Tharp,  61   Mich.  216,  28  N.  W.  74;  breach   of    a   partnership    contract  is 

Evans  v.  Warner,  20  App.  Div.  230,  the    value    of    the    contract    broken, 

47  N.  Y.  S.   16;   Covington  v.  Leak,  separate     and     independent     of     any 

88  N.  Car.  133;  Terrill  v.  Richards,  1  other    former    contract.      Addams   v. 

Nott.  &  M.  (S.  Car.)  20.  Tutton,    39    Pa.    St.    447.      See    also 

'^Beecham  v.  Dodd,  3  Har,  (Del.)  Jones  v.  Morehead,  3  B.  Mon.   (Ky.) 

485;   Branch  v.   Cooper,  82   Ga.  512,  ZV ;    Jewett    v.    Brooks,    134    Mass. 

9  S.  E.   1130;   Snowden  v.  Cunning-  505. 

ham,  59  Fla.  604,  51   So.  543 ;  Hart-  "  Goldsmith  v.  Sachs,  17  Fed.  726, 

zell    v.    Murray,    127    111.    App.    608;  8    Sawy.    110;    Rockwell    Stock    &c. 

Blain  v.  Desrosiers,  39  111.  App.  50;  Co.    v.    Castroni,    6    Colo.    App.    521, 

Carl  v.  Knott,   16  lovi^a  379;   Barger  42    Pac.    180;    Hoy   v.    Gronoble,    34 

v.    Collins,  2   Gill  &  J.    (Md.)    410;  Pa.  St.  9,  75  Am.  Dec.  628;  Hill  v. 

Adamson    v.    Guild,    177    Mass.    331,  Palmer,   56  Wis.   123,    14  N.   W.  20, 

58  N.  E.  1081 ;  Dart  v.  Laimbeer,  107  43  Am.  Rep.  703 ;   Webster  v.  Beau, 

N.   Y.   664,    14   N.    E.  291,    Silv.   Ct.  11  Wash.  444,   137  Pac.   1013,   51   L. 

App.  533;   Cobb  v.  Martin,  32  Okla.  R.  A.  (N.  S.)  81n. 

588,    123   Pac.   432;   Yoke   v.    Barnet,  ^s  Bagley  v.   Smith,   10  N.   Y.   489, 

3    Watts    &    S.    (Pa.)    81;    Roop    v.  61    Am.    Dec.    756,    19    How.    Pr.    1, 

Roop,  3  Phila.  (Pa.)  364.  Seld.  Notes  109. 

7fia  Howell  V.   Harvey,   5  Ark.  270,  ^9  Hoy  v.   Gronoble,   34   Pa.    St.  9, 

39  Am.  Dec.  7>l(i\  Corcoran  v.  Sump-  75  Am.  Dec.  628. 

tion,    79    Minn.    108,    81    N.    W.    761,  ^o  Krapp    v.    Aderholdt,    42    Kans. 


1065  ACTIONS    BETWEEN    PARTNERS  §    768 

However,  if  the  defendant  agrees  to  furnish  all  the  capital,  and 
his  failure  to  do  so  breaks  up  the  business,  the  measure  of  the 
damages  is  the  same  as  where  a  partner  is  excluded  from  the 
business  or  there  is  a  refusal  to  go  on  with  it,  and  is,  generally 
speaking,  the  loss  of  profits.^^  The  measure  of  damages  for 
breach  of  a  covenant  to  continue  the  partnership  for  a  fixed 
period  as  well  as  in  all  other  cases  of  broken  covenant  depends  on 
the  extent  of  the  injury.^^  In  an  action  for  damages  for  wrong- 
ful dissolution  it  is  competent  in  estimating  the  value  of  the 
contract  as  a  measure  of  damages  to  show  the  actual  condition 
and  situation  of  the  business  and  assets  of  the  firm,  together 
with  proof  as  to  the  actual  results  accomplished  in  the  business 
before  the  breach.^^  Damages  actually  sustained  may  be  recov- 
ered from  a  partner  who  canceled  firm  contracts  before  his 
withdrawal  so  as  to  obtain  them  for  his  individual  benefit/*  Two 
physicians  agreed  to  form  a  partnership;  the  articles  were  to 
the  effect  that  they  should  divide  the  receipts  should  the  part- 
nership continue,  but,  if  one  withdrew  from  practice,  the  other 
should  pay  him  a  certain  sum.  Before  anything  was  done  under 
this  contract,  one  party  declined  to  proceed  with  the  business, 
and  it  was  held  that  this  act  did  not  prevent  the  other  from 
recovering  the  sum  agreed  on  as  compensation  for  withdrawal 
from  practice,  he  having  elected  so  to  do.^^  In  a  case  where  an 
action  was  brought  for  a  failure  of  one  partner  to  comply  with 
an  agreement  made  by  him  as  a  condition  precedent  to  the  forma- 
tion of  the  partnership,  the  court  said  f^  "When  one  violates  his 

247,  21  Pac.  1063 ;  Hartman  v.  Woehr,     Sneed  v.  Deal,  53  Ark.  152,  13  S.  W. 

18  N.  J.  Eq.  383;  Delp  v.  Edlis,  190  703;  White  v.  Rodeman,  44  App. 
Pa.  St.  25,  42  Atl.  462.  Div.  503,  60  N.  Y.  S.  971. 

81  Dart  V.  Lalmbeer,  107  N.  Y.  ^^  Rgiter  v.  Morton,  96  Pa.  St.  229. 
664,  14  N.  E.  291,  Silv.  Ct.  App.  533 ;  s*  Axton  v.  Kentucky  Bottlers' 
Hunter  v.  Land,  81  Pa.  St.  296;  Supply  Co.,  159  Ky.  51,  166  S.  W. 
Gale  V.  Leckie,  2  Stark.  107,  19  Rev.  776. 

Rep.  692.  ^^  Frothingham     v.     Seymour,     121 

82  Bagley  v.    Smith,   10  N.   Y.  489,  Mass.  409. 

19  How.  Pr.  1,  Seld.  Notes  (N.  Y.)  §6  Qwen  v.  Meroney,  136  N.  Car. 
109,  61  Am.  Dec.  756.  See  also  475,  48  S.  E.  821,  103  Am.  St.  952, 
Wadsworth  v.   Manning,   4   Md.   59 ;  1  Ann.  Cas.  834. 


§    769  LAW    OF    PARTNERSHIP  1066 

contract  he  is  liable  for  such  damages  as  are  caused  by  its  breach, 
or  such  as  being  incidental  to  the  act  of  omission  or  commission, 
and  a  natural  consequence  thereof  may  reasonably  be  presumed 
to  have  been  in  the  contemplation  of  the  parties  when  the  con- 
tract was  made.^^  Where  two  parties  have  made  a  contract 
which  one  of  them  has  broken,  the  damages  which  the  other 
party  ought  to  receive  in  respect  of  such  breach  of  contract 
should  be  such  as  may  fairly  and  reasonably  be  considered,  either 
arising  naturally,  that  is,  according  to  the  usual  course  of  things, 
from  such  breach  of  contract  itself,  or  such  as  may  reasonably 
be  supposed  to  have  been  in  the  contemplation  of  both  parties 
at  the  time  they  made  the  contract,  as  the  probable  result  of  the 
breach  of  it."®®  "The  application  of  these  principles  to  the  facts 
of  this  case,  as  they  may  prove  to  be,  is  a  matter  for  considera- 
tion upon  the  trial." 

§  769.  Profits  as  the  measure  of  damage. — There  is  no 
doubt  that  where  a  partner  who  carries  on  the  business  excludes 
another  partner  from  the  business,  the  latter  is  entitled  in  equity 
to  an  accounting  for  profits.^^  Where  the  term  has  expired  or 
the  excluding  partner  has  put  an  end  to  the  business  the  excluded 
partner  has  a  right  in  an  action  at  law  to  recover  as  damages 
his  share  of  the  profits.^*  The  right  of  a  partner  to  an  account 
of  profits  in  equity  when  wrongfully  excluded  from  the  business 

87  Citing  Spencer  v.  Hamilton,  113  Holmes  v.  Oilman,  138  N.  Y.  369,  34 
N.  Car.  49,  118  S.  E.  167,  Z7  Am.  St.  N.  E.  205,  20  L.  R.  A.  566,  34  Am. 
611.  St.  463. 

88  Citing  Herring  v.  Armwood,  130  ^o  Pearce  v.  Ham,  113  (U.  S.)  585, 
N.  Car.  180,  41  S.  E.  96,  57  L.  R.  28  L.  ed.  1067,  5  Sup.  Ct.  676;  Kar- 
A.  958.  rick  v.  Hannaman,   16  U.  S.  328,  42 

89  Ambler  v.  Whipple,  20  Wall.  (U.  L.  ed.  484,  18  Sup.  Ct.  135 ;  Hart- 
S.)  546,  22  L.  ed.  403;  Karrick  v.  man  v.  Woehr,  18  N.  J.  Eq.  383; 
Hannaman,  168  U.  S.  328,  42  L.  ed.  Bagley  v.  Smith,  10  N.  Y.  489,  Seld. 
484,  18  Sup.  Ct.  135 ;  Pearce  v.  Ham,  Notes  109,  19  How.  Pr.  1,  61  Am. 
113  ^U.  S.)  585,  28  L.  ed.  1067,  5  Dec.  756;  Canfield  v.  Johnson,  144 
Sup.  Ct.  676;  Freeman  v.  Freeman,  Pa.  St.  61,  22  Atl.  974;  Clarkson  v. 
136  Mass.  260;  Beller  v.  Murphy,  139  Whitaker,  12  Tex.  Civ.  App.  483,  ZZ 
Mo.  App.  663,  123  S.  W.  1029;  Hart-  S.  W.  1032. 

man   v.   Woehr,    18   N.   J.   Eq.   383; 


1067  ACTIONS    BETWEEN    PARTNERS  §    7(£ 

by  his  copartner  does  not  exclude  his  right  to  sue  at  law  and 
recover  profits  as  damages.  As  said  in  a  leading  case  :°^  "When 
she  (the  defendant  partner)  assumed  the  right  to  take  posses- 
sion for  herself,  and  to  carry  on  the  business  with  the  partner- 
ship property,  Harding  had  a  clear  right  to  call  her  to  account 
for  his  share  in  all  of  the  joint  property,  and  at  his  election  to 
require  her  to  account  for  the  profits,  by  way  of  damages  or 
otherwise,  which  he  had  been  prevented  from  making  by  his 
wrongful  exclusion  from  the  business.  Neither  is  the  remedy 
in  equity  for  a  breach  of  a  partnership  agreement  exclusive. 
There  may  be  at  law  a  recovery  of  all  the  damages  which  result, 
including  damages  for  profits  prevented  by  a  wrongful  disso- 
lution. Thus,  if  one  member  assumes  to  dissolve  a  partnership 
before  the  end  of  the  term,  the  other  may  bring  an  action  for 
damages  for  the  breach,  and  recover  not  only  his  interest,  but 
also  his  share  of  the  profits,  which  might  have  been  made  during 
the  term.  He  need  not  wait  until  the  expiration  of  the  period, 
and  need  not  go  into  equity  for  an  accounting,  but  may  at  law 
show  the  probable  profits  which  he  has  been  deprived  of."  In 
many,  probably  in  most  cases,  the  right  to  recover  prospective 
profits  has  been  allowed,  where  such  profits  are  not  remote, 
speculative,  or  legally  uncertain.^-  "The  object  of  commercial 
partnerships  is  profits.  This  is  the  motive  upon  which  men  enter 
into  the  relation.  The  only  legitimate  beneficial  consequence  of 
continuing  a  partnership  is  the  making  of  profits.  The  most 
direct  and  legitimate  injurious  consequence  which  can  follow 
upon  an  unauthorized  dissolution  of  a  partnership  is  the  loss  of 
profits.     Unless  that  loss  can  be  made  up  to  the  injured  party, 

91  Zimmerman  v.  Harding,  227  U.  Laimbeer,  107  N.  Y.  664,  14  N.  E. 
S.  489,  57  L.  ed.  608.  291,    Silvernail    Ct.   App.    533;    <Zx\\.- 

92  Ramsay  v.  Meade,  Zl  Colo.  465,  tenden  v.  Johnston,  7  App.  Div.  258, 
86  Pac.  1018 ;  Maguire  v.  Kiesel,  86  40  N.  Y.  S.  87 ;  Hunter  v.  Land,.  81 
Conn.  453,  85  Atl.  689;  Tygart  v.  Pa.  St.  296;  Hoy  v.  Gronoble,  34 
Albritton,  5  Ga.  App.  412,  dZ  S.  E.  Pa.  St.  9,  75  Am.  Dec.  628;  Treat  v. 
521;  Rule  v.  McGregor,  117  Iowa  Hiles,  81  Wis.  280,  50  N.  W.  896; 
419,  90  N.  W.  811 ;  Brown  v.  Had-  Gale  v.  Leckie,  2  Stark.  107,  19  Rev. 
ley,  43  Kans.  267,  23  Pac.  492 ;  Wins-  Rep.  692. 

low  V.  Lane,  63  Alaine  161 ;  Dart  v. 


§    769  LAW    OF    PARTNERSHIP  1068 

it  is  idle  to  say  that  any  obligation  is  imposed  by  a  contract  to 
continue  a  partnership  for  a  fixed  period.  The  loss  of  profits  is 
one  of  the  common  grounds,  and  the  amount  of  profits  lost  one 
of  the  common  measures,  of  the  damages  to  be  given  upon  a 
breach  of  contract."®^  And  the  amount  of  probable  profits  if  there 
had  been  no  dissolution  has  been  held  the  measure  of  damages.®* 
It  was  said  in  one  case  as  to  the  measure  of  damages  for  the  repu- 
diation of  an  agreement  to  share  as  partners  in  the  purchase  of 
real  estate  :®^  "The  measure  of  damages  in  the  present  case  is  there- 
fore reasonable  compensation  for  the  loss  which  the  plaintiff 
suffered  in  being  wrongfully  deprived  of  the  benefit  of  the  agree- 
ment. That  which  it  provided  for  was  a  sharing  of  anticipated 
profits.  Such  profits  were,  therefore,  within  the  contemplation 
of  the  parties.  *  *  *  The  measure  of  the  loss  must  be  found 
in  the  profits  which  under  the  agreement  the  plaintiff  would  have 
been  entitled  to  receive.  *  h«  =h  jf  the  compensation  is  to  be 
adequate,  as  the  law  endeavors  as  best  it  can,  to  make  it,  pros- 
pective as  well  as  past  profits  must  be  taken  into  account  in  so 
far  as  the  former  are  established  with  the  requisite  degree  of 
certainty  in  respect  to  both  connection  and  amount.  *  *  *  The 
question  which  arises  in  such  cases  relates  not  so  much  to  the 
legal  right  of  recovery  as  to  the  sufficiency  of  proof.  There  will 
be  questions  as  to  the  proximate  or  remote  character  of  the 
connection  between  the  claimed  profits  and  the  alleged  breach, 
and  as  to  the  certainty  of  the  proof  as  to  the  amount.  The  re- 
quirement of  the  law,  however,  is  not  that  prospective  profits, 
in  order  to  furnish  a  foundation  for  recovery,  must  be  established 
with  absolute  certainty.  It  is  sufficient  that  it  be  shown  that  they 
are,  in  the  ordinary  course  of  events,  reasonably  to  be  expected. 
*  *  *  It  follows  that  the  court  in  the  situation  before  it 
was  entitled  to  discover  what  the  period  prior  to  the  trial  had 
revealed  in  the  way  of  gain,  for  the  double  purpose  of  determin- 

93  Barley   v.    Smith,    10    N.    Y.    (6        s*  Ramsay  v.  Meade,  Zl  Colo.  465, 
Selden)   489,  19  How.  Pr.  1,  61  Am.     86  Pac.  1018. 

Dec.  756.  ^^  Maguire  v.  Kiesel,  86  Conn.  45J, 

85  Atl.  689. 


1069  ACTIONS    BETWEEN    PARTNERS  §    770 

ing  what  profits,  if  any,  had  accrued,  to  enter  directly  into  its 
award,  if  the  conditions  seemed  to  justify  it,  and  to  draw  there- 
from, in  connection  with  the  other  pertinent  facts,  such  reason- 
able inferences  as  it  might  as  to  additional  future  profits.  Evi- 
dence of  past  profits  is  admissible  upon  an  inquiry  as  to  pros- 
pective, but  not,  of  course,  conclusive."  But  if  there  is  no  prob- 
ability of  any  profits  resulting  from  the  business,  it  seems  only 
nominal  damages  shall  be  awarded. ""^  Some  decisions  have  held 
that  prospective  profits  are  too  speculative  to  be  allowed  as  dam- 
ages in  cases  of  the  character  under  consideration.''^  If  profits 
are  in  fact  speculative,  resting  on  conjecture,  it  has  been  held  they 
will  not  be  allowed. ^^  And  this  rule  has  been  applied  in  an  action 
for  damages  for  breach  of  a  contract  to  establish  a  fur-trade  in 
a  distant  and  sparsely  settled  portion  of  Alaska.^*  It  has  also 
been  held  that  the  measure  of  damages  is  the  value  of  the  par- 
nership  to  a  partner  at  the  time  of  the  wrongful  dissolution  and 
is  not  the  share  of  the  partner  in  the  profits  which  the  remaining 
partner  made  on  thereafter  carrying  on  the  business.^ 

§  770.  Other  measures  of  damage. — Several  cases  have 
refused  to  allow  damages  for  contract  relations  or  professional 
practice  given  up  in  order  to  enter  into  a  partnership.^  It  has 
also  been  held  that  the  value  of  an  appointment  relinquished  by 
a  partner  in  order  to  enter  the  partnership,  is  an  element  of 
damages.^  In  some  of  the  cases  which  do  not  allow  recovery  for 
the  loss  of  prospective  profits,  the  value  of  time  lost  is  considered 

96  Jones   V.   Morehead,   3   B.    Mon.  229;   Shropshire  v,   Adams,   40  Tex. 

(Ky.)    Zll;   Van    Ness   v.   Fisher,   5  Civ.  App.  339,  89  S.  W.  448. 

Lans.   (N.  Y.)  236;  Sandius  v.  Mus-  i  McCollum    v.    Carkicci,    206    Pa. 

tacchi,  153  App.  Div.  810.  312,  55  Atl.  979,  98  Am.  St.  780.    See 

^''  Rhodes    v.    Baird,    16    Ohio    St.  also  Corcoran  v.  Sumption,  79  Minn. 

573;    Van    Ness    v.    Fisher,    5    Lans.  108,  81   N.  W.  761,  79  Am.  St.  428; 

(N.    Y.)    236;    Couch    v.    Parker,    1  Van  Ness  v.  Fisher,  5  Lans.  (N.  Y.) 

Tex.  Civ.  App.  Cas.  192,  §  435.  236. 

^8  Havemeyer     v.     Havemeyer,     13  ^  WilHams  v.   Barton,   13  La.  404 ; 

Jones  &  S.   (N.  Y.)  464.  Addams  v.  Tutton,  39  Pa.  St.  447. 

89  Webster  v.  Beau,  11  Wash.  444,  3  Macneill   v.    Reid,   2    M.   &    Scott 

137  Pac.   1013,  51  L.  R.  A.    (N.  S.)  89,  9  Bing.  68,  1  L.  J.  C.  P.  162.  And 

81n,    See  Reiter  v.  Morton,  96  Pa.  St.  see  McNeill  v.  Reid,  9  Bing.  68. 


§    771  LAW    OF    rARTXERSIIIP  1070 

a  substitute.*  Some  cases  are  inclined  to  a  contrary  holding.^ 
Expenses  incurred  in  performing  his  part  of  the  breached  agree- 
ment are  usually  allowed  a  plaintiff  in  cases  where  profits  are 
not  taken  as  an  element  of  damages.*^  In  some  cases  the  value 
of  services  actually  rendered  the  firm  has  been  allowed  J  If  a 
partner  was  induced  by  fraud  to  furnish  funds  for  a  partner- 
ship business,  by  one  who  did  not  use  the  money  in  the  interest 
of  said  business,  he  should  recover  the  amount  paid.^  A  partner 
may  often  recover  his  money  advanced  for  the  purposes  of  car- 
rying out  the  contract.® 

§  771.  Damages  for  breach  of  contract  to  pay  firm  debts 
or  not  to  engage  in  business. — The  damages  recoverable  for 
a  breach  of  contract  by  which  one  partner  agreed  to  pay  certain 
debts  of  the  firm  on  a  dissolution  would  be  the  amount  of  the 
debts  provided  for  in  the  contract."  These  damages  are  recov- 
erable on  the  failure  of  the  partner  to  pay  the  debts  as  agreed, 
and  this,  though  the  other  partner  has  paid  nothing  on  the  debts.^^ 
"Where  there  is  an  affirmative  contract  to  do  or  to  perform 
a  certain  act,  or  pay  a  certain  sum  of  money,  or  a  certain  indebt- 
edness, an  action  may  be  maintained,  although  the  plaintiff  has 
performed  no  act,  or  paid  no  part  of  the  indebtedness,  or  sus- 
tained no  actual  damage,  and  the  measure  of  his  recovery  is  the 

4  Webster  v.  Beau,  ll  Wash.  444,  ^  Hagenaers  v.  Herbst,  30  App. 
137  Pac.  1013,  51  L.  R.  A.  (N.  S.)  Div.  546,  52  N.  Y.  S.  360;  Jennings 
81n ;  Rogers  v.  Bemus,  69  Pa.  St.  432 ;  v.  Beale,  146  Pa.  St.  125,  23  Atl.  225 ; 
Johnson  v.  Arnold,  2  Cush.  (Mass.)  Ball  v.  Britton,  58  Tex.  57.  See 
46;  Hunt  v.  Reilly,  50  Tex.  99.  White   v.    Rodemann,    44    App.    Div. 

5  Rockwell   Stock  &c.   Co.   v.   Cas-  503,  60  N.  Y.  S.  971. 

troni,  6  Colo.  App.  521.  »  Crosby  v.  McDermitt,  7  Cal.  146 ; 

6  United  States  v.  Behan,  110  U.  Child  v.  Swain,  69  Ind.  230;  Hale  v. 
S.  338,  28  L.  ed.  168,  4  Sup.  Ct.  81,     Wilson,  112  Mass.  444. 

19   Ct.    CI.   710 ;   Johnson   v.   Arnold,  ^  Corcoran  v.    Sumption,   79  Minn. 

2    Cush.     (Mass.)     46;     Webster    v.  108,    79    Am.    St.    428;    Kerrigan    v. 

Beau,  n  Wash.  444,    137   Pac.   1013,  Kelly,  17  Mo.  275;  Nelson  v.  Hatch, 

51  L.  R.  A.   (N.  S.)  81n;  Woodbury  70   App.   Div.  206,   75   N.   Y.    S.   389 

V.  Jones    44  N.   H.  206;   Kiralfy  v.  (afifd.  174  N.  Y.  546,  67  N.  E.  1085). 

^lacauley,   17  Ohio  Wkly.    L.    Bulle-  ^o  Gillen    v.    Peters,   39   Kans.   489, 

tin  331 ;  Hunt  v.  Reilly,  50  Tex.  99 ;  18  Pac.  613. 

Gale  V.  Leckie,  2  Stark.  107,  19  Rev.  ii  Gage  v.  Lewis,  68  111.  604 ;  Smith 

Rep,  692.  V.  Riddell,  87  IIL  165 ;  Bacon  v.  Mar- 


1071  ACTIONS    BETWEEN    PARTNERS  §    772 

value  of  the  act  to-be  done  or  the  payment  to  be  made.""^  In  one 
case  where  a  partner  after  dissolution  of  the  firm  organized  a 
firm  with  other  parties  and  this  firm  contracted  with  the  former 
partner  in  the  dissolved  firm  to  pay  the  debts  of  the  old  firm 
and  to  save  such  partner  harmless  from  any  cost,  trouble  or 
liability  on  account  of  the  debts  of  the  old  firm,  it  was  held  that 
such  partner  on  failure  of  the  new  firm  to  pay  the  debts  within 
a  reasonable  time  could  recover  the  amount  of  the  debts  unpaid 
at  the  commencement  of  the  action,  with  interest.^"  On  the  breach 
of  a  contract  by  a  retiring  partner  not  to  again  engage  in  the 
same  business  in  the  same  locality,  it  has  been  held  that  the 
remaining  partner  may  recover  in  one  action  all  damages  sus- 
tained by  him,  and  this  will  include  the  damages  past,  present 
and  future/^ 

§  772.  Judgment  and  execution. — The  judgment  in  a 
partnership  action  must  be  determined  by  the  pleadings  and 
proof.^*  Thus,  the  limit  of  relief  in  a  suit  between  partners  as 
to  a  lease  in  one  partner's  name  necessary  for  the  business,  is  to 
decree  it  a  partnership  asset/^  The  fact  that  the  partner  had  a 
good  defense  which  he  did  not  interpose,  makes  the  judgment 
no  less  binding/*^  Where  a  partner  enforces  an  execution  against 
his  copartner's  interest  in  firm  property,  he  must  act  with  abso- 

shall,  2>1  Iowa  581 ;  Stout  v.  Folger,  i*  Wliitesides    v.    Collier,    7    Dana 

34  Iowa  71,  11  Am.  Rep.  138;  Cro-  (Ky.)     283;    Brinley    v.    Kupfer,    6 

foot  V.  Moore,  4  Vt.  204.     See  also  Pick.     (Mass.)     179;    Cheeseman    v.. 

Lathrop  v.  Atwood,  21  Conn.  117.  Sturges,  9  Bosw.  (N.  Y.)  246;  Bige- 

iia  Gillen  V.  Peters,  39  Kans.  489,  18  low  v.  Powers,  20  Ont.  L.  R.  559. 

Pac.  613.  15  Dikis  v.  Likis,  187  Ala.  218,  65 

12  Lathrop    v.    Atwood,    21    Conn.  So.  398. 

117.     See  also   Nelson  v.   Ravens,  3        i^  Johnson-Maakestad    v.    Johnson, 

111.   App.  565;   Weddle  v.   Stone,   12  44  111.  App.  593;  Kunneke  v.  Mapel, 

Ind.  625.  60  Ohio  St.  1,  53  N.  E.  259;  Logan 

13  Downs  V.  Woodson,  25  Ky.  L.  v.  Dixon,  IZ  Wis.  533,  41  N.  W.  713. 
566,  76  S.  W.  152.  See  also  Davis  See  also  Taylor  v.  Watts,  20  S.  W. 
V.  Brown,  98  Ky.  475,  17  Ky.  L.  1428,  388,  14  Ky.  L.  451 ;  Bowman  v. 
32  S.  W.  614,  36  S.  W.  534.  O'Reilly,  31  Miss.  261. 


§    77Z  LAW    OF    PARTNERSHIP  1072 

lute  fairness  if  he  buys  in  such  interest/^  And  he  takes  such 
interest  subject  to  the  rights  of  partnership  creditors. ^^  Ordi- 
narily, costs  in  a  partnership  action  should  be  paid  out  of  part- 
nership property."^ 

§  773.  Equitable  actions — In  general. — It  has  been  seen 
that  the  remedy  for  most  differences  between  partners  is  in 
equity,  and  the  most  important  of  these  remedies  is  accounting 
and  dissolution.  Equitable  actions  are  the  rule  between  partners, 
and  the  legal  actions  herein  treated  are  but  the  exceptions  to  the 
general  rule.  Among  the  equitable  actions  which  may  be  men- 
tioned in  addition  to  accounting  and  which  are  treated  herein 
are  specific  performance,  injunctions,  receiverships,  rescission  or 
reformation  of  contract,  and  the  equitable  application  of  assets. 
It  is  said  that  there  are  three  general  rules  applied  in  all  cases 
where  equitable  relief  is  sought  by  one  partner  against  another: 
"Not  to  interfere  except  with  a  view  to  dissolve  the  partnership; 
not  to  interfere  in  matters  of  internal  regulation;  not  to  inter- 
fere at  the  instance  of  persons  who  have  been  guilty  of  laches."^'* 
Of  course,  there  is  no  right  to  equitable  relief  where  there  is  an 
adequate  remedy  at  law,  but,  as  we  have  seen,  there  are  few 
matters  arising  between  partners  to  which  legal  relief  is  ade- 
quate.-'^ The  three  rules  previously  mentioned  have  become  some- 
what relaxed.     However,  though  courts  will  not  order  a  disso- 

1' Perrens  v.   Johnson,   3  Jur.    (N.  v.    Morris,    IZ    Ga.    406;    Epping    v. 

S.)    975,   3    Smale   &  G.   419;    Smith  Aiken,     71     Ga.     682;     Goodson     v. 

V.  Harrison,  3  Jur.  (N.  S.)  287.  Cooley,  19  Ga.  599;   Church  v.  First 

18  Priestly     v.      Bisland,     9     Rob.  Nat.    Bank,    87    III.   68;    Hopkins    v. 

(La.)   425.  Watt,    13   111.  298;   Bracken   v.   Ken- 

18a  Clark     V.     Wilson,     23     Mani-  nedy,  4  111.  558 ;  Martin  v.  Stubbings, 

toba  10.  20  111.  App.  381 ;  Waggoner  v.  Minter, 

laGilmore    Partnership,    §    162,    p.  7    J.    J.    Marsh.    (Ky.)    173;    Wood- 

492.  ward  v.  Cowing,  41  Maine  9,  66  Am. 

20  Spear  v.  Newell,  2  Paine  (U.  S.)  Dec.  211;  Reed  v.  Johnson,  24  Maine 

267,  Fed.  Cas.  No.  13224;  Haynes  v.  322;  Chase  v.  Garvin,  19  Maine  211; 

Short,  88  Ala.  562,  7  So.  157;   Fogg  Aliller  v.  Lord,  11  Pick.  (Mass.)   11; 

V.  Johnston,  27  Ala.  432,  62  Am.  Dec.  Stevens    v.    Yeatman,    19    Md.    480 ; 

771 ;    McGown    v.    Sprague,    23    Ala.  Learned    v.    Ayers,    41    Mich.    677,    3 

524;  Niles  v.  Williams,  24  Conn,  279;  N.  W.  178;  Matter  of  Elder,  39  Mich. 

Hargis  v.  Campbell,  14  Fla.  27;  Neel  474;    Wheeler    v.    Arnold,    30    Mich. 


1073 


ACTIONS    BETWEEN    PARTNERS 


§  773 


lution  where  one  partner  would  receive  an  improper  and  unfair 
advantage,  and  may  sometimes  interfere  to  prevent  a  wrong  when 
they  would  not  formerly,  they  will  not  undertake  the  manage- 
ment of  a  going  partnership.^^  A  court  of  equity  will  not  inter- 
fere where  partners  merely  fail  to  agree  as  to  questions  of  man- 
agement, and  generally  will  leave  the  parties  to  work  out  such 
problems  themselves,  unless  some  partners  are  guilty  of  illegal 
acts  or  breach  of  trust.""  Nor  will  the  courts  interfere  where 
there  has  not  been  reasonable  vigilance  in  pressing  a  claim  for 
equitable  relief.-^  It  has  been  held  that  in  an  action  by  one  part- 
ner against  a  nonresident  copartner,  jurisdiction  to  determine 
the  plaintiff's  interest  in  partnership  real  estate,  or  other  partner- 
ship property,  may  be  acquired  by  constructive  service."* 


304;  Cobb  V.  Cole,  44  Minn.  278,  46 
N.  W.  364 ;  Lesley  v.  Rosson,  39  Miss. 
368,  11  Am.  Dec.  679;  Wright  v. 
Radcliffe,  61  Mo.  App.  257;  Converse 
V.  Hobbs,  64  N.  H.  42,  5  Atl.  832; 
Seighortner  v.  Weissenborn,  20  N.  J. 
Eq.  172 ;  Blackwell  v.  Rankin,  7  N.  J. 
Eq.  152;  Wilcox  v.  Pratt,  125  N.  Y. 
688,  25  N.  E.  1091 ;  Gridley  v.  Dole, 
4  N.  Y.  486;  Burnside  v.  Savier,  6 
Ore.  154 ;  Andriessen's  Appeal,  In  re, 
123  Pa.  St.  303,  16  Atl.  840;  Bauer's 
Appeal,  5  W.  N.  C.  (Pa.)  485,  2  W. 
N.  C.  (Pa.)  242;  Tindel  v.  Park,  154 
Pa.  St.  36,  26  Atl.  300 ;  Christy's  Ap- 
peal, 92  Pa.  St.  157;  Spear  v.  Newell, 
13  Vt.  288;  Tillar  v.  Cook,  11  Va. 
477;  Stein  v.  Benedict,  83  Wis.  603, 
53  N.  W.  891. 

21  Fairthorne  v.  Weston,  3  Hare 
387,  13  L.  J.  Ch.  263;  Hogan  v. 
Walsh,  122  Ga.  283,  50  S.  E.  84 ;  Bond 
V.  May,  38  Ind.  App.  396,  78  N.  E. 
260;  Davis  v.  Davis,  60  Miss.  615; 
Lord  V.  Hull,  178  N.  Y.  9,  70  N.  E. 
69,  102  Am.  St.  484;  Traphagen  v. 
Burt,  67  N.  Y.  30. 

22  Burke    v.    Roper,    79    Ala.    138; 


Gorman  v.  Russell,  14  Cal.  531 ;  Buck 
V.  Smith,  29  Mich.  166,  18  Am.  Rep. 
84 ;  Lord  v.  Hull,  178  N.  Y.  9,  70  N. 
E.  69,  102  Am.  St.  484;  Marshall  v. 
Colman,  2  Jac.  &  W.  266,  22  Rev. 
Rep.  116;  Anderson  v.  Anderson,  25 
Beav.  190;  Smith  v.  Jeyes,  4  Beav. 
503;  Crofton  v.  Horner,  5  Price  537; 
Lawson  v.  Morgan,  1  Price  303 ; 
Waters  v.  Taylor,  15  Ves.  10,  2  Ves. 
&  B.  299,"  13  R.  R.  91;  Carlen  v. 
Drury,  1  Ves.  &  B.  154,  12  Rev.  Rep. 
203;  Foss  v.  Harbottle,  2  Hare  461; 
Mozley  v.  Alston,  1  Phil.  Ch.  790. 

23  Hoyt  v.  Sprague,  103  U.  S.  613, 
26  L.  ed.  585 ;  Pond  v.  Clark,  24  Conn. 
370;  Groenendyke  v.  Cofifeen,  109  111. 
325 ;  Richards  v.  Todd,  127  Mass.  167 ; 
Drew  v.  Beard,  107  Mass.  64;  Stout 
v.  Seabrooks,  30  N.  J.  Eq.  187  (affd. 
Zl  N.  J.  Eq.  826)  ;  Sturt  v.  Mellish, 
2  Atk.  611;  Sherman  v.  Sherman,  2 
Vern.  276;  Evans  v.  Smallcombe,  L. 
R.  3  H.  L.  249,  19  L.  T.  207. 

24  Williams  v.  Williams,  221  111. 
541,  n  N.  E.  928;  Smith  v.  Smith, 
123  Alinn.  431,  144  N.  W.  138,  52 
L.  R.  A.  (N.  S.)  1061. 


§    774  LAW    OF    PARTNERSHIP  1074 

§  774.  Accounting — Dissolution. — The  topics,  Account- 
ing and  Dissolution,  on  account  of  their  importance,  have  been 
discussed  in  separate  chapters,  bearing  their  respective  titles, 
hence  are  not  treated  at  this  time  and  place,  although  logically- 
falling  under  this  chapter.  Contrary  to  the  general  rule,  it  was 
held  in  a  few  jurisdictions  that  a  common-law  action  known  as 
account  or  account-render  might  lie  between  partners  as  to  part- 
nership transactions.^^  As  to  the  effect  of  the  codes  abolishing 
distinctions  between  actions  in  law  and  equity,  it  has  been  said : 
''An  action  can  not  be  maintained  by  one  partner  against  another 
for  a  partial  accounting,  but  he  must  either  sue  for  a  complete 
settlement  and  winding  up  of  the  partnership  matters  or  to  re- 
cover a  balance  struck  and  agreed  between  them."^^  The  codes 
make  a  change  only  in  the  form  of  the  action,  none  whatever  in 
the  nature  of  the  remedy. 

§  775.  Rescission  of  partnership  contract. — There  are 
conditions  under  which  a  partner  may  commence  an  action  in  a 
court  of  equity  to  rescind  a  contract  of  partnership,  entered  into 
by  him  on  account  of  the  fraud  of  the  other  partner  or  partners, 
in  inducing  him  to  enter  the  firm,  and  to  reimburse  him  for 
money  advanced,  and  to  indemnify  him  against  all  liabilities 
which  he  may  have  incurred  by  reason  of  the  partnership  rela- 
tion. A  very  ancient  case,  quoted  by  Mr.  Lindley,  and  one  of 
the  landmarks  in  this  branch  of  the  subject,  is  that  of  Pellans  v. 
Harkness,"^  in  which  one  partner  filed  a  bill  against  his  partners 
for  a  discovery  of  their  transactions,  and  for  the  recovery  of 

2=  Travers  v.  Dyer,  16  Blatchf.  (U.  Brown,  24  N.  Y.  143,  23  How.  Prac. 

S.)  178;  Bailey  V.  Starke,  6  Ark.  191;  207;  Leonard  v.  Leonard,  1  W.  &  S. 

Mickle  V.  Peet,  43  Conn.  65;  Lee  v.  (Pa.)    342;   Elmer  v.   Hall,    148   Pa. 

Abrams,  12  111.  Ill;  Stuart  v.  Kerr,  St.  345,  23  Atl.  971;  Kendrick  v.  Tar- 

1   Morr.    (Iowa)    240;  Xeal  v.   Keel,  bell,  27  Vt.  512;   Tillar  v.   Cook,  11 

4  T.  B.  Mon.    (Ky.)    162;   Chase  v.  Va.  477;  Scott  v.  M'Intosh,  2  Campb. 

Garvin,   19  Maine  211;   Hamilton   v.  238. 

Conine,    28    Md.    635,    92    Am.    Dec.  26  Qwen  v.   Meroney,    136  N.    Cas. 

724 ;  Scott  V.  Searles,  5  Smed.  &  M.  475,  48  S.  E.  821,  103  Am.  St.  952,  1 

(Miss.)    25;   Burley  v.   Harris,  8  N.  Ann.  Cas.  834. 

H.  233,  29  Am.  Dec.  650;  Jaques  v.  27  Colles,  442. 
Hulit,    16   N.   J.    L.   38;    Appleby   v. 


1075  ACTIONS    BETWEEN    PARTNERS  §    775 

the  money  advanced  by  him  to  the  firm.     It  appeared  that  the 
defendant  partners,  through  fraud,  induced  plaintiff  to  enter  a 
partnership  with  them  in  the  business  of  fishing,  and  to  advance 
money  to  the  firm,  and,  although  defendant  partners  furnished 
nothing,  they  induced  him,  however,  to  sign  a  statement  to  the 
effect  that  he  had  bought  their  shares  of  the  capital.     For  a  con- 
siderable time  they  deceived  him  as  to  the  true  condition  of 
affairs,  and  finally,  when  he  became  insistent,  they  advised  him 
to  look  at  certain  books,  which  proved  to  have  no  entries  touch- 
ing upon  the  firm  business.    The  court  decreed  that  his  position 
was  well  taken,  rescinded  the  partnership  agreement  as  to  plain- 
tiff, ordered  the  defendants  to  reimburse  him  for  the  money  ad- 
vanced and  to  indemnify  him   from  any  partnership  liability. 
This  was  all  done  by  the  chancellor  in  the  exercise  of  his  juris- 
diction over  partnerships  and  fraudulent  matters  therein.    The 
present  American  rule  is  practically  the  same,  as  is  shown  by  a 
large  number  of  reported  American  cases. "^     In  one  case""  the 
court  went  so  far  as  to  hold  that  if  equity  finds  a  partnership 
contract  to  be  void  in  its  inception,  on  account  of  the  fraud  of 
one  partner  in  inducing  the  other  to  enter  into  it,  the  damages 
that  the  fraudulent  partner  shall  repay  to  the  other  include  all 
sums  the  latter  has  paid  into  the  firm  as  his  portion  of  the  capital 
stock;  also  a  reasonable  compensation  for  the  time  he  has  acted 
as  copartner,  and  indemnity  for  all  liability  arising  out  of  the 
business,  and  this  seems  to  be  the  general  and  well  accepted  rule 
both  in  the  law  of  this  country  and  in  that  of  England.     It  should 
be  kept  in  mind,  at  this  point,  that  equity  does  not  lend  its  aid 
simply  to  equalize  duties  or  division  among  partners, — to  assist 
one  partner  in  evading  the  effects  of  his  poor  judgment  in  mak- 
ing a  bad  judgment, — but  acts  purely  for  the  purpose  of  reliev- 
ing against  fraud  and  mutual  mistakes  as  to  certain  matters.     It 
is  also  held''°  that  slight  and  trivial  reasons  will  not  induce  the 
setting  aside  of  a  settlement  of  partnership  accounts  and  the 

2«  Hynes    v.    Stewart,    10    B.    Mon.         29  Richards  v.  Todd,  127  Mass.  167. 
(Ky.)   429.    See  ante  §  222.  on  part-         3o  Qage  v.  Parmelee,  87  111.  329. 
nership  agreement  induced  by  fraud. 


§    775  LAW    OF    PARTXERSIIIP  1076 

sale  by  one  partner  to  another  of  his  interest,  fairly  and  delib- 
erately made,  and  evidenced  by  their  written  agreement,  signed 
and  sealed.  This  case  indicates  that  the  above  rule  as  to  fraud 
in  the  inception  of  the  relation,  relates,  in  a  general  way,  also, 
to  the  closing  of  the  relation.  The  test  here,  as  elsewhere,  in 
the  law  of  partnership,  is  4;hat  of  the  utmost  good  faith  between 
partners,  or  those  about  to  enter  into  the  relation."^  A  New  York 
case^^  cites  and  approves  a  decision  by  Lord  Justice  Turner,'"'^ 
where  the  learned  judge  said :  "We  can  not  assume  from  what 
was  done  in  ignorance  of  the  misrepresentation,  what  would  have 
been  done  if  the  misrepresentation  had  been  detected."  The  court 
in  the  Nev/  York  case  continues :  "The  relation  of  partners  is  one 
implying  the  highest  degree  of  mutual  confidence,  as  it  was  well 
observed  in  the  opinion  below;  and,  if  the  contract  of  partner- 
ship was  initiated  by  fraud,  it  is  thereby  avoided  and  annulled. 
The  person  fraudulently  induced  to  enter  into  the  partnership 
is  entitled  to  a  decree  canceling  the  partnership  agreement  ab 
initio,  as  he  can  also  have  an  action  for  the  deceit.""^  The  trial 
court  having  found  the  making  of  the  false  representations,  with 
the  fraudulent  intention  to  induce  the  defendant  to  enter  into  the 
partnership,  no  rule  of  law  and  no  principle  of  equity  stood  in 
the  way  of  its  decreeing  the  cancelation  of  the  agreement,  and 

3ilngraham  v.  Foster,  31  Ala.  123;  N.    E.   859;   Jones   v.   Weir,   217   Pa. 

Fogg  V.  Johnson,  27  Ala.  432,  62  Am.  321,  66  Atl.   550,    10  Ann.   Cas.  692; 

Dec.   771 ;   White  v.    Smith,   63   Ark.  Fuller  v.  Atwood,  13  R.  I.  316 ;  Cap- 

513,  39  S.  W.  555 ;  Howell  v.  Harvey,  len  v.  Cox,  42  Tex.  Civ.  App.  297,  92 

5  Ark.  270,  39  Am.  Dec.  376;   Cald-  S.  W.    1048;    Kimmins  v.  Wilson,   8 

well  V.  Davis,   10  Colo.  481,   IS  Pac.  W.    Va.    584;    Pillans    v.    Harkness, 

696 ;  Hopkins  v.  Watt,  13  111.  298.   See  Colles  442 ;    Rawlins  v.   Wickham,   3 

also  Chase  v.  Garvin,  19  Maine  211;  DeG.  &  J.  304;  Adam  v.  Newbigging, 

Cohoon   V.    Fisher,    146   Ind.   583,   44  13  App.  Cas.  308,  affg.  34  Ch.  D.  582. 

N.    E.  664,  45   N.   E.   787,   36  L.   R.  See  ante  §  222,  on  partnership  agree- 

A.  193  ;   St.  John  v.  Hendrickson,  81  ment  induced  bj'  fraud. 

Ind.  350;  Richards  v.  Todd,  127  Mass.  22  Harlow  v.  La  Brum,   151   N.  Y. 

167 ;  Smith  v.  Everett,  126  Mass.  304 ;  278,  45  N.  E.  859. 

Rambo  v.   Patterson,    133   Mich.  655,  ^^  Rawlins   v.   Wickham,    3    DeGex 

95  N.  W.  722 ;  Cash  v.  Powell,  55  N.  &  J.  304. 

J.  Eq.  826,  41   Atl.   1115 ;  Harlow  v.  33a  Citing  2  Bates  Partn.  595 ;  Pars. 

La  Brum,  82  Hun    (N.   Y.)    292,  31  Partn.  (2d  ed.),  *p.  467. 
N.  Y.  S.  487,  affd.  151  N.  Y.  278,  45 


1077  ACTIONS    BETWEEN    PARTNERS  §    776 

in  its  directions  as  to  the  judgment  to  which  the  defendant  was 
entitled  it  followed  the  requirement  of  the  rule  in  such  cases,  as 
it  may  be  found  laid  down  in  the  books.^^^  It  is  a  well-settled 
principle  of  law  that  if  by  any  act  of  one  of  the  parties  the  per- 
formance of  a  contract  is  rendered  impossible,  then  the  other  party 
may  rescind  the  contract,  and  this  has  been  applied  where  a  part- 
ner through  bankruptcy  became  incapable  of  performing  the  part- 
nership agreements.^*  A  right  to  rescind  a  partnership  agree- 
ment may  be  lost  by  ratification  with  knowledge  of  the  facts,^^ 
or  waived  and  a  suit  for  damages  instituted.^" 

§  776.  Rescission  of  partnership  contract  under  Uniform 
Partnership  Act. — The  Uniform  Partnership  Act  provides 
for  the  rescission  of  a  partnership  on  the  grounds  of  fraud 
or  misrepresentation  and  makes  the  following  provisions  as 
to  the  rights  of  the  parties  on  such  rescission :  Section  39. 
(Rights  Where  Partnership  Is  Dissolved  for  Fraud  or  Misrep- 
resentation.)— "Where  a  partnership  contract  is  rescinded  on  the 
ground  of  the  fraud  or  misrepresentation  of  one  of  the  parties 
thereto,  the  party  entitled  to  rescind  is,  without  prejudice  to  any 
other  right,  entitled:  (a)  To  a  lien  on,  or  right  of  retention  of, 
the  surplus  of  the  partnership  property  after  satisfying  the  part- 
nership liabilities  to  third  persons  for  any  sum  of  money  paid 
by  him  for  the  purchase  of  an  interest  in  the  partnership  and  for 

S3b  Citing  Biglow  Fraud,  p.  629,  and  could   not  be   performed.     Hardy  v. 

cases  cited  there.  Weyer,  42   Ind.   App.   343,   85    N.   E. 

3*G  sold  an  interest  in  his  busi-  731.  See  generally  Panama  &  South 
ness  under  a  partnership  agreement  Pacific  Telegraph  Co.  v.  India  Rub- 
for  $1,000  cash  and  $1,000  at  the  end  ber  &c.  Co.,  L.  R.  10  Ch.  App.  515. 
of  one  year,  unless  the  purchaser  -de-  ^5  gj-^  John  v.  Hendrickson,  81  Ind. 
sired  to  terminate  the  partnership  at  350;  Andriessen's  Appeal,  123  Pa.  St. 
that  time,  in  which  event  he  was  to  303,  16  Atl.  840 ;  Fuller  v.  Atwood,  13 
receive  back  the  money  paid.  G  be-  R.  I.  316.  Compare  Rambo  v.  Pat- 
came  a  voluntary  bankrupt  before  the  terson,  133  Mich.  655,  95  N.  W.  722. 
expiration  of  the  year.  It  was  held  2*^  Cohoon  v.  Fisher,  146  Ind.  583, 
that  his  trustee  in  bankruptcy  could  44  N.  E.  664,  45  N.  E.  787,  26  L.  R. 
not  recover  the  second  instalment,  the  A.  193 ;  Rice  v.  Culver,  32  N.  J.  Eq. 
partnership  being  dissolved  by  a  601 ;  Troster  v.  Dann,  83  Misc.  399, 
bankruptcy,  so  that  the  consideration  145  N.  Y.  S.  56. 
for  payment  of  the  second  instalment 


§    'J77  LAW    OF    TARTNERSIIIP  1078 

any  capital  or  advances  contributed  by  him;  and  (b)  to  stand, 
after  all  lia1)ilities  to  third  persons  have  been  satisfied,  in  the 
place  of  the  creditors  of  the  partnership  for  any  payments  made 
by  him  in  respect  of  the  partnership  liabilities;  and  (c)  to  be 
indemnified  by  the  person  guilty  of  the  fraud  or  making  the 
representation  against  all  debts  and  liabilities  of  the  partnership." 

§  777.  Reformation  of  partnership  contract. — The  sub- 
jects of  rescission  and  of  reformation  of  partnership  contracts 
are  closely  related,  and  at  first  view  it  might  appear  that  a  de- 
frauded partner  would,  in  most  instances,  have  an  election  as  to 
which  remedy  to  pursue.  As  a  rule,  however,  this  is  not  true, 
for  in  a  contract  of  partnership,  which  may  be  rescinded  because 
one  partner  has  deceived  another,  how  can  it  also  be  reformed  to 
conform  to  the  real  intention  of  the  parties  thereto?  In  the  one 
case,  there  is  a  meeting  of  the  minds  of  the  parties,  which,  how- 
ever, equity  will  set  aside  on  account  of  the  wrong  practiced  on 
one  partner  by  the  other.  In  the  other  case,  the  apparent  con- 
tract does  not  conform  to  the  actual  agreement  made  by  the  par- 
ties. The  usual  basis  of  the  one  is  fraud,  of  the  other,  mistake 
of  the  parties. 

§  778.     Specific  performance   of  partnership   contracts. — 

It  is  an  elementary  principle  in  the  law  of  contracts,  in  general, 
that  one  party  may,  upon  breach  of  the  contract  by  the  other 
party,  elect  whether  to  treat  the  contract  as  broken,  and  sue  the 
offending  party  for  damages,  in  an  action  at  law,  which  action 
has  been  treated  heretofore,  or  to  compel  the  offending  party  to 
carry  out  the  terms  of  his  agreement,  by  an  equitable  action  for 
specific  performance,  when  such  an  action  may  be  brought  un- 
der the  circumstances  of  the  case.  The  partnership  law,  with 
some  exceptions,  noted  herein,  differs  from  the  general  rules, 
as  to  specific  performance.  Partnership  is  based  upon  the  great- 
est good  faith  and  confidence  between  the  partners,  owing  to 
the  complex  and  confidential  nature  of  the  relations  and  liabili- 
ties existing  between  partners,  and,  consequently,  the  policy  of 


1079  ACTIONS    BETWEEN    PARTNERS  §    778 

the  courts  of  equity  is  not  to  compel  one  party  to  continue  as 
partner  of  another,  regardless  of  his  contract  therefor,  leaving 
the  injured  partner  to  his  action  at  law  for  damages  for  the 
breach.  The  reason  is  very  apparent.  The  partner  breaking  the 
contract  may  see,  from  the  conduct  of  his  copartner,  perhaps  in 
little  evidences  of  unreliability,  or  of  personal  habits,  or  other 
such  matters,  none  of  which  might  be  of  sufficient  degree  to 
justify  a  termination  of  the  contract,  without  liability,  that 
there  is,  however,  grave  danger  to  himself  in  the  continuation 
of  the  relation,  and  he  may  be  willing  to  pay  damages  for  breach 
of  the  partnership  agreement,  rather  than  to  continue  the  rela- 
tion, with  its  resulting  liability.  It  is  held^®  that  an  agreement 
to  enter  into  a  partnership,  and,  as  a  partner,  to  use  and  exer- 
cise personal  skill  and  judgment  in  the  control  and  management 
of  the  partnership  business,  is  not  enf  orcible  specifically.  The  court 
in  one  case  said  f^  "We  consider  it  very  clear  that  the  case  which 
the  complainant  makes  by  his  bill  is  not  suitable  for  the  jurisdic- 
tion invoked.  The  power  vested  in  courts  of  equity  to  compel  the 
specific  performance  of  contracts,  instead  of  leaving  parties  in 
all  cases  to  obtain  common-law  redress  through  actions  for  dam- 
ages, is  a  very  useful  one,  when  legitimately  exercised.  It  must, 
however,  be  borne  in  mind  that  the  jurisdiction  has  many  neces- 
sary limits  and  qualifications,  and  that  it  does  not  necessarily 
attach  or  operate  with  imperative  force  wherever  a  contract 
relation  exists  which  the  complainant  has  respected  and  the 
defendant  has  not.    In  each  case  the  court  must  consider  whether, 

35  Levine  v.  Michel,  35  La.  Ann.  ers'  Co.  v.  Harrison,  17  Beav.  294 ; 
1121;  Buck  V.  Smith,  29  Mich.  166,  Buxton  v.  Lister,  3  Atk.  383;  Eng- 
18  Am.  Rep.  84;  Reed  v.  Vidal,  5  land  v.  Curling,  8  Beav.  129;  Syers  v. 
Rich.  Eq.  (S.  Car.)  289.  See  also  Syers,  1  App.  Cas.  174,  35  L.  T.  10, 
Clark  V.  Truitt,  183  111.  239,  55  N.  E.  24  Wkly.  Rep.  970 ;  Stocker  v.  Wed- 
683 ;  Roberts  v.  Kelsey,  38  Mich.  602.  derburn,  3  Kay  &  J.  393,  26  L.  J.  Ch. 
But  compare  Somerby  v.  Buntin,  118  713,  5  Wkly.  Rep.  671 ;  Sichel  v.  Mo- 
Mass.  279,  19  Am.  Rep.  459;  Mor-  senthal,  30  Beav.  371,  31  L.  J.  Ch. 
ris  V.  Peckham,  51  Conn.  128;  386,  8  Jur.  (N.  S.)  275,  5  L.  T.  784, 
Whitworth  V.  Harris,  40  Miss.  483 ;  10  Wkly.  Rep.  283. 
Meason  v.  Kaine,  63  Pa.  St.  335 ;  39  Buck  v.  Smith,  29  Mich.  166,  18 
Scott  V.  Rayment,  L.  R.  7  Eq.  112,  38  Am.  Rep.  84. 
L.  J.  Ch.  48;  Sheffield  Gas  Consum- 

18 — Row.  ON  Partn.— VuL.  2 


§    77^  LAW    OF    rARTNERSIIIP  1080 

in  view  of  all  the  facts  and  those  doctrines  which  are  interwoven 
with  the  very  texture  of  equity  jurisprudence,  and  in  view  of  the 
specific  peculiarities  presented,  and  the  settled  principles  and 
maxims  of  the  court,  it  is  right  and  proper  to  entertain  the  case 
and  administer  relief.*"  Among  the  primary  considerations  is 
the  question  whether  the  substantial  sense  and  design  of  both 
parties  can  be  worked  out  by  the  decree  of  the  court,  since  the 
real  equity  of  the  proceeding,  the  spirit  of  the  particular  juris- 
diction, means  performance  on  both  sides  and  not  a  compulsory 
surrender  by  one  party  to  another  without  a  present  substantial 
and  practical  equivalent,  an  equivalent  susceptible  of  enforce- 
ment and  execution  by  the  court.  Now,  what  is  the  real  essence 
of  the  case  made  by  this  bill?  What  is  the  arrangement  the  court 
is  asked  to  carry  out?  It  is  an  agreement,  according  to  the  rep- 
resentation of  complainant,  between  himself  and  the  defendant, 
by  which  the  latter  agreed  to  convey  an  undivided  interest  in  real 
and  personal  property  held  by  defendant  in  common  with  third 
persons,  and  that  the  complainant  should,  for  an  indefinite  time, 
become  a  partner  with  the  defendant  and  such  third  persons  in 
operating  the  property;  that  the  defendant  should  advance  from 
time  to  time  the  complainant's  quota  of  the  funds  necessary  for 
the  business  and  the  improvement  of  the  property;  that  the  com- 
plainant should  have  the  right  to  manage  and  direct  the  business 
and  the  improvements ;  and  that  he  would  employ  his  time,  skill, 
judgment,  and  experience  in  the  direction  and  supervision  of  the 
property  and  business,  and  that  the  purchase-price  of  his  pro- 
prietary share,  and  the  amount  advanced  for  his  benefit  in  carry- 
ing on  the  business,  should  be  paid  by  his  skill  and  services  in 
the  concern,  and  the  gains  obtained  in  the  enterprise.  Waiving 
all  objection  founded  on  the  circumstance  that  the  bill  does 
not  assert  that  ]\'IcDonald  and  MacArthur  became  in  any  man- 
ner engaged  with  complainant  to  admit  him  to  a  partnership, 
or  to  clothe  him  with  any  right  of  power  to  manage  their  inter- 

40  Citing    McMurtrie    v.    Bennette,     ermore,  15  Mich.  381 ;  Willard  v.  Tay- 
Har.    (Mich.)     124;    Smith    v.    Law-     loe,  8  Wall.  (U.  S.)  557. 
rence,  15  Mich.  499 ;  Chambers  v.  Liv- 


1081  ACTIONS    BETWEEN    PARTNERS  §    778 

ests,  we  first  encounter  the  rule,  which  is  pretty  well  recognized, 
that  the  court  will  not  enter  upon  so  vain  an  undertaking  as  to 
compel  a  party  to  go  into  partnership  where  the  agreement  is 
silent  as  to  its  duration,  and  where,  therefore,  it  may  be  dis- 
solved at  the  will  of  either  as  soon  as  formed.  But,  secondly, 
we  confront  the  inevitable  and  very  formidable  objection  that 
the  agreement  by  its  very  nature  is  practically  not  en  forcible 
on  both  sides.  It  is  extremely  plain  that  the  court  can  not  assume 
to  enforce  the  performance  of  daily  prospective  duties,  or  super- 
vise or  direct  in  advance  the  course  or  conduct  of  one  who  is 
to  control  and  manage  in  the  interest  of  a  firm  in  which  he  is  to 
stand  as  a  member,  and  where,  too,  the  stipulated  aarangement 
as  plainly  set  forth  contemplates  that  his  personal  skill  and  judg- 
ment shall  be  applied  and  govern  according  to  the  shifting  needs 
of  property  and  business.  No  court  is  competent  to  execute  such 
an  arrangement.  The  complainant's  portion  of  the  executory 
scheme,  then,  which  relates  to  his  introduction  to  the  position 
of  partner  and  manager,  to  his  rights  and  duties  in  that  posi- 
tion and  to  the  agreed  method  for  working  out  the  compensation 
to  be  made  by  him  for  the  benefit  he  seeks,  can  not  be  specifically 
enforced.  Looking  at  the  case  made  by  the  bill,  the  court  is 
powerless  to  execute  the  equivalent  the  complainant  is  bound  to 
render.  If  a  conveyance  to  the  complainant  should  be  ordered, 
he  would  get  at  once  the  essence  of  what  he  claims,  whilst  the 
defendant  would  fail  in  getting,  through  a  decree,  any  sub- 
stantial consideration  whatever.  As  the  court  possesses  no  means 
by  which  to  work  out  performance  on  the  part  of  the  complain- 
ant, he  would  become  at  once  invested  with  the  benefit  for  which 
he  prosecutes,  whilst  the  defendant  would  be  left  standing  upon 
a  naked  right  to  exact  the  consideration  through  the  future  per- 
formance of  duties  incapable  of  being  specifically  decreed.  The 
doctrine  of  the  court  will  not  sanction  such  one-sided  relief,"*^ 

41  Citing   Blackett  v.    Bates,   L.    R.  ering  v.  Bishop  of  Ely,  2  Y.  &  Coll. 

1    Ch.    App.    117,    2    H.    &    M.    610;  C.  C.  249,  12  L.  J.  Ch.  271,  7  Jur.  479; 

Stocker   v.    Brockelbank,    5    E.    L.    &  Kemble   v.   Kean,  6   Sim.   333 ;   Kim- 

E.  67;  Johnson  v.  Shrewsbury  &  B.  berly  v.  Jennings,  6  Sim.  340,  5  L.  J. 

R.  W.  Co.,  19  E.  L.  &  E.  584;  Pick-  Ch.  115 ;  Baldwin  v.  Society  for  Dif- 


§    779  LAW    OF    PARTNERSHIP  1082 

On  the  contrary,  under  some  conditions  agreements  relating  to 
partnerships  will  be  enforced  specifically,  when  the  reasons  above 
given  for  refusal  to  apply  this  remedy  do  not  apply.  For  ex- 
ample, one  partner  may  compel  another  to  apply  partnership 
funds  to  partnership  debts,*"  or  compel  his  associates  to  adhere 
to  the  terms  of  the  partnership  agreement  as  long  as  they  choose 
to  continue  the  firm,*^  specific  performance  has  been  decreed 
where  one  partner  has  contributed  thereto  his  share  and  the  other 
partner  refuses  to  carry  out  this  part  of  the  agreement,**  for  the 
execution  of  some  formal  instrument,  the  failure  of  which  would 
cause  the  partner  asking  it  loss,  and  which  the  other  party  has 
agreed  to  do,*^  or  in  some  instances  a  decree  of  specific  perform- 
ance of  a  partnership  agreement  has  been  granted,  in  order  to 
make  a  foundation  for  an  accounting,*''  or  to  secure  to  a  partner 
interests  in  property  rights  to  which  he  is  entitled.*^  And  an 
agreement  for  sharing  of  profits  has  been  enforced,  even  though 
it  created  a  partnership.*^^ 

§  779.  Specific  performance  after  dissolution. — Mr.  Lind- 
ley  has  said  :*^  "With  respect  to  the  specific  performance,  after 
a  dissolution  of  partnership,  all  agreements  entered  into  by 
the  partners  previously  to,  or  at  the  time  of  dissolution,  it  need 
only  be  observed  that  relief  will  be  granted  or  refused  upon 
the  principles  by  which  the  court  is  ordinarily  guided  in  ques- 
tions of  specific  performance,  and  that  nothing  turns  on  the  cir- 
cumstance of  the  litigants  having  been  partners.  For  purposes 
of  reference,  it  may  be  useful  to  mention  that  the  court  has 

fusing  &c.,   9   Sim   394,   2   Jur.    161;  45  Stocker   v.   Wedderburn,   3   Kay 

Gervais  v.  Edwards,  2  Dr.  &  W.  80,  &  J.  393,  26  L.  J.  Ch.  713,  5  W.  R. 

1   Con.  &  L.  242,  4  Ir.  Eq.  R.  555 ;  671 ;  Buxton  v.  Lister,  3  Atk.  385. 

Bozon  V.  Farlow,  1  Mer.  459 ;  Flight  ^^  Dale  v.  Hamilton,  5  Hare  369,  2 

V.  Bolland,  4  Russ.  298,  28  Rev.  Rep.  Phil.  Ch.  266. 

101.  47  Somerby  v.  Buntin,  118  Mass.  279, 

42  Gridley  v.  Conner,  2  La.  Ann.  87.  19  Am.  Rep.  459. 

43Kean  v.  Johnson,   1   Stockt.    (N.  47a  Donohoe  v.  Rogers,  168  Cal.  700, 

J.)   401.  144  Pac.  958. 

44Birchett     v.     Boiling,     5     Munf.  48  Ljndley  Partnership   (8th  ed.),  p. 

(Va.)   442;  Whit  worth  v.  Harris,  40  553. 
Miss.  483. 


1083  ACTIONS    BETWEEN    PARTNERS  §    779 

enforced  the  following  agreements  entered  into,  upon  or  with  a 
view  to  a  dissolution,  namely:  Agreements  not  to  carry  on 
business  within  a  certain  distance  or  for  a  certain  space  of  time  ',^^ 
agreements  by  one  partner  to  withdraw  from  a  firm  and  assign 
his  share  to  his  copartners;^"  agreements  as  to  the  custody  of 
partnership  books  and  the  furnishing  of  copies  thereof  ;^^  agree- 
ments that  a  third  party,  and  he  only,  shall  get  in  debts  ;^^  agree- 
ments that  the  value  of  the  shares  of  an  outgoing  or  a  deceased 
partner  shall  be  ascertained  in  a  specified  way  and  taken  accord- 
ingly;^^ agreements  that  an  outgoing  partner  shall  offer  his  share 
to  his  copartners,  before  selling  it  to  other  persons;^"*  agreements 
to  grant  an  annuity  to  a  retiring  partner  and  his  widow  f^  agree- 
ments not  to  divulge  or  make  use  of  a  trade  secret. ^°  The  gen- 
eral rule  (of  no  specific  performance)  above  stated  may  be  said 
to  apply  to  attempts  to  continue  or  pursue  a  partnership,  while 
the  exceptions,  as  a  rule,  apply  to  those  agreements  which  do 
not  imply  retaining  the  relation  and  the  corresponding  liabilities. 
Therefore,  when  the  exceptions  do  govern,  and  a  partnership 
is  created,  it  may  be,  as  a  general  rule,  dissolved,  subject,  of 
course,  to  an  action  for  damages  therefor, 

49  Citing  Whittaker  v.  Howe,  8  325;  Daw  v.  Herring  (1892),  1  Ch. 
Beav.  383;  Turner  v.  Major,  3  Giff.  284,  61  L.  J.  Ch.  5,  65  L.  T.  782,  40 
442,  8  Jur.  (N.  S.)  909,  5  L.  T.  600,  Wkly.  Rep.  61;  Featherstonhaugh  v. 
10  W.  R.  243 ;  Coates  v.  Coates,  6  Turner,  25  Beav.  382,  28  L.  J.  Ch.  812, 
Madd.  287;  William^  v.  Williams,  1  and  Gibson  v.  Goldsmid,  5  DeG.,  M. 
Wils.  Ch.  473,  note.  &  G.  757,  24  L.  J.  Ch.  279,  3  Eq.  R. 

50  Citing  Gray  v.  Smith,  43  Ch.  106,  1  Jur.  (N.  S.)  1,  3  W.  R.  79, 
D.  208,  62  L.  T.  335,  38  W.  R.  310,  revg.  18  Beav.  584. 

59  L.  J.  Ch.  145.  54  Citing    Homfray    v.     Fothergill, 

51  Citing     Lingen     v.     Simpson,     1     L.  R.  1  Eq.  567,  14  L.  T.  49. 

Sim.  &  Stu.  602,  24  Rev.  Rep.  249,         ^5  citing  Aubin  v.  Holt,  2  K.  &  J. 

and  see  Whittaker  v.  Howe,  8  Beav.  66,  25  L.  J.  Ch.  36,  4  Wkly.  Rep.  112; 

383.  Page  v.  Cox,  10  Ha.   163.     See  also 

52  Citing  Davis  v.  Amer,  3  Drew.  Murray  v.  Flavell,  25  Ch.  D.  89,  53 
64;  Turner  v.  Major,  3  Gifif.  442,  8  L.  J.  Ch.  185,  32  Wkly.  Rep.  102,  and 
Jur.  (N.  S.)  909,  5  L.  T.  600,  10  Bonville  v.  Bonville,  6  Jur.  (N.  S.) 
Wkly.  Rep.  243.  414. 

53  Citing  Morris  v.  Kearsley,  2  Y.  5n  Citing  Morison  v.  Moat,  9  Hare 
&    C.    Ex.    139;    Essex   v.    Essex.    20  241. 

Beav.  442;  King  v.  Chuck,  17  Bea^. 


§    780  LAW    OF    PARTNERSHIP  1084 

§  780.  Injunctions. — In  distinction  to  the  remedy  of  spe- 
cific performance,  or  the  compelling  to  do  a  certain  thing,  is 
the  remedy  of  injunction,  which  is,  except  as  to  mandatory 
injunctions,  the  restraint  from  doing  a  certain  thing.  Injunction, 
hke  specific  performance,  lies  in  proper  cases,  in  partnership, 
but  must  not,  as  a  rule,  be  allowed  to  interfere  with  the  peculiar 
phases  of  partnership  law.  It  has  been  said:"  "There  can  be 
no  such  thing  as  an  indissoluble  partnership.  Every  partner  has 
an  indefeasible  right  to  dissolve  the  partnership  as  to  all  future 
contracts  by  publishing  his  own  volition  to  that  effect.  =i=  *  * 
There  may  be  cases  in  which  equity  would  enjoin  a  dissolution 
for  a  time,  when  the  circumstances  were  such  as  to  make  it  spe- 
cifically injurious;  but  no  question  of  equitable  restraint  arises 
here.  Vv'hen  one  partner  becomes  dissatisfied  there  is  commonly 
no  legal  policy  to  be  subserved  by  compelling  a  continuance  of 
the  relation,  and  the  fact  that  a  contract  will  be  broken  is  no  argu- 
ment against  the  right  to  dissolve.  Most  contracts  may  be  broken 
at  pleasure,  subject,  however,  to  responsibility  in  damages.  This 
decision,  therefore,  while  conceding  that  there  might  possibly 
be  some  instances  in  which  an  injunction  might  restrain  a  dis- 
solution temporarily,  holds  that  it  can  go  no  further,  and  that  in 
most  cases  will  not  be  allowed  to  any  extent  in  opposing  the  with- 
drawal of  a  partner. ^^  Although,  as  has  been  seen,  injunctions 
against  dissolution  are  very  generally  refused,  owing  to  the  pecu- 
liar rules  and  nature  of  partnership,  yet  there  are  many  conditions 
under  which  injunctions  will  be  granted  in  partnership  affairs, 
and  they  will  be  here  treated  under  their  various  headings. 

§  781.  Injimction  to  prevent  breach  of  agreement. — We 
have  just  seen  that,  in  nearly  all  cases,  a  contract  to  continue 
a  partnership  may  be  broken,  yet,  as  long  as  the  partners 
may  all  see  fit  to  continue  the  partnership,  it  by  no  means 
follows  that  in  such  a  case  the  rule  would  apply,  so  as  to  enjoin 
one  or  more  of  the  partners  from  doing  certain  acts,  in  violation 

s''  Solomon  V.  Kirkwood,  55  Mich.     10  Am.  Dec.  286 ;  Mason  v.  Connell, 

256,  21  N.  W.  336.  1  Whart.   (Pa.)   381;   Slemmer's  Ap- 

58  Skinner  v.  Dayton,  19  Johns.  513,     peal,  58  Pa.  St.  155,  98  Am.  Dec.  248. 


1085  ACTIONS    BETWEEN    PARTNERS  §    782 

of  the  partnership  agreements,  and  prejudicial  to  the  copartners. ^^ 
Mr.  High  thus  treats  this  question:  "Courts  of  equity  will  enter- 
tain jurisdiction  to  prevent  by  injunction  members  of  a  copartner- 
ship from  the  commission  of  acts  inconsistent  with  the  terms  of 
their  agreement  and  from  violating  the  rights  of  their  copart- 
ners. The  jurisdiction  is  founded  upon  well  established  princi- 
ples of  equity,  and  is  exercised  irrespective  of  whether  a  disso- 
lution of  the  partnership  is  sought."^^^ 

§  782.  Injunction  to  restrain  change  in  the  application  of 
profits. — When  the  partners  have  agreed  upon  a  mode  of 
distribution  of  profits,  and  some  of  the  partners  attempt  to 
change  the  mode  of  distribution,  without  the  consent  of  all  the 
partners,  the  nonassenting  partner  or  partners  may  maintain  an 
action  enjoining  his  copartner  from  deviating  from  the  original 
plan  agreed  upon  by  them.*^" 

§  783.  Injunction  against  change  in  nature  of  partnership 
business. — No  number  less  than  all  can  change  the  gen- 
eral nature  of  the  business  of  the  firm,  this  rule  having  its 
origin  early  in  English  law,  being  recognized  in  the  old  English 
decisions  about  the  year  1824,  in  the  case  of  Natusch  v.  Irving.*'^ 
One  Natusch,  who  was  a  partner  in  a  fire  and  life  insurance 
company,  commenced  an  action  against  certain  of  his  partners, 
asking,  among  other  matters,  an  injunction  restraining  them 
from  entering  the  business  of  marine  insurance,  to  which  added 
business  he  had  not  assented,  and  the  injunction  was  allowed. 
Lord  Eldon,  delivering  the  opinion,  gave  some  very  pertinent  ob- 
servations on  the  question.  "Courts,"  said  he,  "must  struggle 
to  prevent  particular  members  of  those  bodies   (partnerships) 

59  Marble   Co.   v.   Ripley,   10  Wall.  Eq.  302 ;  Hall  v.  Hall,  3  Macn.  &  G. 

(U.  S.)  339,  19  L.  ed.  955;  Pirtle  v.  79,  20  L.  J.  Ch.  585,  15  Jur.  363. 

Penn,  3  Dana  (Ky.)  247,  28  Am.  Dec.  soaRigh  Injunctions,  Vol.  II,  p.  330. 

70;    Levine   v.    Michel,    35    La.    Ann.  eo  Const  v.  Harris,  Turn.  &  R.  496, 

1121 ;     Ballou     v.     Wood,     8     Cush.  24  Rev.  Rep.  108. 

(Mass.)  48;  New  v.  Wright,  44  Miss.  si  2  Coop.  C.  C.  358;  Gow  on  Part- 

202;   Van   Keuren   v.  Trenton   Loco-  nership   (3d  ed.),  App.  398. 
motive  &  Machine  Mfg.  Co.,  13  N.  J. 


§    784  LAW    OF    TARTNERSIIIP  1086 

from  engaging  other  members  in  projects  in  which  they  have 
not  consented  to  be  engaged,  or  the  engaging  in  which  they  have 
not  encouraged,  assented  to  or  empowered,  or  acquiesced  in, 
expressly  or  tacitly,  so  as  to  make  it  not  equitable  that  they 
should  seek  to  restrain  them.  The  principles  which  a  court  would 
act  upon  in  the  case  of  a  partnership  of  six,  must,  as  far  as  the 
nature  of  things  will  admit,  be  applied  to  a  partnership  of  six 
hundred.  *  *  *  They  who  seek  to  embark  a  partner  in  a 
business  not  originally  part  of  the  partnership  concern,  must 
make  out  clearly  that  he  did  expressly  or  tacitly  acquiesce."  The 
question  as  to  what  acts  constitute  acquiescence  by  the  object- 
ing partner  is  perhaps  left  open,  to  be  determined  upon  an  in- 
vestigation of  the  particular  facts  of  each  individual  case,  but 
the  general  rule  holds  that  the  objecting  partner  is  entitled  to 
an  injunction  against  any  change  in  the  general  nature  of  the 
business,  unless  he  has,  by  express  consent,  general  or  specific, 
or  by  such  acts  as  create  an  estoppel  against  him,  consented  to 
the  change.  Undoubtedly,  however,  the  articles  of  partnership 
might  be  so  drawn  as  to  give  a  certain  number  the  right  to  make 
a  change  in  the  nature  of  the  business,  without  further  consent 
on  the  part  of  their  copartners.  It  seems  also  that  the  nature  of 
the  partnership  might  in  itself  give  the  right  to  a  number  less  than 
all  to  make  changes  without  the  consent  of  the  copartners,  al- 
though such  an  occurrence  would  be  very  rare,  indeed. 

§  784.     Injunction  against  commencing  legal  actions. — In 

early  English  law,  injunctions  were  allowed  to  restrain  certain 
actions,  but  this  right  was  curtailed  until,  in  1860,  when  Mr. 
Lindley  first  published  his  admirable  work  on  partnership,  this 
right  had  been  practically  abolished.  Mr.  Lindley  thus  states 
the  English  law  at  that  period:  "Although  injunctions  to  re- 
strain actions  are  now  abolished,  it  may  be  useful  to  observe 
that  where  surviving  partners  gave  the  executors  of  their  late 
partner  a  bond  for  the  amount  of  his  share,  the  amount  of  which 
had  not  been  ascertained,  an  action  on  the  bond  was  stayed  on 
its  being  shown  that  if  the  partnership  accounts  were  taken  it 
would  appear  that  the  surviving  partners  had  already  paid  too 


1087  ACTIONS    BETWEEN    PARTNERS  §    785 

much.  But  an  action  for  the  balance  of  a  settled  account  would 
not  be  restrained  merely  because  there  were  other  unsettled  ac- 
counts between  the  parties ;  nor  would  a  court  of  equity  interfere 
to  prevent  a  shareholder  of  a  company,  who  was  a  creditor  of 
that  company,  from  executing  a  judgment  obtained  against  it 
by  him  as  a  creditor."^^^  The  American  law  has  relaxed,  some- 
what, the  later  English  law,  and  will,  in  many  instances,  grant 
injunctions  to  restrain  actions.  Thus  in  a  case,*'"  where  one  part- 
ner filed  a  bill  in  equity,  in  which  he  asked  an  injunction  against 
his  copartner,  who  owned  the  legal  title  to  property  which  equi- 
tably belonged  to  the  firm,  and  who  had  recovered  a  judgment 
in  ejectment  against  the  complainant,  from  enforcing  the  judg- 
ment pending  the  hearing  of  complainant's  bill  for  an  account 
and  settlement  of  the  partnership,  the  court  held  that  an  injunc- 
tion might  issue.  The  same  general  rule  of  recognition  of  injunc- 
tions to  restrain  actions  has  often  been  recognized.*'^ 

§  785.  Injunction  against  dissolution. — As  a  general  rule, 
injunctions  will  not  be  allowed  to  prevent  dissolution,  as  we 
have  seen  that  any  partnership  may  be  dissolved  by  any  member, 
even  in  the  face  of  a  contract  to  the  contrary  (there  being,  of 
course,  an  action  in  damages  for  the  breach).  As  has  been  said, 
there  is  no  such  thing  as  an  indissoluble  partnership.  However, 
"there  may  be  cases  in  which  a  court  of  equity  would  enjoin  a 
dissolution  for  a  time,  when  the  circumstances  were  such  as  to 
make  it  specially  injurious."*''*  Such  a  case,  it  must  be  ad- 
mitted, is  rare,  and  the  necessity  of  a  relaxation  of  the  general 
rule  must  be  plainly  shown.  "A  court  of  equity,  doubtless,  will 
not  assist  the  partner  breaking  his  contract  to  procure  a  dissolu- 
tion of  the  partnership,  because,  upon  familiar  principles,  a  part- 
ner who  has  not   fully  and   fairly  performed  the  partnership 

61a  Lindley  Partnership,  *p.  543.  6*  Solomon  v.  Kirkwood,  55  Mich. 

62  Wells  V.  Strange,  5  Ga.  22.  256.   21    N.   W.   336.     See   also    Kar- 

63  Mowbray  v.   Lawrence,    13   Abb.  rick  v.  Hannaman,  168  U.  S.  328,  42 
Pr.    (N.  Y.)    317,  22  How.   Pr.   107.  L.  ed.  484,  18  Sup.  Ct.  135. 

See  also  Moody  v.   Payne,  2  Johns. 
(N.  Y.)   Ch.  548. 


§    786  LAW    OF    PARTNERSHIP  1088 

agreement  on  his  part  has  no  standing  in  a  court  of  equity  to 
enforce  any  rights  under  the  agreement."^  But,  generally  speak- 
ing, neither  will  it  interfere  at  the  suit  of  the  other  partner  to 
prevent  the  dissolution,  because,  while  it  may  compel  the  execu- 
tion of  articles  of  partnership  so  as  to  put  the  parties  in  the 
same  position  as  if  the  articles  had  been  executed  as  agreed,  it 
will  seldom,  if  ever,  specifically  compel  subsequent  performance 
of  the  contract  by  either  party,  the  contract  of  partnership  being 
of  an  essentially  personal  character,®*'  Especially  where  by  the 
partnership  agreement,  as  in  the  case  at  bar,  the  defendant  is 
to  supply  all  or  most  of  the  capital,  and  the  plaintiff  is  to  fur- 
nish his  personal  services,  the  agreement  can  not  be  specifically 
enforced  against  the  plaintiff,  and  will  not  be  enforced  against 
the  defendant."" 

§  786.  Other  acts  enjoined. — The  exclusion  of  one  part- 
ner from  the  business  has  been  held  ground  for  an  injunction, 
the  court  saying  in  one  case  f^  "Any  unauthorized  attempt  by 
one  to  oust  the  other  from  the  position  and  rights  assigned  to 
him  by  the  contract  was,  therefore,  not  only  a  breach  of  their 
agreement,  but  a  fraud  upon  the  relation  they  had  assumed  to 
each  other.  Such  a  wrong  it  is  the  province  of  a  court  of  equity 
to  prevent.  A  chancellor  will  interfere  by  injunction  to  restrain 
one  partner  from  violating  the  rights  of  his  copartner  even 
when  a  dissolution  of  the  partnership  is  not  necessarily  contem- 
plated."°^    Among  other  acts  enjoined  by  the  courts  have  been 

esKarrick  v.  Hannaman,  168  U.  S.  19  Am.  Rep.  459;  Reed  v.  Vidal,  5 

328,  42  L.  ed.  484,  18  Sup.  Ct.  135;  Rich  Eq.  (S.  Car.)  289. 

citing  Rutland  Marble  Co.  v.  Ripley,  ^'^  Citing    Stocker    v.    Wedderburn, 

77  U.  S.  339,  19  L.  ed.  955.  3  Kay  &  J.  393.  26  L.  J.  Ch.  713,  5 

66  Citing  Batten   Specific  Perform-  VV.  R.  671 ;  Buck  v.  Smith,  29  Mich, 

ance,  165-167;  3  Lindley  Partnership,  166,  18  Am.  Rep.  84. 

ch.    10,    §    4;    Pomeroy    Spec.    Perf.  es  Rutland  Marble  Co.  v.  Ripley,  10 

§    290;     Scott    V.    Payment,    L.    R.  Wall.  (U.  S.)  339,  19  L.  ed.  955. 

7    Eq.    112,    38    L.    J.    Ch.    48;    Sat-  69  Miller  v.  O'Boyle,  89  Fed.   140; 

terthwait  V.  Marshall,  4  Del.  Ch.  337 ;  Pirtle   v.    Penn,    3   Dana    (Ky.)    247, 

Somerby   v.    Buntin,    118   Mass.   279,  28    Am.    Dec.    70;    McCabe    v.    Sin- 


1089  ACTIONS    BETWEEN    PARTNERS  §    787 

using  partnership  property  contrary  to  agreement''''  and  carry- 
ing on  a  competing  business.'^  An  injunction  will  not  be  granted 
where  the  effect  would  be  to  exclude  one  partner  from  the  busi- 
ness, against  his  will.^' 

§  787.  Injunction  in  action  for  dissolution  or  after  dissolu- 
tion.— In  an  action  for  dissolution  or  for  accounting  after 
dissolution  by  death  of  a  partner,  equity  will  enjoin  acts  of  a 
partner  which  will  interfere  with  proper  winding  up  of  partner- 
ship affairs,  such  as  carrying  on  the  business  for  a  purpose  other 
than  winding  it  up;'^  from  improperly  interfering  with  the  busi- 
ness;^* from  collecting  debts  and  assets  of  the  firm;"  from  dam- 
aging the  value  of  the  good  will;'"  from  issuing,  accepting,  or 
indorsing  bills  of  exchange  in  the  firm  name  for  other  than 
partnership  purposes  ;^^  from  withholding  the  partnership  books. '^*^ 
A  surviving  partner  may  be  enjoined  from  improperly  dispos- 
ing of  partnership  assets;^'*  or  from  wrongfully  ejecting  the  de- 
ceased partner's   representatives.®"     On  dissolution,   a  partner 

clair,  66  N.  J.  Eq.  24,  58  Atl.  412;  "O'Brien  v.  Cooke,  Ire.  R.  5  Eq. 

Petit  V.  Chevelier,  13  N.  J.  Eq.  181 ;  51 ;    Read   v.    Bowers,   4   Brown    Ch. 

Wolbert  V.  Harris,  7  N.  J.  Eq.  605;  441. 

Fitzgerald  v.  Flynn    (R.  I.),  69  Atl.  '^e  Angier     v.     Webber,     14     Allen 

921;  Hall  v.  Hall,  12  Beav.  414.  (Mass.)  211,  92  Am.  Dec.  748;  Tur- 

70  New    V.    Wright,    44    Miss.   202;  ner  v.  Major,  3  Giff.  442,  8  Jur.   (N. 

Hall  V.  Hall,  12  Beav.  414.  S.)   909,  5  L.  T.  600,  10  W.  R.  243 ; 

■71  Marshall  v.  Johnson,  33  Ga.  500 ;  Bradbury  v.  Dickens,  27  Beav.  53,  28 

Crownfield  v.  Phillips  (Md.  App.),  92  L.  J.  Ch.  667;  Trego  v.  Hunt,  65  L.  J. 

Atl.  1033;  Holladay  v.  Faurot,  8  Ohio  Cli.  (N.  S.)   1,  A.  C.  7,  73  L.  T.  514, 

Dec.  (Reprint)  633;  Kemble  v.  Kearn,  44  W.  R.  225. 

6   Sim.   333.      See   also    Stockdale   v.  ^7  Williams     v.     Bingley,     2     Vern. 

Ullery,  37  Pa.   St.  486,  78  Am.  Dec.  278n ;   Jarvis   v.   White,   7   Ves.   413; 

440;  England  v.  Curling,  8  Beav.  129.  Hood  v.  Aston,  1  Russ.  412,  25  Rev. 

72  Salmon  v.  Salmon,  178  Ala.  672,  Rep.  93;  Collyer  Partnership,  233. 

60  So.  837.  78  Taylor  v.   Davis,   3   Beav.   388n  ; 

73  De    Tastet    v.     Bordenave,    Jac.     Greatrex  v.  Greatrex,  1  DeGex  &  S. 
516;    Marshall   v.   Watson,    25    Beav.     692,  11  Jur.  1052. 

501;  Wilson  v.  Fitchter,  11  N.  J.  Eq.  79  Hartz  v.  Schrader,  8  Ves.  317. 

71.  80  Hawkins  v.  Hawkins,  4  Jur.  (X. 

74  Smith    v.    Jeyes,    4    Beav.    503;  S.)   1044 ;  Elliot  v.  Brown,  3  Swanst. 
Charlton  v.  Poulter,  19  Ves.  148,  note.  489. 


§    788  LAW    OF    PARTNERSHIP  1090 

will  be  enjoined  from  injuring  firm  property.^^  After  disso- 
lution a  former  partner  may  be  enjoined  from  breaking  special 
agreements  entered  into,  such  as  not  to  collect  debts  of  the  firm;*^- 
not  to  carry  on  business;®^  not  to  divulge  a  trade  secret;'^*  or  if 
he  has  sold  the  good  will  from  so  carrying  on  business  as  to  lead 
persons  to  believe  he  was  the  successor  of  the  firm,^^  and  other 
similar  acts.^*^ 

§  788.  Receiverships. — The  subjects  of  injunctions  and  of 
receiverships  are  closely  related,  and  in  perhaps  the  greater 
number  of  cases  involving  one,  the  other  is  also  resorted  to.  In 
fact,  as  pointed  out  by  Mr.  Lindle}^,  a  receivership  necessarily  acts 
as  an  injunction,  for  the  court  will  not  allow  the  receiver,  its  own 
officer,  to  be  disturbed  in  his  conduct  of  the  business  by  a  part- 
ner, yet  there  are  many  cases  where  a  receivership  is  not  de- 
manded or  desired,  where  an  injunction  is  necessary  and  proper, 
as,  for  example,  where  the  offending  partner  does  not  directly 
interfere  with  the  receiver,  but  indirectly  injures  or  opposes  him. 
It  wull  be  perceived  that  a  receivership  acts  as  an  injunction  only 
in  a  limited  number  of  cases,  and  is  only  inferential  even  then, 
so  that  in  case  some  specific  matters  are  desired  to  be  protected, 
it  is  better  to  have  an  injunction  granted,  when  possible,  against 
the  specific  point  involved.  Moreover,  there  may  be  many  in- 
stances in  which  a  receiver  would  be  unnecessary,  even  detri- 
mental, and  where  simply  an  injunction  will  serve  every  purpose. 
The  object  of  an  injunction  is  to  compel  or  prohibit  the  doing 
of  a  certain  thing.     The  object  of  a  receivership  is  to  hold  the 

SI  Marshall    v.    Watson,    25    Beav.  ^^  Churton      v.      Douglas,      Johns. 

501;   Allen   v.   Kilbre,   4   Madd.  464;  (Eng.)    Ch.    174,   28    L.   J.    Ch.    841, 

Bevan  v.  Lewis,  1  Sim.  Z16,  27  Rev.  5  Jur.  (N.  S.)  887,  7  W.  R.  365.    See 

Rep.  205.  ch.  12,  §  317  et  seq.,  ch.  10,  §  266. 

82  Davis  V.  Amer,  3  Drew.  64;  ^g  wju^jnson  v.  Tilden,  9  Fed.  683; 
Hartz  V.  Schrader,  8  Ves.  317,  7  Rev.  Fletcher  v.  Vandusen,  52  Iowa  448, 
Rep.  55;  Ellis  v.  Commander,  1  3  N.  W.  488;  Shannon  v.  Wright,  60 
Strob.  Eq.  (S.  Car.)   188.  Md.    520.      See   also    McGowan    Bro. 

83  Whittaker  v.  Howe,  8  Beav.  383.     Pump  &   Machine  Co.  v.   McGowan, 
S4  Roberts  v.   McKee,  29   Ga.   161 ;    22  Ohio  St.  370. 

Morison  v.  Moat,  9  Hare  241. 


1091  ACTIONS    BETWEEX    PARTNERS  §    788 

property,  by  an  officer  of  the  court,  for  the  use  of  all  the  cred- 
itors, also  of  the  partners,  as  their  interests  appear,  and,  in  the 
interests  of  the  estate,  the  court  may  authorize  the  receiver  to 
continue  the  business  of  the  firm  (in  case  there  is  a  business) 
for  hmited  times.  The  ordinary  duty  of  a  receiver  is  simply  to 
hold  the  assets  until  further  order  of  the  court,  or  to  dispose  of 
the  same  as  soon  as  practicable,  and  to  hold  the  proceeds.  The 
court  may,  however,  if  it  be  considered  for  the  best  interests  of 
the  business,  allow  the  receiver  to  act  as  manager  of  the  busi- 
ness, or  to  hire  some  other  person  as  such  manager,  and  conduct 
the  business  of  the  firm,  as  a  going  concern,  thus  protecting  the 
good  VN'ill  of  the  business,  and  realizing  upon  the  same  upon  a 
sale  of  the  assets.  The  positions  of  receiver  and  manager  are  not 
identical,  and  may  be  either  held  by  one  person,  or  may  be  placed 
in  different  persons,  although  the  manager  must  necessarily  be 
under  the  direction  of  the  receiver,  as  the  receiver  is  responsible 
for  the  assets  of  the  firm.  The  English  law  has  long  held  that 
a  receiver  may  be  appointed,  although  no  dissolution  is  sought,®' 
but  has  made  a  distinction  when  a  manager  is  asked,  holding  that 
in  such  a  case  a  dissolution  must  be  sought.  Lord  Cottenham,^' 
and  Lord  Eldon,*®  held  strongly  to  this  principle.  Lord  Eldon 
stated,  that  the  court  would  not,  by  appointing  receivers,  take 
upon  itself  the  management  of  every  trade  in  the  kingdom;  nor 
will  it  take  upon  itself  the  management  of  any  partnership  busi- 
ness, save  with  a  view  of  its  final  winding  up.  However,  this 
rule,  like  most  other  wtII  established  rules,  is  subject  to  excep- 
tion. Thus,  where,  certain  members  of  a  firm  filed  a  bill,  alleg- 
ing misappropriation  of  funds  by  certain  directors,  and  asking 
a  receiver  and  manager.  Although  it  was  not  certain  that  disso- 
lution would  be  necessary,  and  was  not  definitely  asked  unless  it 
should  appear  necessary,  the  court  appointed  a  receiver  and  man- 
ager to  protect  what  remained  of  the  assets  until  the  hearing  of 

87  Const  V.  Harris,  Turn.  &  R.  517,         «»  Roberts  v.  Eberhardt,  1  Kay  148, 
24  Rev.  Rep.  108.  23  L.  J.  Ch.  201,  2  W.  R.  125. 

88  Hall  V.  Hall,  3  Macru  &  G.  79,  20 
L.  J.  Ch.  585. 


§    789  LAW    OF    PARTNERSHIP  1092 

the  cause,  upon  the  ground  that  plaintiff  had  an  interest  in  the 
funds  in  question,  and  that  these  funds  were  in  danger  of  being 
lost/'"'  But  ordinarily  a  receivership  will  not  be  appointed  un- 
less a  dissolution  is  sought."^ 

§  789.  Receiverships  on  account  of  misconduct  of  a  part- 
ner.— It  is  largely  within  the  discretion  of  the  court  as  to 
whether  a  receiver  will  be  appointed  in  partnership  matters. °^ 
There  is  nothing  which  gives  a  partner  a  more  undoubted  right 
to  a  receiver  for  the  firm  business  than  the  misconduct  of  his 
partner  therein,  especially  when  this  misconduct  wastes  or  tends 
toward  wasting  the  firm  assets.  Thus,  in  a  leading  case'^^  one 
partner,  Augustus  Hoexter,  had  brought  about  through  his  mis- 
conduct, loss  and  waste  in  the  firm  property.  In  the  suit  grow- 
ing out  of  the  matter,  the  court  laid  down  the  following  state- 
ment :  "This  appeared  to  be  a  very  plain  case  for  the  prompt 
intervention  of  a  court  of  equity  and  for  the  sequestration  of 
the  firm  assets  in  the  hands  of  a  receiver,  upon  facts  showing 
the  condition  of  embarrassment  in  the  affairs  of  the  firm,  which 
Augustus  Hoexter  had  brought  about  by  his  misconduct."  In 
case  of  the  death  of  one  of  the  partners,  the  surviving  partner 
has  no  right  to  hold  and  mingle  the  firm  assets  with  his  own, 
so  that  they  can  not  be  distinguished,  unless  he  gives  bond  and 
also  conforms  to  statutory  provisions,  and  the  administrator  of 
the  deceased  partner  may  have  a  receiver  appointed,  unless  such 
bond  be  furnished.^*  It  may  be  here  stated,  that  not  every 
little  act  of  misconduct  or  of  difference  between  the  partners 
will  constitute  grounds  for  the  appointment  of  a  receiver.  The 
acts  must  be  so  great  or  of  such  importance  that  the  conduct 

90  Evans  v.  Coventry,  5  DeG.,  M.  &     W.  786;  Ramsey  v.  Bird   (Tex.),  147 
G.  911.  S.   W.  671;    Goodman  v.   Whitcomb, 

91  Campbell  v.  Rich  Oil  Co.,  29  Ky.     1  Jac.  &  W.  589. 

L.  716,  96  S.  W.  442;  Sieghortner  v.  92  Gilktt  v.  Higgins,   142  Ala.  444, 

Weissenborn,  20  N.  J.  Eq.  172;  Mc-  38  So.  664. 

Elvey  V.  Lewis,  76  N.  Y.  2i72 ;  Garret-  93  Continental  Nat.  Bank  v.  Strauss, 

son  V.  Weaver,  3  Edw.  (N.  Y.)  385;  137  N.  Y.  148,  32  N.  E.  1066. 

Sloan  v.  Moore,  Z7  Pa.  St.  217 ;  Style  94  Jennings  v.  Chandler,  10  Wis.  21. 

v.  Lantrip    (Tex.  Civ.  App.),   171    S. 


1093 


ACTIONS    BETWEEN    PARTNERS 


§  789 


or  dissolution  of  the  firm  business  will  be  seriously  impaired 
thereby.  Equity  will  not  lend  the  aid  of  its  strong  arm  to  adjust 
mere  lapses  of  good  feeling,  or  of  proper  interest  in  the  firm 
business,  but  looks  for  some  gross  abuse  by  one  or  more  partners 
of  their  firm  duties. °^  Misconduct  may  be  ground  for  a  receiver- 
ship, such  as  collusion  with  debtors;^''  carrying  on  a  separate 
trade  for  himself  with  partnership  property  f^  making  away 
with  partnership  assets  f^  mismanagement  endangering  the 
whole  business;"^  fraudulent  confusion  of  debts  with  those 
of  other  firms  of  which  some  of  the  partners  were  members, 
and  confessing  judgments  in  favor  of  relatives  ;'^  danger  of 
loss  or  destruction  of  firm  property,"  or  general  disregard 
of  duty  of  good  faith  to  partners  as  implied  in  every  part- 
nership contract.^  The  exclusion  of  a  partner  from  the  busi- 
ness is  always  ground  for  a  receivership.*  If  a  partnership  is 
alleged,  where  a  receiver  is  asked,  it  is  usually  held  that  a  court 
will  not  appoint  a  receiver  until  proof  is  made  of  the  existence 


95  0'Bryan  v.  Gibbons,  2  Mel.  Ch. 
9 ;  Loomis  v.  McKenzIe,  31  Iowa  425 ; 
McEIvey  v.  Lewis,  76  N.  Y.  Z7Z; 
Henn  v.  Walsh,  2  Edw.  Ch.  (N.  Y.) 
129;  Sloan  v.  Moore,  2,7  Pa.  St.  217; 
Roberts  v.  Eberhardt,  1  Kay  148,  23 
L.  J.  Ch.  201,  2  W.  R.  125. 

^^  Estwick  V.  Conningsby,  1  Vern. 
118. 

37  Harding  v.  Glover,  18  Ves.  281. 

38  Evans  v.  Coventry,  5  DeGex,  M. 
&  G.  911. 

93  Reinhardt  v.  Reinhardt,  134  App. 
Div.  440,  119  N.  Y.  S.  285;  Cohn  v. 
Wahn,  117  N.  Y.  S.  6Z?>;  De  Tastet 
v.  Bordicu,  2  Brown  Ch.  272n. 

1  Watson  v.  Bettman,  88  Fed.  825. 

2  Holtenstein  v.  Conrad,  9  Kans. 
435. 

3  Boj'ce  V.  Burchard,  21  Ga.  74 ; 
Maher  v.  Bull,  44  111.  97;  Saylor  v. 
Mocklie,  9  Iowa  209 ;  Haight  v.  Burr, 
19  Md.  130;  Rolfe  v.  Burnham,  110 
Mich.  660,   68  N.  W.  980;    Sutro  v. 


Wagner,  23  N.  J.  Eq.  388;  Evans  v. 
Evans,  9  Paige  (N.  Y.)  178;  Webb 
V.  Allen,  15  Tex.  Civ.  App.  605,  40 
S.  W.  342;  Cole  v.  Price,  22  Wash. 
18,  60  Pac.  153. 

4  Einstein  v.  Schnebly,  89  Fed.  540; 
Gillett  V.  Higgins,  142  Ala.  444,  38 
So.  664 ;  Leeds  v.  Townsend,  74  111. 
App.  444;  Barnes  v.  Jones,  91  Ind. 
161 ;  Hottenstein  v.  Conrad,  9  Kans. 
435;  Katz  v.  Brewington,  71  Md.  79, 
20  Atl.  139;  Heathcot  v.  Ravenscroft, 
6  N.  J.  Eq.  113;  Marten  v.  Van 
Schaick,  4  Paige  (N.  Y.)  479;  Van 
Rensselaer  v.  Emery,  9  How.  Pr.  (N. 
Y.)  135;  McElvey  v.  Lewis,  76  N.  Y. 
372) ;  Richards  v.  Baurman,  65  N.  Car. 
162;  Sloan  v.  Moore,  27  Pa.  St.  217; 
Shulte  V.  Hoffman,  18  Tex.  678; 
Rische  v.  Rische,  46  Tex.  Civ.  App. 
23,  101  S.  W.  849;  Holder  v.  Shelby 
(Tex.  Civ.  App.),  118  S.  W.  590; 
Wilson  v.  Greenwood,  1  Swanst.  471 ; 
Goodman  v.  Whitcomb,  1  Jac.  &  W. 


§  789 


LAW    OF    PARTNERSHIP 


1094 


of  a  partnership.^  If  the  partnership  has  been  dissolved,  the 
rule  is  not  applied  so  strictly,  and  a  receiver  will  be  appointed 
upon  a  smaller  showing.  Receiverships  after  dissolution  were 
treated  in  a  former  chapter.® 


589 ;  Rowe  v.  Wood,  2  Jac.  &  W.  558, 
22  Rev.  Rep.  208;  Const  v.  Harris, 
Turn.  &  R.  525,  24  Rev.  Rep.  108; 
Kershaw^  v.  Matthews,  2  Russ.  62,  26 
Rev.   Rep.    13 ;    Blakeney   v.    Dufaur, 

15  Beav.  40;  Hale  v.  Hale,  4  Beav. 
369.  See  also  Sheppard  v.  Oxenford, 
1  Kay  &  J.  491 ;  Peacock  v.  Peacock, 

16  Ves.  49,  10  Rev.  Rep.  138. 

5  Leeds   v.  Townsend,  74  111.  App. 


444 ;  Hobart  v.  Ballard,  31  Iowa  521 ; 
Hottenstein  v.  Conrad,  9  Kans.  435 ; 
Guyton  v.  Flack,  7  Md.  398 ;  McCarty 
V.  Stanwix,  16  Misc.  132,  38  N.  Y. 
S.  820 ;  Baxter  v.  Buchanan,  3  Brewst. 
(Pa.)  435;  Rische  v.  Rische,  46  Tex. 
Civ.  App.  23,  101  S.  W.  849;  Peacock 
v.  Peacock,  16  Ves.  49. 
<-'  See  ch.  19. 


CHAPTER  XXV 


ACTIONS    INVOLVIXG    PARTNERS    AND    PARTNERSHIPS 


SECTIOX 

795.  Parties  in  actions  involving  part- 

nerships. 

796.  Plaintiffs — General  rule. 

797.  Plaintiffs — Nominal  partners. 

798.  Plaintiffs — Dormant  partners. 

799.  Plaintiffs — Wrongdoing   partner. 

800.  Collusion    of    third    parties    and 

partners. 

801.  One  partner  suing  for  all. 

802.  Action  on  contract  made  in  name 

of  one  partner. 

803.  Plaintiffs     where     contract     as- 

signed. 

804.  Surviving  partner  as  plaintiff. 

805.  Plaintiffs  in  tort  actions. 

806.  Defendants     in     action     against 

partnership — In  general. 

807.  Defendants  —  Wife  —  Dower  in- 

terest. 

808.  Defendants  —  Representatives  of 

deceased  partner. 

809.  Defendants — Outgoing     and     in- 

coming partners. 

810.  Defendants — Dormant  and  nom- 

inal partners. 

811.  Nonjoinder     of     defendants     in 

contract  obligations. 

812.  Nonjoinder     of     defendants     in 

tort. 

813.  Suit  against  one  partner. 

814.  Equitable  actions  involving  part- 

nerships. 

815.  Parties  in  equitable  actions. 

816.  Venue. 


SECTION 

817.  Process  and  service. 

818.  Appearance. 

819.  Dismissal  and  discontinuance. 

820.  Attachment  and  garnishment. 

821.  Charging    partner's    interest    un- 

der Uniform  Partnership  Act. 

822.  Arrest. 

823.  Injunction  and  receiver. 

824.  Defenses. 

825.  Trial. 

826.  Judgment. 

827.  Execution. 

828.  Injunction    against    enforcement 

of  judgment  against  firm. 

829.  Injunction  against  sale  of  part- 

nership   property,    under    levy 
against  one  partner. 

830.  Levy  on  partnership  property  for 

individual  debt  of  a  partner. 

831.  Procedure  in  sale  of  partner's  in- 

terest for  one  partner's  debt. 

832.  Interest  taken  by  purchaser  upon 

sale    of    partnership    property 
for  individual  partner's  debt. 

833.  Levy  of  execution  on  firm  prop- 

erty for  individual  debt — Uni- 
form Partnership  Act. 

834.  Action  after  a  change  in  mem- 

bership. 

835.  Action   by  or   against   estate   of 

surviving  partner. 

836.  Proceeding  against  estate  of  de- 

ceased partner. 

837.  Surety  on  partnership  bond. 


§  795.     Parties  in  actions  involving  partnerships. — One  of 
the  first  matters  to  be  considered,  and  one  of  the  most  important, 

1095 
19 — Row.  ON  Partn. — Vol.  2 


§  795 


LAW    OF    PARTNERSHIP 


1096 


in  actions  involving  partners  and  partnerships,  is  that  of  proper 
and  necessary  parties,  plaintiff  and  defendant.  In  the  first  place, 
should  the  firm  itself  or  the  members  thereof  be  named?  This 
will  depend  somewhat,  perhaps,  in  each  jurisdiction  upon  the 
view  adopted  in  that  jurisdiction  regarding  partnership  entity, 
but  the  more  general  rules  are  stated  below.  The  rule  at  com- 
mon law,  which  is  still  the  rule  except  where  modified  by  statute, 
is  that  partnerships  can  not  sue  or  be  sued  in  the  firm  name,  and 
in  suits  by  or  against  a  partnership,  each  partner  must  be  made 
a  party  by  his  individual  name,  and  all  the  partners  must  join 
or  be  joined.^     So  in  many  cases,  where  a  judgment  has  been 


1  Great  Southern  Fire  Proof  Ho- 
tel Co.  V.  Jones,  177  U.  S.  449,  44 
L.  ed.  842,  20  Sup.  Ct.  690;  Chapman 
V.  Barney,  129  U.  S.  677,  32  L.  ed. 
800,  9  Sup.  Ct.  426;  Bruett  v.  F.  C. 
Austin  Drainage  Excavator  Co.,  174 
Fed.  668;  Carnegie  v.  Hulbert,  10 
U.  S.  App.  454,  53  Fed.  10,  3  C.  C. 
A.  391 ;  Adams  v.  May,  27  Fed.  907 ; 
Metal  Stamping  Co.  v.  Crandall, 
Fed.  Cas.  No.  9493c;  Phillips  v. 
Holmes,  165  Ala.  250,  51  So.  625; 
Johnston  v.  First  Nat.  Bank,  145 
Ala.  378,  40  So.  78;  Simmons  v. 
Titche,  102  Ala.  317,  14  So.  786;  Reid 
V.  McLeod,  20  Ala.  576;  Harrison 
V.  McCormick,  69  Cal.  616,  11  Pac. 
456;  Oilman  v.  Cosgrove,  22  Cal. 
356;  Roberts  v.  Rowan,  2  Harr. 
(Del.)  314;  Richardson  v.  Smith,  21 
Fla.  336;  DeLeon  v.  Heller,  77  Ga. 
740;  Jones  v.  Watson,  63  Ga.  679; 
Hinman  v.  Andrews  Opera  Co..  49 
111.  App.  135;  Page  v.  Brant,  18  111. 
37;  Pollock  v.  Dunning,  54  Ind.  115; 
Davis  V.  Hubbard,  4  Blackf.  (Ind.) 
50;  Hughes  v.  Walker,  4  Blackf. 
(Ind.)  SO;  Percival  v.  Groff,  8 
Blackf.  (Ind.)  233;  Armstrong  v. 
Robinson,  5  Gill  &  J.  (Md.)  412; 
Barber  v.  Smith,  41  Mich.  138,  1  N. 
W.  992;   Smith  v.  Canfield,  8  Mich. 


493;  McCartey  v.  Kittrell,  55  Miss. 
253;  Blackwell  v.  Reid,  41  Miss.  102; 
Van  Natta  v.  Harroun  Real  Estate 
Co.,  221  Mo.  373,  120  S.  W.  738; 
Revis  V.  Lamme,  2  Mo.  207;  Mitch- 
ell V.  Railton,  45  Mo.  App.  273;  Con- 
rades  v.  Spink,  38  Mo.  App.  309; 
Faulkner  v.  Whitaker,  15  N.  J.  L. 
438;  Crandall  v.  Denny,  2  N.  J.  L. 
137;  Bentley  v.  Smith,  3  Cai.  (N. 
Y.)  170;  Crawford  v.  Collins,  45 
Barb.  269,  30  How.  Pr.  (N.  Y.)  398 
Smith  V.  Hoover,  39  Ohio  St.  249 
Haskins  v.  Alcott,  13  Ohio  St.  210 
Kamm  v.  Harker,  3  Ore.  208;  Por- 
ter V.  Cresson,  10  Serg.  &  R.  (Pa.) 
257;  Martin  v.  Kelly,  Cheves  L.  (S. 
Car.)  215;  Harris  v.  Water  &  Light 
Co.,  108  Tenn.  245,  67  S.  W.  811; 
Marshall  v.  Hill,  8  Yerg.  (Tenn.) 
101;  Frank  v.  Tatum,  87  Tex.  204, 
25  S.  W.  409;  Western  Grocery  Co. 
V.  Jata  (Tex.  Civ.  App.),  173  S.  W. 
518;  Style  v.  Lantrip  (Tex.  Civ. 
App.),  171  S.  W.  786;  Houston  &c. 
R.  Co.  V.  Corsicana  Fruit  Co.  (Tex. 
Civ.  App.),  170  S.  W.  849;  Law 
Reporting  Co.  v.  Texas  Grain  &c.  Co. 
(Tex.  Civ.  App.),  168  S.  W.  1001; 
Western  U.  Tel.  Co.  v.  Hirsch  (Tex. 
Civ.  App.),  84  S.  W.  394;  Kingsland 
&  D.  Mfg.  Co.  V.  Mitchell  (Tex.  Civ. 


1097  Actions  generally  §  795 

rendered  for  or  against  a  partnership  by  the  firm  name,  it  has 
been  reversed  on  appeal."  Some  states,  recognizing  the  firm 
entity,  have,  by  statutory  provision,  expressly  granted  the  right 
to  sue  in  the  firm  name.  The  Ohio  statute  governing  this  ques- 
tion, which  is  typical  of  most  statutes  on  the  subject,  is  as  fol- 
lows: "A  partnership  formed  for  the  purpose  of  carrying  on 
a  trade  or  business  in  this  state,  or  holding  property  therein, 
may  sue  or  be  sued  by  the  usual  or  ordinary  name  which  it  has 
assumed,  or  by  which  it  is  known;  and  in  such  case  it  is  not 
necessary  to  allege  or  prove  the  names  of  the  individual  members 
thereof."^  The  states  which  have  by  statute  adopted  this  rule 
have  done  so  in  opposition  to  the  general  rule,  and  the  methods 
laid  down  in  the  statutes  must  be  clearly  followed,  and  the  stat- 
utes strictly  construed.*  It  has  been  held  in  some  cases  that 
the  proper  manner  of  pleading  in  such  a  case  is  to  aver,  in  the 
body  of  the  petition,  the  existence  of  the  partnership,  and  that 
it  is  a  partnership  formed  for  the  purpose  of  doing  business  in 
the  state. ^  It  is,  however,  also  held  that  it  is  sufficient  to  de- 
scribe the  firm  as  "a  firm  doing  business  under  that  name  in  the 

state  of "  (naming  the  state),  instead  of  stating  that  it  was 

formed  for  the  purpose,  etc.,  the  fact  that  it  is  actually  doing 
business  in  the  state,  being  the  important  matter  to  be  consid- 
ered.*'  The  reason  for  this  is  plain,  as  a  foreign  partnership  can 

App.),   Z6  S.   W.   757;   Houghton  v.  10  N.   J.   L.  295;    Burns   v.    Hall,   3 

Puryear,    10  Tex.    Civ.  App.   383,   30  N.    J.    L.   984;    McCredy   v.    Vanne- 

S.  W.  583 ;  Behan  V.  Long  (Tex.  Civ.  man,    3    N.    J.    L.    870;    Crandall    v. 

App.),  30  S.  W.  380;  Pate  v.  Bacon,  Denny,    2    N.    J.    L.    137;    Seely    v. 

6  Munf.   (Va.)  219;  Olson  v.  Veazie,  Schenck,  2  N.  J.  L.  71;   Dunham  v. 

9  Wash.  481,  2>7  Pac.  677,  43  Am.  St.  Shindler,  17  Ore.  256,  20  Pac.  326. 

855;  King  v.  Harrison,  8  T.  R.  508;  3  Gen.  Code  Ohio,  §  11260. 

Walker  v.  Rooke,  6  Q.  B.  D.  631,  50  *  King    v.    Randlett,    3Z    Cal.    318; 

L.  J.  Q.  B.  470.  Haskins  v.  Alcott,  13  Ohio  210. 

2  Rhea   v.    Rawlings,    3    Cranch    C.  ^  Pryer  v.  Breeze,   16  Colo.  323,  26 

C.   256,    Fed.    Cas.    No.    11737;    Sim-  Pac.  817;  Beers  v.  Gurney,   14  Ohio 

mons  V.  Titche,  102  Ala.  317,  14  So.  Cir.  Ct.  82.    See  also  Kinkead's  Code 

786;    Moore   v.   Burns,   60   Ala.   269;  PI.   (2nd  ed.).  p.  1069. 

Lanford  v.  Patton,  44  Ala.  584 ;  Reid  ^  Globe    Rolling    Mill    v.    King,    13 

V.  McLeod,  20  Ala.  576 ;  Day  v.  Cush-  Ohio   Dec.   744,   2   Cin.    S.   C.   R.   21. 

man,  2   111.   475 ;    Livingston  v.   Har-  See  also  Chamberlain  Bkg.  House  v. 

vey,  10  Ind.  218;  Tomlinson  v.  Burke,  Noyes,  3  Nebr.  550,  92  N.  W.  175. 


§  796 


LAW    OF    PARTNERSHIP 


1098 


not  sue  by  favor  of  the  statute,  but  must  sue  In  the  individual 
names  of  the  partners/ 

§  796.  Plaintiff — General  rule. — The  general  rule  at  com- 
mon law  is  that  in  actions  on  partnership  contracts,  since  these 
are  joint  contracts,  all  persons  who  were  partners  at  the  time  must 
join  as  plaintiffs  by  their  individual  names.®  In  some  states  the 
rule  has  been  changed  by  statute  and  partnerships  may  sue  or 
be  sued  in  the  firm  names. ^     In  jurisdictions  where  suit  may 


■^  Brownson  v.  Metcalfe,  1  Handy 
(Ohio)    188. 

8  Seymour  v.  Western  R.  Co.,  106 
U.  S.  320,  27  L.  ed.  103,  1  Sup.  Ct. 
123 ;  Carne  v.  McLane,  Fed.  Cas.  No. 
2416,  1  Cranch  (C.  C.)  351;  Sim- 
mons V.  Titche,  102  Ala.  317,  14  So. 
786;  Garner  v.  Tiffany,  Minor 
(Ala.)  167;  Coleman  v.  Fisher,  67 
Ark.  27,  53  S.  W.  671 ;  Molen  v.  Orr, 
44  Ark.  488;  Thompson  v.  McDon- 
ald. 84  Ga.  5,  10  S.  E.  448;  Ameri- 
can Cent.  R.  Co.  v.  Miles,  52  111.  174; 
Snodgrass  v.  Broadwell,  2  Litt.  (Ky.) 
353;  Creel  v.  Bell,  2  J.  J.  Marsh. 
(Ky.)  309;  Dorr  v.  Jouet,  20  La. 
Ann.  27 ;  Gallot  v.  McCluskey,  18  La. 
Ann.  259 ;  Bumpus  v.  Turgeon,  98 
Maine  550,  57  Atl.  883 ;  White  Moun- 
tain Bank  v.  West,  46  Maine  15; 
Day  V.  Swann,  13  Maine  165 ;  Smith 
V.  Crichton,  33  Md.  103 ;  Armstrong 
V.  Robinson,  5  Gill  &  J.  (Md.)  412; 
May  V.  Western  Union  Tel.  Co.,  112 
Mass.  90;  Reed  v.  Hanover  Branch 
R.  Co.,  105  Mass.  303;  Halliday  v. 
Doggett,  6  Pick.  (Mass.)  359;  Page 
V.  Wolcott,  15  Gray  (Mass.)  536; 
McDonnell  v.  Ford,  87  Mich.  198,  49 
N.  W.  545 ;  Iroquois  Mfg.  Co.  v. 
Annan-Burg  Milling  Co.  (Mo.  App.), 
161  S.  W.  320;  Burlington  &c.  R. 
Co.  V.  Dick,  7  Nebr.  242;  Tinkum 
V.  O'Neale,  5  Nev.  93 ;  Pearson  v. 
Parker,  3  N.  H.  366 ;  Wright  v.  Will- 


iamson, 3  N.  J.  L.  532 ;  Seely  v. 
Schenck,  2  N.  J.  L.  71 ;  Rosenberg 
V.  Block,  50  N.  Y.  Super.  Ct.  357; 
Waterbury  v.  Head,  12  N.  Y.  St. 
361;  Dob  v.  Halsey,  16  Johns.  (N. 
Y.)  34,  8  Am.  Dec.  293;  Brown  v. 
Bostian,  6  Jones  L.  (N.  Car.)  1; 
Wells  V.  Mitchell,  1  Ired.  L.,  23  N. 
Car.  484,  35  Am.  Dec.  757;  Choteau 
V.  Raitt,  20  Ohio  132 ;  Wilson  v.  Wal- 
lace, 8  Serg.  &  R.  (Pa.)  53;  Smith  v. 
Walker,  6  S.  Car.  169;  Speake  v. 
Prewitt,  6  Tex.  252 ;  Amarillo  Com- 
mercial Co.  V.  Chicago,  R.  I.  &  G. 
Ry.  Co.  (Tex.  Civ.  App.),  140  S.  W. 
377;  Hines  v.  Dean,  1  White  &  W. 
Civ.  Cas.  Ct.  App.  (Tex.)  690;  De- 
Wit  V.  Lander,  72  Wis.  120,  39  N. 
W.  349;  Miller  v.  Price,  20  Wis.  117; 
Moller  V.  Lambert,  2  Campb.  548; 
Teed  v.  Elworthy,  14  East  210. 

9  Illinois  Cent.  R.  Co.  v.  Avery 
(Ala.),  67  So.  414;  Levystein  v.  Ger- 
son  &c.  Co.,  147  Ala.  251,  41  So. 
774;  Illinois  Cent.  R.  Co.  v.  Kilgore 
12  Ala.  App.  358,  67  So.  707 ;  Harrison 
v.  McCormick,  69  Cal.  616,  11  Pac. 
456;  United  States  Express  Co.  v. 
Bedbury,  34  111.  459;  Van  Dyk  v. 
Mosterdt  (Iowa),  153  N.  W.  206; 
Sweet  v.  Ervin,  54  Iowa  101,  6  N.  W. 
156;  Dimond  v.  Minnesota  Sav.  Bank, 
70  Minn.  298,  73  N.  W.  182;  Gale 
V.  Townsend,  45  Minn.  357,  47  N. 
W.    1064;    Leach   v.    Milburn   Wagon 


1099 


ACTIONS    GENERALLY 


§  796 


be  commenced  in  the  firm  name,  through  statutory  provision,  the 
names  of  the  individual  partners  are  not  necessary,  yet,  if  a  firm 
sues  in  the  firm  name  in  such  jurisdictions,  an  allegation  stating 
the  individual  names  is  immaterial  and  surplusage."  In  those 
states  which  have  not  changed  the  general  rule,  and  which  do 
not  thereby  recognize  the  firm  entity  in  this  relation,  it  is  neces- 
sary that  each  partner  be  made  a  party,  either  as  plaintiff,  or 
if  he  refuses  to  so  join,  then,  under  the  codes,  as  defendant,^ ^ 
with  certain  exceptions,  given  in  succeeding  sections.  Advantage 
may  be  taken  by  demurrer  of  the  fact  that  a  partnership  sues 
by  its  firm  name^"  if  it  appears  on  the  face  of  the  pleading  that 
the  suit  is  so  brought ;^^  or  by  motion  to  dismiss;^*  or  plea  in 
abatement.^^     The  defect  may  be  cured  by  amendment;"   or 


Co.,  14  Nebr.  106,  15  N.  W.  232; 
Burlington  &c.  R.  Co.  v.  Dick,  7 
Nebr.  242;  Martin  v.  District  Ct.,  13 
Nev.  85 ;  Gillig  v.  Lake  Bigler  Road 
Co.,  2  Nev.  214;  Abernathy  v.  Lati- 
more,  19  Ohio  286;  Haskins  v.  Al- 
cott,  13  Ohio  St.  210;  Beers  v.  Gur- 
ney,  7  Ohio  Cir.  Dec.  411 ;  Rice  v. 
Summers,  2  Pa.  Dist.  Rep.  31 ; 
Schweppe  v.  Wellauer,  71  Wis.  19, 
45  N.  W.  17;  Noble  v.  Hudson,  20 
Wyo.  227,  122  Pac.  901;  O'Brien  v. 
Foglesong,  3  Wyo.  57,  31  Pac.  1047; 
Ala.  Code  1907,  §  2506;  Cal.  Code 
Civ.  Proc.  1909,  §  388;  Iowa  Code 
1897,  §  3468;  Mont.  Rev.  Codes  1907, 
§  6497;  Cobbey's  Consol.  Stat. 
(Nebr.)  1903,  §  1023;  Bates  Ann. 
Stat.  (Ohio)  (6  ed.),  §  5011;  Comp. 
Stat.  1910   (Wyo.),  §  4329. 

1°  Connecticut  Fire  Ins.  Co.  v. 
Carnahan,  63  Ohio  258,  58  N.  E. 
805. 

11  Hill  V.  Marsh,  46  Ind.  218 ;  Pog- 
son  V.  Owen,  3  Desaus.  (S.  Car.) 
31;  Hines  v.  Dean,  1  White  &  W. 
Civ.  Cas.  Ct.  App.  (Tex.),  §  690; 
Noonan  v.  Orton,  31  Wis.  265. 

12  Pollock  V.  Dunning,  54  Ind.  115; 
Blackwell    v.    Reid,    41    Miss.    102; 


Bentley  v.  Smith,  3  Caines  (N.  Y.) 
170;  Weisz  v.  Davey,  28  Nebr.  566, 
44  N.  W.  470;  Rogers  v.  Verlander, 
30  W.  Va.  619,  5  S.  E.  487;  Behan 
V.  Long  (Tex.  Civ.  App.),  30  S.  W. 
380. 

13  Morrison  v.  Tate,  1  Met.  (Ky.) 
569;  Armstrong  v.  Robinson,  5  Gill 
&  J.  (Md.)  412;  Brookmire  v.  Rosa, 
34  Nebr.  227,  51  N.  W.  480. 

14  Johnson  v.  First  Nat.  Bank,  145 
Ala.  378,  40  So.  78;  Davis  v.  Hub- 
bard, 4  Blackf.  (Ind.)  50;  Hays  v. 
Lanier,  3  Blackf.  (Ind.)  322;  Fox 
v.  Blue  Grass  Grocery  Co.,  22  Ky, 
L.  1695,  61  S.  W.  265 ;  Mexican  Mill 
V.  Yellow  Jacket  Silver  Min.  Co.,  4 
Nev.  40,  91  Am.  Dec.  510. 

15  Holland  v.  Butler,  5  Blackf. 
(Ind.)  255;  Revis  v.  Lamme,  2  Mo. 
207;  Martin  v.  Kelly,  Cheves  (S. 
Car.)  215;  Marshall  v.  Hill,  8  Yerg. 
(Tenn.)   101. 

1"  Loewenberg  v.  Gilliam,  72  Ark. 
314,  79  S.  W.  1064;  Morrison  v.  Tate, 
1  Met.  (Ky.)  569;  Kleinert  v.  Knoop, 
147  Mich.  387,  110  N.  W.  941 ;  Mor- 
gridge  v.  Stoefer,  14  N.  Dak.  430, 
104  N.  W.  1112. 


796 


LAW    OF    PARTNERSHIP 


1100 


waived  by  failure  to  object."  And  it  has  been  held  that  objec- 
tion after  judgment  is  too  late/^  for  a  judgment  rendered  in  the 
firm  name  is  not  void,  only  irregular,  nor  is  it  subject  to  collateral 
attack."  However,  this  latter  rule  does  not  hold  if  service  was 
defective,  or  all  the  partners  did  not  appear  to  the  action.^"  Al- 
though the  firm  name  may  be  used,  in  the  summons,  it  is  sufficient 
when  the  names  of  the  partners  appear  in  the  body  of  the  com- 
plaint, or  vice  versa.^^  In  Louisiana  the  suit  should  be  in  the  firm 
name  by  the  individual  partners,  naming  them.^^  In  all  cases, 
averments  of  the  facts  necessary  to  bring  the  case  within  the  stat- 
ute should  be  made  in  the  pleading,  in  order  to  show  capacity  to 
sue,  and  if  not  so  done,  the  pleading  is  demurrable. ^^    At  common 


I'' Marget  v.  Wood,  3  Cranch  (C. 
C.)  2,  Fed.  Cas.  No.  9067;  Foreman 
V.  Weil,  98  Ala.  495,  12  So.  815; 
Moore  v.  Watts,  81  Ala.  261,  2  So. 
278;  Spaulding  Mfg.  Co.  v.  God- 
bold,   92   Ark.   63,    121    S.   W.    1063, 

29  L.  R.  A.  (N.  S.)  283;  Gilman  v. 
Cosgrove,  22  Cal.  356;  Mitchell  v. 
Railton,  45  Mo.  App.  273.  Conrades 
V.  Spink,  38  Mo.  App.  309;  Daniels 
V.  Roanoke  R.  &  Lumber  Co.,  158 
N.  Car.  418,  74  S.  E.  331 ;  Brownson 
V.  Metcalf,  1  Handy  (Ohio)  188; 
Porter  v.  Cresson,  10  Serg.  &  R. 
(Pa.)  257;  Easterwood  v.  Burnitt 
(Tex.  Civ.  App.),  126  S.  W.  934. 

1*  Namee  v.  Huffman,  3  Har. 
(Del.)  425;  Cady  v.  Smith,  12  Nebr. 
628,  12  N.  W.  95 ;  Justice  v.  Meeker, 

30  Pa.  Super.  Ct.  207;  Seitz  v.  Buf- 
fum,  14  Pa.  St.  69;  Pate  v.  Bacon, 
6  Munf.  (Va.)  219.  Compare  Ope- 
lika  V.  Daniel,  59  Ala.  211. 

19  Ives  V.  Muhlenburg,  135  111. 
App.  517;  Mackenzie  v.  School  Trus- 
tees, 72  Ind.  193 ;  Livingston  v.  Har- 
vey, 10  Ind.  218;  Jones  v.  Martin.  5 
Blackf.  (Ind.)  351 ;  Hays  v.  Lanier, 
3  Blackf.  (Ind.)  322;  Smith  v.  Che- 
nault,  48  Tex.  455 ;  Corder  v.  Steiner 


(Tex.  Civ.  App.),  54  S.  W.  277; 
Stephens  v.  Turner,  9  Tex.  Civ.  App. 
623,  29  S.  W.  937;  Frisk  v.  Reigel- 
man,  75  Wis.  499,  43  N.  W.  1117,  44 
N.  W.  766,  17  Am.  St.  198;  Bennett 
v.  Child,  19  Wis.  362,  88  Am.  Dec. 
692. 

20  Moses  P.  Johnson  Machinery 
Co.  V.  Watson,  57  Mo.  App.  629; 
Cobble  V.  Farmers'  Bank,  63  Ohio 
St.  528,  59  N.  E.  221;  Perry-Rice 
Grocery  Co.  v.  W.  E.  Craddock  Gro- 
cery Co.,  34  Tex.  Civ.  App.  442,  78 
S.  W.  966.  Contra :  Neiswanger  v. 
Ord,  81  Kans.  63,  105  Pac.  17,  29  L. 
R.  A.  (N.  S.)  287n. 

21  Greer  v.  Liipfert  Scales  Co.,  156 
Ala.  572,  47  So.  307;  Hatcher  v. 
Branch,  141  Ala.  410,  37  So.  690; 
Putman  v.  Wheeler,  65  Tex.  522 ;  De- 
Walt  V.  Zeigler,  9  Tex.  Civ.  App.  82, 
29  S.  W.  60. 

22  Wolf  V.  New  Orleans  Tailor- 
Made  Pants  Co.,  52  La.  Ann.  1357, 
27  So.  893. 

23  Burlington  &c.  R.  Co.  v.  Dick, 
7  Nebr.  242;  Haskins  v.  Alcott,  13 
Ohio  210 ;  Sanders  v.  Keber,  28  Ohio 
St.  630. 


1101 


ACTIONS    GENERALLY 


797 


law  nonjoinder  of  all  partners  as  plaintiffs,  in  action  ex  con- 
tractu, may  be  raised  as  a  ground  of  nonsuit  because  of  vari- 
ance;-* or  pleaded  in  abatement;-^  or  if  apparent  on  the  face 
of  the  record,  taken  advantage  of  by  demurrer,  motion  in  arrest 
or  error.'*^  In  tort  the  defect  can  be  taken  advantage  of  only 
by  plea  in  abatement."^  Under  the  codes  nonjoinder  of  a  partner 
as  plaintiff  should  be  raised  by  demurrer  if  apparent  of  rec- 
ord ;^^  or  if  not  so  apparent,  by  answer;-^  else  the  objection  is 
deemed  waived.^^'  Ordinarily  one  partner  can  not  sue  alone  on 
a  firm  contract  not  executed  in  his  own  name,^^ 

§  797.     Plaintiffs — Nominal  partners. — The  general  rule  is 
that  one  who  is  a  nominal  partner  only,  is  not  a  real  principal 


24  Jordan  v.  Wilkins,  3  Wash.  (C. 
C.)  110,  Fed.  Cas.  No.  7527;  Caine 
V.  McLane,  1  Cranch  (C.  C.)  351, 
Fed.  Cas.  No.  2416;  Smith  v.  Hunt, 
2  Stew.  (Ala.)  222;  Hicks  v.  Bran- 
ton,  21  Ark.  186;  PhilHps  v.  Penny- 
wit,  1  Ark.  59;  Snell  v.  DeLand,  43 
111.  323;  Mitchell  v.  Dall,  2  Har.  & 
G.  (Md.)  159;  Smith  v.  Crichton,  33 
Md.  103 ;  Halliday  v.  Dogget,  6  Pick. 
(Mass.)  359;  Burlington  &c.  R.  Co. 
V.  Dick,  7  Nebr.  242;  True  v.  Cong- 
don,  44  N.  H.  48;  Chamberlin  v. 
Hite,  5  Watts  (Pa.)  373;  Wilson 
V.  Wallace,  8  Serg.  &  R.  (Pa.)  53; 
Ball  V.  Strohecker,  2  Speers  (S. 
Car.)  364;  Hilliker  v.  Loop,  5  Vt. 
116,  26  Am.  Dec.  286. 

2s  Garner  v.  Tiffany,  Minor  (Ala.) 
167;  Phillips  V.  Pennywit,  1  Ark.  59; 
Chamberlin  v.  Hite,  5  Watts  (Pa.) 
373;  Hilliker  v.  Loop,  5  Vt.  116,  26 
Am.  Dec.  286. 

26  Smith  V.  Hunt,  2  Stew.  (Ala.) 
222;  Hicks  v.  Branton,  21  Ark.  186; 
Burlington  &c.  R.  Co.  v.  Dick,  7 
Nebr.  242. 

27  True  V.  Congdon,  44  N.  H.  48; 
Deal  V.  Bogue,  20  Pa.  St.  228,  57  Am. 
Dec.    702 ;     Story    v.    Richardson,    6 


Bing.  N.  Cas.  123;  Addison  v.  Over- 
end,  6  T.  R.  766. 

2s  Gilman  v.  Cosgrove,  22  Cal.  356; 
Carico  v.  Moore,  4  Ind.  App.  20,  29 
N.  E.  928;  Boyd  v.  Platner,  5  Mont. 
226,  2  Pac.  346;  Green  v.  Lippincott, 
53  How.  Pr.  (N.  Y.)  33;  Belshaw  v. 
Colie,  1  E.  D.  Smith  (N.  Y.)  213; 
Gill  V.  Bickel,  10  Tex.  Civ.  App.  67, 

30  S.  W.  919. 

29  Karelsen  v.  Sun  Fire  Office,  45 
Hun  144,  9  N.  Y.  St.  831;  Dickin- 
son V.  Vanderpoel,  2  Hun  (N.  Y.) 
626;  Zabriskie  v.  Smith,  13  N.  Y. 
322,  64  Am.  Dec.  551. 

30  Bibb  V.  Allen,  149  U.  S.  481,  37 
L.  ed.  819,  13  Sup.  Ct.  950;  Molen 
V.  Orr,  44  Ark.  486 ;  Carico  v.  Moore, 
4  Ind.  App.  20,  29  N.  E.  928;  Conk- 
lin  V.  Fox,  3  Mont.  208;  Parchen  v. 
Peck,  2   Mont.   567;   Abbe  v.   Clark, 

31  Barb.  (N.  Y.)  238;  Zabriskie  v. 
Smith,  13  N.  Y.  322,  64  Am.  Dec. 
551 ;  Browning  v.  Marvin,  22  Hun 
(N.  Y.)  547;  Belshaw  v.  Colie,  1 
E.  D.  Smith  (N.  Y.)  213;  Clark  v. 
Miller,  4  Wend.  (N.  Y.)  628;  Cald- 
well V.  Devinney,  4  Cin.  Wkly.  Lav/ 
Bui.  117,  7  Ohio  Dec.   (Reprint)   599. 

31  Tallapoosa  County  Bank  v.   Sal- 


§  798 


LAW    OF    PARTNERSHIP 


1102 


nor  a  real  party  in  interest,  and  need  not  as  such  be  joined  as  co- 
plaintiff,  for  although  his  name  appears  as  a  partner,  he  really 
takes  no  part  in  the  partnership  business  or  affairs,  and  has  no 
real  interest  in  the  action,  since  he  merely  permits  the  use  of 
his  name.^^  However,  a  nominal  partner  may  be  a  proper  plain- 
tiff, though  not  a  necessary  one  in  actions  by  the  firm.^^ 

§  798.  Plaintiffs — Dormant  partners. — A  dormant  part- 
ner in  a  firm  (aside  from  statute)  need  not  be  made  a  party 
plaintiff  in  a  suit  by  ostensible  partners  in  behalf  of  the  firm, 
provided  there  was  no  privity  of  contract  between  him  and  the 
defendant,^*  unless,  it  has  been  held,  he  was  the  sole  survivor,^^ 
the  general  rule  being  that  the  sole  survivor  of  a  partnership 
should,  in  such  a  case,  commence  the  action  as  such  surviving 
partner,  and  he  need  not  join  the  representative  of  the  deceased 
partner."^  It  is  said  the  reason  for  the  rule  requiring  partners 
to  join  as  plaintiffs  is  to  prevent  judgments  in  favor  of  different 
partners  in  separate  suits  and  this  could  not  apply  to  dormant 


mon,  12  Ala.  App.  589,  68  So.  542; 
Roller  V.  McKinney,  159  N.  Car.  319, 
74  S.  E.  966. 

32  Phillips  V.  Pennywit,  1  Ark.  59 ; 
Lasher  v.  Colton,  225  111.  234,  80  N. 
E.  22,  8  Ann.  Cas.  367,  note;  Hatch 
V.  Wood,  43  N.  H.  633;  Waite  v. 
Dodge,  34  Vt.  181 ;  Wetherill  v.  Mc- 
Closkey,  28  W.  Va.  195 ;  Kell  v.  Nain- 
by,  10  B.  &  C.  20,  21  E.  C.  L.  20; 
Harrison  v.  Fitzhenry,  3  Esp.  238; 
Glossop  V.  Colman,  1  Stark.  21,  2  E. 
C.  L.  20;  Teed  v.  Elworthy,  14  East 
210;  Spurr  v.  Cass,  L.  R.  5  Q.  B. 
656,  39  L.  J.  Q.  B.  24,  23  L.  T.  409. 
See  also  Cox  v.  Hubbard,  4  C.  B. 
317,  56  E.  C.  L.  317;  Beudel  v.  Hett- 
rick,  45  How.  Pr.  198,  35  N.  Y.  Sup. 
Ct.  405 ;  Parsons  v.  Crosby,  5  Esp. 
199;  Davenport  v.  Rackstrow,  1  C. 
&  P.  89;  3  Bates  PI.,  Pr.  &  Forms, 
p.  2376. 

33  Phoenix    Ins.    Co.    v.    Hamilton, 


14  Wall.   (U.  S.)  504,  20  L.  ed.  729; 
Jones  V.  Howard,  53  Miss.  707. 

34  St.  Mary's  Bank  v.  St.  John,  25 
Ala.  566;  McCabe  v.  Morrison,  2 
Har.  (Del.)  66;  Council  v.  Teal,  122 
Ga.  61,  49  S.  E.  806;  Coble  v.  Gale, 
7  Blackf.  (Ind.)  218,  41  Am.  Dec. 
219;  Keane  v.  Fisher,  9  La.  Ann.  70; 
Wood  V.  O'Kelley,  8  Cush.  (Mass.) 
406;  Kenniston  v.  Ham,  29  N.  H. 
501;  Clarkson  v.  Carter,  3  Cow.  (N. 
Y.)  84;  Clark  v.  Miller,  4  Wend.  (N. 
Y.)  628;  Wilkes  v.  Clark,  12  N.  Car. 
178;  Choteau  v.  Raitt,  20  Ohio  132; 
Garrett  v.  Muller,  37  Tex.  589;  Hil- 
liker  v.  Loop,  5  Vt.  116,  26  Am.  Dec. 
286;  Wetherill  v.  McCloskey,  28  W. 
Va.  195 ;  Leveck  v.  Shaftoe,  2  Esp. 
468;  Bates  Partnership,  §  1022;  Chit- 
ty  PI.  (14  ed.),  pp.  11,  12. 

35  Beach  v.  Hayward,  10  Ohio  455. 
3fi  Daly  V.  Ericsson,  45  N.  Y.  786 ; 

Beach  v.  Hayward,  10  Ohio  455. 


1103  ACTIONS    GENERALLY  §    799 

partners,  where  the  persons  sued  dealt  only  with  the  ostensible 
partners.^''  But  if  the  defendant  knew  a  dormant  partner  was 
interested  in  the  subject-matter  of  the  suit,  he  should  be  joined.^" 
As  to  whether,  under  the  codes,  a  dormant  partner  must  be 
joined,  may  depend  upon  the  provision  of  the  code,  if  there  is 
any,  and  it  has  been  decided  both  ways,  most  cases  probably  hold- 
ing that  the  dormant  partner  need  not  be  joined,'^"  though  it  has 
been  held  that,  under  the  code,  he  must  be  joined.^*'  Although 
not  a  necessary  party  plaintiff  in  an  action  by  a  partnership,  a 
dormant  partner  is  not  an  improper  party,  and  may  join  with 
the  ostensible  partners.*^ 

,^  799.  Plaintiffs — Wrongdoing  partner. — An  exception 
has  also  been  made  by  some  courts,  where  the  partner  whose  non- 
joinder is  in  question,  has  been  guilty  of  an  act  in  fraud  of  his 
partners,  which  fraudulent  act  is  in  controversy  in  the  suit.  This 
would  virtually  be  seeking  to  repudiate  his  own  act,  if  he  should 
appear  as  plaintiff.  However,  Mr.  Bates  says*"  that,  many 
courts  permit  all  the  partners  to  join  as  plaintiffs,  on  the  ground 
that  the  transaction  is  a  nullity  and  the  title  is  still  in  the  firm, 
but  also  states  that  the  defrauded  partner,  while  he  could  not 
sue  alone  at  law,  could  do  so  at  equity.  And,  there  are  de- 
cisions to  the  effect  that,  where  one  partner  fraudulently  sells 
all  the  property  of  the  firm  to  a  third  party,  the  defrauded  part- 
ner may  sue  the  third  party  for  reimbursement  without  making 
his  wrongdoing  partner  a  party  to  the  suit.*^ 

37  Anderson  v.   Ad!artindale,   1    East  rick,  125  Mass.  154 ;  Emerson  v.  Bay- 

497;   Collyer  Partnership    (1861   ed.),  lies,    19   Pick.    (Mass.)    55;    Beach  v. 

§  633.  Hayward,    10    Ohio    455;    Rogers    v. 

•^8  Bird  V.  Fake,  1  Pin.   (Wis.)  290.  KichHne,  36  Pa.  St.  293 ;   Hilhker  v. 

Contra:    Monroe    v.    Ezzell,    11    Ala.  Loop,   5   Vt.   116,   26  Am.   Dec.   286; 

603.  Garrett    v.     Muller,     Zl     Tex.     589; 

39  Howe  V.    Savory,   49   Barb.   403,  Waite  v.   Dodge,   34  Vt.    181;    Coth- 
51  N.  Y.  631 ;  Keesy  v.  Old,  3  Tex.  way  v.  Fennell,  10  B.  &  C.  671. 
Civ.  App.  1,  21  S.  W.  693.  42  Bates  Partnership,  §§  1038,  1039. 

40  Secor  V.  Keller,  4  Duer  (N.  Y.)  ^^  Hogendobler  v.  Lyon,  12  Kans. 
416.  276;  Doll  v.  Hennessy  Merc.  Co.,  Zl 

41  Desha   v.   Holland,    12   Ala.    513,  Mont.  80,  81   Pac.  625. 
46   Am.    Dec.   261;    Wright   v.    Her- 


§    800  LAW    OF    PARTNERSHIP  1104 

§  800.     Collusion  of  third  parties  and  partners. — One  of 

the  first  things  which  every  partner  has  a  right  to  expect  from 
third  parties,  is  good  faidi  in  all  transactions  involving  the 
firm  or  die  members  thereof.  The  mere  fact  that  one  or 
more  of  the  partners  approve  or  assent  to  the  acts  of  the 
third  party  will  not  make  against  the  partnership  or  the  non- 
assenting  members,  if  the  acts  are  in  fraud  of  them,  and  collu- 
sion therein  is  shown  between  the  assenting  partners  and  the 
third  party.  Even  where  the  partners  gave  one  member  of  the 
firm  authority  to  collect  a  debt,  and  there  was  a  collusive  settle- 
ment between  the  firm  debtor  and  this  partner,  such  settlement 
will  not  bind  the  firm/*  A  Kentucky  case  illustrates  the  point 
very  clearly.  An  insurance  company  was  unable  to  agree  upon 
a  settlement  with  a  firm  for  loss  occasioned  by  fire,  under  an 
insurance  policy  of  such  company.  The  agent  of  the  insurance 
company  thereupon  commenced  secret  negotiations  with  one 
partner  who  was  hostile  to  his  copartners,  and  made  a 
settlement  with  him  for  a  much  smaller  amount  than  the  at- 
torneys for  the  firm  had  offered  to  accept,  and  received  a  release 
from  this  partner,  to  which  release  the  firm  name  was  signed. 
The  other  partners  thereupon  sued  the  insurance  company,  for 
the  sum  due  them  under  the  policy,  and  the  court  held  that  the 
other  partners  were  not  bound  by  the  release,  nor  were  they 
chargeable  with  any  part  of  the  sum  received  by  the  releasing 
partner,  the  evidence  showing  that  he  had  appropriated  the  sum 
so  received  to  his  own  use,  to  the  exclusion  of  his  copartners.'*^ 
The  element  of  lack  of  good  faith  in  the  third  party,  however, 
must  be  present,  as  a  rule,  to  make  the  transaction  fall  within 
the  foregoing  principle,  and  a  partner  in  a  trading  partnership 
may  enter  into  any  contract  for  the  firm  in  its  ordinary  trade  and 
business;  and,  as  between  the  firm  and  those  dealing  with  it  in 
good  faith,  it  is  not  material  whether  such  partner  is  acting  fairly 
with  his  copartners,  so  long  as  he  is  within  the  scope  of  the 

**  Loftus  V.  Ivy,  14  Tex.  Civ.  App.        ^^  Phoenix    Ins.    Co.   v.    Miller,    13 
701,  Zl  S.  W.  766.  Ky.  L.   (abstract)  464. 


1105  ACTIONS    GENERALLY  §    801 

firm's  business/®  A  somewhat  different  rule  has  been  adopted 
in  Arkansas.  In  Busby  v.  Rooks/'  a  partner  settled  a  claim  of 
the  firm  against  the  debtor  for  a  sum  considerably  less  than  was 
due,  the  partner  acting  fraudulently  and  without  authority  or 
consideration.  He  retained  one-half  of  the  amount  so  recov- 
ered, and  deposited  the  other  half  in  a  bank  to  the  credit  of  his 
partner.  Thereafter  the  firm  sued  to  recover  the  bill,  and  the 
court,  in  deciding  the  case  held  that  the  defendant  was  entitled  to 
a  credit  for  the  sum  paid  the  partner,  who  was  not  entitled  to 
recover  anything,  and  that  the  other  partner  was  entitled  to 
half  of  the  remainder  of  the  debt.  As  to  what  constitutes  collu- 
sion or  lack  of  good  faith,  it  can  simply  be  said  that  each  indi- 
vidual case  must  be  judged  by  itself,  and  no  hard  and  fast  rule 
can  be  applied.  It  might,  perhaps,  be  said  that  only  actual 
assistance  in  or  knowledge  of  the  fraud  of  the  partner  by  the 
debtor,  or  at  least  such  facts  existing  as  would  of  themselves 
imply  knowledge,  would  show  his  lack  of  good  faith,  and  even 
this,  it  seems,  would  not  adequately  control  the  question.  The 
difficulty  appears  in  deciding  just  what  amounts  to  such  waiver. 
One  decision  seems  almost  to  require  actual  notice  of  the  fraud, 
holding  that  a  partner,  in  executing  a  chattel  mortgage  in  the 
name  of  the  firm  to  secure  its  debts,  increased  the  amount  so  as 
to  cover  his  individual  debts,  does  not  conclusively  render  it 
fraudulent,  but  it  will  be  a  lien  only  to  the  amount  of  the  firm 
debt.'' 

§  801.  One  partner  suing  for  all. — Some  states  have  pro- 
vided by  statute  that  one  partner  may  sue  for  and  in  behalf 
of  all  when  they  are  too  numerous  to  bring  upon  the  record. 
Under  such  a  statute  it  has  been  held  that  the  managing  partner 
of  a  firm  of  over  forty  members,  residing  in  different  counties, 
can  not  sue  for  all,"  but  that  if  the  number  of  partners  is  large, 

4«  Salt  Lake  Brevr.  Co.  v.  Hawke,  ^^  72  Ark.  657.  81  S.  W.  1056. 

24  Utah  199,  66  Pac.  1058.     See  also  "s  Rock  v.  Collins,  99  Wis.  630,  75 

Dietz  V.  Regnier,  27  Kans.  94;  Will-  N.  W.  426. 

son  V.  Whaley,  7  Ky.  Law  (abstract)  ^^  Brainerd  v.  Bertram,  5  Abb.  N. 

527.  Gas.  (N.  Y.)   102. 


§  802 


LAW    OF    PARTNERSHIP 


1106 


as  in  the  case  of  an  unincorporated  joint  stock  company  in  which 
frequent  changes  by  death  or  transfer  of  shares  may  occur,  one 
may  sue  for  all,  and  that  the  caption  need  only  be  in  the  name 
of  the  plaintiff.''*^ 

§  802.     Action  on  contract  made  in  name  of  one  partner. 

' — Where  a  contract  is  made  by  one  partner  for  the  firm  which 
shows  on  its  face  it  is  a  firm  transaction,  all  partners  must  join 
in  action  thereon.^^  The  same  rule  holds  whereby  a  transaction 
was  had  through  which  an  implied  contract  with  the  firm  arose, 
as  by  the  sale  of  firm  goods. ^"  Where  there  was  a  transaction 
in  one  partner's  name  for  the  firm  benefit,  in  which  the  firm 
was  not  disclosed  as  a  principal,  then,  under  the  rules  of  agency, 
the  one  partner  in  whose  name  the  contract  was  made  may  sue 
as  plaintiff,^^  or  all  the  partners  may  join  in  the  action,^*  or  in 
jurisdictions  where  the  statute  permits  suits  in  the  firm  name, 


50  Piatt  V.  Colvin,  SO  Ohio  St.  703, 
36  N.  E.  735. 

51  Creel  v.  Bell,  2  J.  J.  Marsh. 
(Ky.)  309;  White  Mountain  Bank 
V.  West,  46  Maine  15;  Wiley  v.  Lo- 
gan, 95  N.  Car.  358;  Wilson  v.  Wal- 
lace, 8  Serg.  &  R.  (Pa.)  53;  Sawyer 
V.  Worthington,  28  Vt.  7Z2,;  Rob- 
bins  V.  Deverill,  20  Wis.  142;  De- 
Wit  V.  Lander,  72  Wis.  120,  39  N. 
W.  349;  Badger  v.  Daenicke,  56  Wis. 
678,  14  N.  W.  821. 

52  Bennett  v.  Scott,  1  Cranch  (C. 
C.)  339,  Fed.  Cas.  No.  1323;  Stevens 
V.  Lunt,  19  Maine  70;  Badger  v. 
Daenicke,  56  Wis.  678,  14  N.  W. 
821;  Garrett  v.  Handley,  3  B.  &  C. 
462,  10  E.  C.  L.  462.  But  see  Driver 
V.  Burton,  17  Q.  B.  989,  79  E.  C.  L. 
989,  21  L.  J.  Q.  B.  157;  Halliday  v. 
Doggett,  6  Pick.  (Mass.)  359;  Gilbert 
V.  Lichtenberg,  98  Mich.  417,  57  N. 
W.  259;  Speake  v.  Prewitt,  6  Tex. 
252.  See  also  Wilson  v.  Wallace,  8 
Serg.  &  R.  (Pa.)  53. 

53  Ewing     V.     French,     1     Blackf. 


(Ind.)  353;  New  York  Mut.  F.  Ins. 
Co.  V.  Hammond,  106  Ky.  386,  50 
S.  W.  545,  20  Ky.  L.  1944;  Trott  v. 
Irish,  1  Allen  (Mass.)  481.  But  com- 
pare Halliday  v.  Doggett,  6  Pick. 
(Mass.)  359;  Simpson  v.  Baker,  2 
Black.  (U.  S.)  581,  17  L.  ed.  263; 
Hilliker  v.  Francisco,  65  Mo.  598; 
Taylor  v.  The  Robert  Campbell,  20 
Mo.  254;  Missouri  Pac.  R.  Co.  v. 
Smith,  84  Tex.'  348,  19  S.  W.  509 ; 
Gill  V.  Bickel,  10  Tex.  Civ.  App.  67, 
30  S.  W.  919;  Curtis  v.  Belknap,  21 
Vt.  433;  Driver  v.  Burton,  17  Q.  B. 
989,  21  L.  J.  Q.  B.  157,  79  E.  C.  L. 
989;  Lomas  v.  Bradshaw,  9  C.  B.  620, 
19  L.  J.  C.  P.  273,  67  E.  C.  L.  620. 

54  Bennett  v.  Scott,  1  Cranch  C.  C. 
339,  Fed.  Cas.  No.  1323;  Havana  &c. 
R.  Co.  V.  Walsh,  85  111.  58;  Illinois 
Cent.  R.  Co.  v.  Owens,  53  111.  391; 
Ward  V.  Leviston,  7  Blackf.  (Ind.) 
466;  Gilbert  v.  Lichtenberg,  98  Mich. 
417,  57  N.  W.  259 ;  Schnader  v.  Schna- 
der,  26  Pa.  St.  384;  Chamberlin  v. 
Kite,  5  Watts    (Pa.)    Z7Z;  Badger  v. 


1107  ACTIONS    GENERALLY  §    803 

the  partnership  may  sue  on  such  contract  in  its  own  name.^^ 
There  was  no  defect  in  parties  in  a  suit  by  an  individual  plain- 
tiff on  a  claim  in  which,  as  he  testified,  his  firm  was  interested, 
while  the  defendant  answered  and  testified  that  the  contract  was 
with  plaintiff  individually.^"  A  note  and  mortgage  taken  by  one 
partner  to  secure  a  debt  due  to  the  partnership  may  be  enforced 
by  such  partner  in  his  own  name.^^ 

§  803.  Plaintiffs  where  contract  assigned. — If  one  part- 
ner makes  an  assignment  of  his  individual  estate,  the  assignee 
must  join  with  the  other  partners  in  firm  actions,  as  tenants 
in  common.^^  At  common  law  a  partner  can  not  sue  in  his 
own  name,  where  a  partnership  claim  was  assigned  to  him,^'' 
although  he  may  in  case  of  a  negotiable  note  assigned  by  indorse- 
ment in  the  firm  name.''*^  At  common  law  the  partner  to  whom 
a  firm  claim  is  assigned  may  sue  in  the  name  of  the  assignor.*'^ 
Under  the  codes  which  require  an  action  to  be  brought  by  the 
real  party  in  interest  a  partner  who  is  the  assignee  of  a  firm 
claim  may  sue  in  his  own  name.*^-     Some  codes  require  the  as- 

Daenicke,  56  Wis.  678,  14  N.  W.  821 ;  60S ;  Horbach  v.  Huey,  4  Watts  (Pa.) 

Skinner  v.  Stocks,  4  B.  &  AM.  437,  455;  De  Groot  v.  Darby,  7  Rich.  L. 

22>  Rev.  Rep.  ZZI ,  6  E.  C.  L.  550.  (S.  Car.)  118;  Brougham  v.  Balfour, 

55  Hardy  v.  Jones,  13  Ga.  App.  457,  3  U.  C.  C.  P.  72. 
79  S.  E.  246.  «» American  Cent.  R.  Co.  v.  Miles, 

5s  Bryant  v.  Phillips,  189  Mo.  App.  52  111.  174;  Dorr  v.  Jouet,  20  La.  Ann. 

278,  176  S.  W.  294.  27;   Russell  v.   Swan,   16  Mass.   314; 

57  Lundburg  v.  Northwestern  Ele-  Estabrook  v.  Smith,  6  Gray  (Mass.) 
vator  Co.,  42  Minn.  2,7,  43  N.  W.  685.  570,  66  Am.   Dec.  443 ;   Burnham   v. 

58  Pugh  V.  Holliday,  3  Ohio  St.  284.  Whittier,  5  N.  H.  334;  Kirby  v.  Cogs- 

59  Howell  V.  Reynolds,  12  Ala.  128;  well,  1  Caines  (N.  Y.)  505,  Colem.  & 
Molen  V.  Orr,  44  Ark.  486;  Dough-  C.  Cas.  320;  Manegold  v.  Dulau,  30 
erty  v.  Smith,  4  Met.  (Ky.)  279;  Lunt  Wis.  541. 

V.  Stephens,  24  Maine  534 ;  Russell  v.  "i  l^^mt  v.  Stevens,  24  Maine  534 ; 

Swan,  16  Mass.  314;  Tate  v.  Citizens'  Busfield  v.  Wheeler,  14  Allen  (Mass.) 

Mut.    F.   Ins.    Co.,    13   Gray    (Mass.)  139. 

79 ;    Busfield    v.    Wheeler,    14    Allen  ''■2  Pacific  Mut.  L.  Ins.  Co.  v.  Fisher, 

(Mass.)    139;    Burnham   v.   Whittier,  109    Cal.    566;    Walker    v.    Steele.    9 

5   N.   H.   334;    Kirby  v.   Cogswell,    1  Colo.    388,    12    Pac.    423;    Carroll    v. 

Caines  (N.  Y.)  505,  Colem.  &  C.  Cas.  Campbell,  110  Mo.  557,  19  S.  W.  809; 

320;  Gaither  v.  Caldwell,  21  N.  Car.  Farwell  v.   Davis,  66  Barb.    (N.  Y.) 

504 ;  Mosgrove  v.  Golden,  101  Pa.  St.  7i ;  Mansfield  v.  New  York  Cent.  &c. 


§    804  LAW    OF    PARTNERSHIP  1108 

signee  to  be  made  a  party  defendant  to  answer  to  his  interest.''^ 
It  has  been  held  that  where  one  partner  assigned  his  interest  in 
the  firm  to  the  other,  the  remaining  copartner  may  maintain  in 
his  own  name  an  action  on  a  firm  contract  even  though  a  certifi- 
cate of  the  firm  name  and  members  had  not  been  filed  as  re- 
quired by  statute.®* 

§  804.  Surviving  partner  as  plaintiff. — A  surviving  part- 
ner, in  the  absence  of  statutory  action  abrogating  or  restricting? 
the  right,  has  the  power  to  sue  upon  partnership  claims,  and  he 
need  not  join  the  personal  representative  of  the  deceased  part- 
ner,''^ but  he  must  commence  the  suit  as  such  surviving  partner, 
and  not  in  his  own  right.*"'  In  order  to  so  sue,  the  surviving 
partner  should  show,  in  his  petition,  that  he  is  such  surviving 
partner,  and  it  has  been  held  that  it  is  sufficient  for  him  to  aver 
that  a  note  sued  upon  was  made  and  delivered  to  him  as  such 
surviving  partner,  in  the  firm  name,  in  order  to  maintain  such 
action."^  A  Texas  case*'^  holds  that  in  case  both  partners  should 
die,  and  the  administrators  of  both  were  allowed  to  be  substituted 

R.  Co.,  102  N.  Y.  205,  6  N.  E.  386;  dine  v.  Gibbons,  114  Mo.  561,  21  S.  W. 

West  V.   Citizens'   Ins.   Co.,  27  Ohio  726;    Hargadine  v.   Gibbons,   45    Mo. 

St.    1,    22    Am.    Rep.    294 ;    Viles    v.  App.  460 ;  Boyd  v.  Webster,  58  N.  H. 

Bangs,  36  Wis.  131.  336 ;  Daby  v.  Ericsson,  45  N.  Y.  786 ; 

63  Swails  V.  Coverdill,  17  Ind.  Z2,7.  Felton  v.  Reid,  52  N.  Car.  269 ;  Beach 
See  also  Dougherty  v.  Smith,  4  Met.  v.  Hayward,  10  Ohio  445 ;  Hawkins' 
(Ky.)  279.  V.  Capron,  17  R.  I.  679,  24  Atl.  466; 

64  McFadden  v.  Shanley,  16  Ariz,  Dial  v.  Agnew,  28  S.  Car.  454,  6  S.  E. 
91,    141    Pac.   732.  295;  Watson  v.  Miller,  55  Tex.  289. 

65  Pagan  v.  Sparks,  2  Wash.  (C.  C.)  In  Louisiana  the  rule  seems  to  be 
325,  Fed.  Cas.  No.  10659;  Kirby  v.  different.  Norris  v.  Ogden,  11  Mart. 
Lake  Shore  &  M.  S.  R.  Co.,  8  Fed.  (O.  S.)  (La.)  455;  Connelly  v. 
462 ;  Nicklaus  v.  Dahn,  63  Ind.  87 ;  Cheevers,  16  La.  30  ;  Flower  v.  O'Con- 
Brown  v.  Allen,  35  Iowa  306;  Mc-  ner,  7  La.  194;  Crozier  v.  Hodge,  3 
Candless  v.  Hadden,  48  Ky.  (9  B.  La.  357 ;  Notrebe  v.  McKinney,  6  Rob. 
Mon.)  186;  Matherson  v.  Wilkinson,  (La.)  13;  Lockhart  v.  Harrell,  6  La. 
79   Maine   159,   8   Atl.  684 ;    Clark  v.  Ann.  530. 

Howe,  23  Maine  (10  Shep.)  560;  Aus-        66  Reeder  v.  Sayre,  6  Hun  (N.  Y.) 

tin  V.  Walsh,  2  Mass.  401 ;  Peters  v.  562  (affd.  70  N.  Y.  180,  26  Am.  Rep. 

Davis,  7  Mass.  257;  Cragin  v.  Gard-  567). 

ner,  64  Mich.  399,  31  N.  W.  206 ;  Tel-         ^^  Manning  v.  Smith,  16  Nev.  85. 
ler  V.  Wetherell,  9  Alich.  464 ;  Harga-        ^s  Blackman  v.  Green,  17  Tex.  322. 


1109  ACTIONS    GENERALLY  §    805 

as  joint  plaintiff,  without  objection,  or  suggestion  as  to  which 
died  first,  that  this  joinder  was  proper.  The  proper  and  gen- 
eral rule  is,  however,  that  the  administrator  of  the  last  survivor 
should  administer  the  estate,  without  the  joinder  of  the  admin- 
istrators of  the  other  partners.*'''  This,  however,  applies  to  per- 
sonal property,  and  not  to  real  estate  as  to  which  the  survivors 
and  heirs  become  tenants  in  common.'^"  If  a  partner  dies  while 
an  action  by  himself  and  a  copartner  is  pending,  the  action  must 
be  prosecuted  by  the  surviving  partner  alone. '^^ 

§  805.  Plaintiffs  in  tort  actions. — In  general,  all  partners 
must  join  as  plaintiff's  in  suing  for  damages  for  a  tort  which 
has  resulted  in  injury  to  the  firm.'^-  If  the  tort  causes  individual 
damage  to  a  partner  he  may  sue  alone  for  such  damages,  but  in 
such  action  can  not  recover  damages  sustained  by  the  firm.'^ 
Thus  where  the  same  tort  occasions  damage  to  the  firm 
and  individual  damage  to  the  individual  partners,  there  may 
be  two  or  more  causes  of  action,  one  in  favor  of  all  the  part- 
ners jointly  and  one  in  favor  of  each  partner  who  sustained 
individual  damages.'^*  In  an  action  for  the  conversion  of  part- 
es 1  Bates  PI.  Part,  and  Forms,  pp.  569 ;  Taylor  v.  Church,  1  E.  D.  Smith 
55,  56.  (N.  Y.)  279  (revg.  8  N.  Y.  452,  Seld. 

~^  Rammelsberg  v.  Mitchell,  29  Ohio     notes    126)  ;    Little    v.    Hamilton,    61 
St.  22.  N.   Car.  29;  McPherson  v.   Pember- 

Ti  Hathaway    v.    Stone,    215    Mass.     ton,  46  N.   Car.  378;   Barker  v.  Ab- 
212,  102  N.  E.  461.  bott,  2  Tex.  Civ.  App.  147,  21  S.  W. 

.  '2  Donnell  v.  Jones,  13  Ala.  490,  48  72 ;  Farnum  v.  Ewell,  59  Vt.  327,  10 
Am.  Dec.  59 ;  Hughes  v.  Boring,  16  Atl.  527 ;  Story  v.  Richardson,  6  Bing. 
Cal.  81 ;  Leavet  v.  Sherman,  1  Root  N.  Cas.  123,  37  E.  C.  L.  123 ;  Addison 
(Conn.)  159;  Bates  v.  Forsyth,  69  Ga.  v.  Overend,  6  T.  R.  766. 
365 ;  Gannett  v.  Cunningham,  34  ^^  Robinson  v.  Mansfield,  13  Pick. 
Maine  56;  Robinson  v.  Mansfield,  13  (Mass.)  139;  Rogers  v.  Raynor,  102 
Pick.  (Mass.)  139;  Medbury  v.  Wat-  Mich.  473,  60  N.  W.  980;  Coggshall 
son,  6  Mete.  (Mass.)  246,  39  Am.  v.  Alunger,  54  Mo.  App.  420;  Calkins 
Dec.  726;  Haynes  v.  Knowles,  Z6  v.  Smith,  48  N.  Y..614,  8  Am.  Rep. 
Mich.  407 ;  Bigelow  v.  Reynolds,  68  575 ;  Story  v.  Richardson,  6  Bing.  N. 
Mich.   344,   36   N.   W.  95 ;    Peaks   v.     Cas.  123. 

Graves,  25  Nebr.  235,  41  N.  W.  151 ;  ^4  Leavet  v.  Sherman,  1  Root 
Newman  v.  Bean,  21  N.  H.  93;  Far-  (Conn.)  159;  Duffy  v.  Gray,  52  Mo. 
rel  V.  Colwell,  30  N.  J.  L.  123;  Saul  528;  Haythorn  v.  Lawson,  3  C.  &  P. 
V.    Kruger,    9    How.    Prac.     (N.    Y.)     196;  Forster  v.  Lawson,  3  Bing.  452, 


§    806  LAW    OF    PARTNERSHIP  1110 

nership  property,  it  has  been  held  that  one  partner  can  not  re- 
cover to  the  exclusion  of  the  others.'^^  Where  a  libel  is  published 
concerning  a  partnership  business  it  has  been  held  that  all  the 
partners  may  join  in  one  suit  for  their  damages  by  reason 
thereof,  or  any  partner  may  sue  thereon  for  his  separate  dam- 
age.^*^  Where  an  article  libels  both  a  partnership  and  its  indi- 
vidual members,  damages  to  the  partnership  must  be  recovered 
by  the  partners  jointly  and  damages  to  the  partners  individually, 
by  them  separately/'^  But  it  is  held  that  partners  may  sue  as  a 
partnership  for  an  injury  to  the  business  caused  by  an  assault 
upon  the  partners.'^®  Judge  Story  says  -J^  "There  is  not  the 
slightest  doubt  that  a  joint  action  may  be  maintained  by  the  firm 
for  any  defamation  of  the  firm,  or  for  any  libel  upon  the  firm; 
for  this  is,  justly  and  properly  speaking,  a  joint  tort  and  injury, 
applicable  to  their  collective  rights  and  interests.  But  in  such 
a  case  the  damages  must  be  strictly  limited  to  the  injury  sus- 
tained by  the  firm  in  their  joint  trade  or  business;  and  can  not 
be  extended  to  the  injury  done  to  the  private  feelings  of  the 
individual  partners.  The  same  principle  will  apply  to  any  other 
wrong,  done  by  third  persons,  affecting  the  partnership  trade 
or  business;  such  as  obstructing  their  business  and  employment, 
seducing  persons  from  their  service,  or  wrongfully  soliciting  and 
inducing  their  customers  to  withdraw  their  patronage  from  them 
by  fraud,  threats,  or  otherwise;  for  in  all  such  cases  a  joint 
damage  is  done  to  the  firm." 

§  806.  Defendants  in  action  against  partnership — In  gen- 
eral.— Owing  to  the  diversified  and  somewhat  unsettled  rules 
of  law  in  the  various  jurisdictions,  as  to  the  question  of  entity 
in  partnership  law,  the  question  of  proper  defendants  in  a  part- 
nership action  likewise  varies  much  in  different  jurisdictions. 

Compare    Houghton    v.    Puryear,    10        ^'^  Collier  v.  Postum  Cereal  Co.,  ISO 

Tex.  Civ.  App.  383,  30  S.  W.  583.  App.  Div.  169,  134  N.  Y.  S.  847. 

"Edwards    v.    Hatfield,    93    Nebr.         ^s  Seidell   v.    Taylor    (Wash.),    151 

712,  141  N.  W.  1020.  Pac.  41. 

76  Wills  V.  Jones,  13  App.  D.  C.  482.  '  "  Story  Partnership,  §§  257,  258. 


nil  ACTIONS    GENERALLY  §    806 

The  old  English  law  avoided,  as  much  as  possible,  recognition 
of  the  principle  of  legal  entity  in  a  partnership,  and  required  the 
suit  to  be  commenced  against  the  individual  partners.  The 
Scotch  law,  on  the  contrary,  recognized  the  legal  entity  of  a 
partnership,  and  allowed  actions  in  the  firm  name.®°  The  Scotch 
rule  was  adopted,  however,  at  least  partially,  in  England,  by  the 
rules  of  the  Supreme  Court  as  early  as  1883,  when  it  was  pro- 
vided that  any  two  or  more  persons  claiming  or  being  liable  as 
copartners  may  sue  or  be  sued  in  the  name  of  the  firms  of  which 
they  were  members  when  the  cause  of  action  accrued;  and  pro- 
vision is  made  for  the  discovery  of  the  individuals  so  suing  or 
being  sued. ®^  Mr.  Lindley  says  :®"  "With  reference  to  this  last 
rule,  it  is  to  be  observed  that  the  firm's  name,  when  used  in  any 
action,  is  merely  a  convenient  method  of  expressing  the  names 
of  those  who  constituted  the  firm  when  the  cause  of  action  ac- 
crued. The  rule  does  not  incorporate  the  firm;  so  that  if  A  is 
a  creditor  of  a  firm,  B,  C,  and  D,  and  D  retires  and  E  takes 
his  place,  and  the  name  of  the  firm  remains  unchanged,  A  can 
not  maintain  an  action  against  B,  C  &  E,  in  the  name  of  the  firm, 
unless  B,  C  &  E  have  become  or  are  content  to  be  treated  as  his 
debtors.  In  the  case  supposed,  an  action  against  the  firm  would 
mean  an  action  against  B,  C  &  D,  i.  e.,  A's  real  debtors."  Ord. 
16,  r.  14,  further  provided  that,  if  an  action  be  brought  against 
a  firm,  which  the  plaintiff  knows  has  been  dissolved  before  the 
commencement  of  the  action,  the  writ  must  be  served  upon  all 
the  persons  sought  to  be  made  liable.  If,  however,  there  should 
have  been  a  change  in  the  membership  of  the  firm,  unknown 
to  the  plaintiff,  and  not  discovered  until  after  judgment,  it  might, 
upon  execution,  give  rise  to  serious  difficulties.^^  In  this  country 
there  is  no  uniform  rule  as  to  the  proper  parties  defendant.  Many 
states  follow  the  common-law  rule,  and  do  not  allow  the  part- 
ners to  be  sued  in  the  firm  name.  Under  this  rule,  since  part- 
nership liability  in  contract  is  joint,  all  ostensible  partners  must 
be  joined  as  defendants,^*  even  if  some  of  them  are  nonresi- 

80  English  Partnership  Act,  1890,  §  4.        §3  Munster  v.  Cox,  10  App.  Cas.  680. 

81  Ord.  16,  n.  14,  15.  »*  Barry  v.  Foyles,   1  Pet.    (U.  S.) 

82  Lindley  Partnership,  p.  265. 

20 — Row.  ON  Partn. — Vol.  2 


§    806  LAW    OF    PARTNERSHIP  1112 

dents/^  The  court  said  in  a  leading  case  i^^  "I  think,  then,  that 
I  am  authorized  in  saying,  that  in  case  of  joint  debtors,  they 
must  be  jointly  sued;  that  if  a  less  number  than  the  whole  be 
sued,  that  is  matter  which  can  be  pleaded  in  abatement  only; 
that  it  is  necessary  to  show  a  joint  subsisting  indebtedness  in 
all  the  defendants;  and,  in  cases  of  assumpsit,  it  is  necessary 
to  show  a  subsisting  liability  on  the  part  of  all  the  defendants 
as  promisors,  with  the  exceptions  already  mentioned;  and  that 
where  as  respects  any  of  the  defendants,  the  right  of  action  is 
gone  or  suspended,  the  joint  liability  being  at  an  end,  the  other 
defendants  may  avail  themselves  of  this  suspension  or  discharge, 
whether  it  be  produced  by  the  act  of  the  party  or  by  operation 
of  law,  at  the  instance  and  by  the  act  of  the  creditor."  In  states 
where  the  liability  of  partners  is  joint  and  several,  the  action 
may  be  brought  against  any  one  or  more  partners.®^  In  sev- 
eral states  statutory  regulations  permit  suit  against  a  partnership 
by  the  firm  name.  For  example,  Ohio  has  provided  that  "A  part- 
nership formed  for  the  purpose  of  carrying  on  a  trade  or  busi- 
ness in  this  state,  or  holding  property  therein,  may  sue  or  be 
sued  by  the  usual  or  ordinary  name  which  it  has  assumed,  or 
by  which  it  is  known;  and  in  such  case  it  shall  not  be  neces- 
sary to  allege  or  prove  the  names  of  the  individual  members 

311,  7  L.  ed.  157;  Adams  v.  May,  27  Am.  Dec.  227;  Cox  v.  Gille  Hardware 

Fed.  907 ;  Harrison  v.  McCormick,  69  &c.    Co.,   8   Okla.   483,    58    Pac.    645 ; 

Cal.  616,  11  Pac.  456;  Butler  v.  Dela-  Taby  v.  McMurray,  30  Okla.  602,  120 

field,   1    Cal.   App.   367,  82   Pac.  260;  Pac.  664;   Kamm  v.  Harker,  3   Ore. 

Martyn  v.  Arnold,  36  Fla.  446,  18  So.  208 ;  Alexander  v.  McGinn,  3  Watts 

791 ;  Sandusky  V.  Sidwell,  173  111.  493,  (Pa.)    220;    Nathanson   v.    Spetz,    19 

SO  N.  E.   1003;   Pettis  v.  Atkins,  60  R.  I.  70,  31  Atl.  690;  Davis  v.  Willis, 

111.   454;    Livingstone   v.    Harvey,    10  47  Tex.  154;  Biggs  v.  Lee  (Tex.  Civ. 

Ind.  218;  Heavrin  v.  Lack  Malleable  App.),  137  S.  W.  138;  Lew^is  v.  Crane, 

Iron  Co.,  153  Ky.  329,  155  S.  W.  729;  78   Vt.   216,   62   Atl.   60;    Pierson   v. 

Fox   V.   Blue   Grass   Grocery   Co.,  22  Robinson,  3  Swanst.  139n. 

Ky.  L.  169,  61  S.  W.  265  ;  Key  v.  Box,  ss  Wiley    v.     Sledge,     8     Ga.     532 ; 

14  La.  Ann.  497;  Smith  v.  Cooke,  31  Boorum  v.  Ray,  72  Ind.  151. 

Md.  174,  100  Am.  Dec.  58;  Whittaker  ^^  Robertson  v.  Smith,  18  Johns.  (N. 

V.   Collins,  34  Minn.  299,  25   N.   W.  Y.)  459,  9  Am.  Dec.  227. 

632,    57    Am.    Rep.    55 ;    Faulkner    v.  ^^  ciark  v.  Jones,  87  Ala.  474,  6  So. 

Whitaker,  15  N.  J.  L.  438 ;  Robertson  362 ;  Green  v.  Pyne,  1  Ala.  235 ;  Hicks 

V.   Smith,   18  Johns.    (N.  Y.)   459,  9  v.  Maness,  19  Ark.  701;   Ryerson  v. 


1113  ACTIONS    GENERALLY  §    806 

thereof."^^  Another  Ohio  statute^^  provides  that:  "Except  as 
otherwise  provided  in  the  next  section,  every  partnership  trans- 
acting business  in  this  state  under  a  fictitious  name,  or  a  desig- 
nation not  showing  the  names  of  the  persons  interested  as  part- 
ners in  such  business,  must  file  with  the  clerk  of  the  court  of 
common  pleas  of  the  county  in  which  its  principal  office  or  place 
of  business  is  situated,  a  certificate  to  be  indexed  by  said  clerk 
stating  the  names  in  full  of  all  the  members  of  such  partner- 
ship and  their  places  of  residence."  Commercial  or  mercantile 
partnerships  outside  of  the  United  States  "are  excepted  from 
the  above  by  the  next  section.  It  is  also  provided  in  the  act  that, 
until  such  fictitious  partners  are  so  registered  as  provided  in 
the  act,  they  shall  not  commence  such  action.^*  In  Iowa,  it  has 
been  held  that  a  partnership  may  be  sued  in  its  firm  name,  but 
that  the  code  renders  a  scire  facias  necessary,  in  order  to  reach 
individual  property.^^  And  it  is  likewise  held  in  the  same  state  that 
a  partnership  may  be  sued  in  the  individual  names  of  the  part- 
ners as  well  as  in  the  partnership  name.^^  In  Alabama  the  code 
allows  suit  against  a  partnership  in  the  firm  name,**^  and  a  judg- 
ment against  a  firm,  in  the  firm  name,  will  support  an  action 
against  any  individual  partner  therein,  to  enforce  his  individual 
liability  for  the  firm  debts.^*  Under  the  attachment  law  of  Illi- 
nois, the  suit  may  also  be  commenced  against  a  partnership  in 
the  firm  name.^^  In  states  which  have,  by  statutory  enact- 
ment, made  provision  for  the  manner  of  commencing  such  suits, 
the  question  is  settled,  provided  that  the  provisions  of  the  stat- 
utes cover  fully  the  point,  but,  wherever  there  are  any  restric- 

Hendrie,    22    Iowa    480;    Miller    v.  »iLevally   v.   Ellis,    13   Iowa   544; 

Northern  Bank,  34   Miss.  412;   Put-  Davis  v.  Buchanan,  12  Iowa  575. 

nam  v.  Ross,  55  Mo.  116;  Curran  v.  »2  Markham     v.     Buckingham,     21 

W.  W.  Kendall  Co.,  8  N.  Mex.  417,  Iowa  494,  89  Am.  Dec.  590. 

45    Pac.    1120;    Logan   v.   Wallis,   Id  ^s  Alabama  Code,  §  2904. 

N.  Car.  416;  Gratz  v.  Stump,  Cooke  9*  Cox  v.  Harris,  48  Ala.  538;  J.  R. 

(Tenn.)   494;   People's  Nat.  Bank  v.  Kilgore  &  Son  v.  Shannon  &  Co.,  6 

Hall,  76  Vt.  280,  56  Atl.  1012.  Ala.  App.  537,  60  So.  520. 

88  Ohio  Rev.  Stat,  §  5011.  95  United  States  Exp.  Co.  v.  Bed- 

89  Ohio  Rev.  Stat,  §§  3170,  3171.  bury,  34  111.  459. 

90  Ohio  Rev.  Stat,  §§  3170,  3176. 


§    807  LAW    OF    PARTNERSHIP  1114 

tions  or  conditions  imposed  by  the  statute,  these  restrictions  or 
conditions  must  be  strictly  carried  out.  In  Minnesota  it  has 
been  held  that  the  complaint  should  allege  the  partnership.^'' 
There  are  other  states  than  those  mentioned,  in  which  a  part- 
nership may  be  made  a  defendant  by  its  firm  name.**^  An  excep- 
tion of  misjoinder  of  parties  will  be  sustained  where  a  claim 
against  a  firm  is  cumulated  with  a  claim  against  a  partner  in  a 
different  transaction.®^  It  was  immaterial,  where  process  served 
on  the  members  showed  that  the  suit  was  against  the  firm,  that 
a  partnership  was  not  specifically  made  a  party  after  an  amend- 
ment setting  up  that  the  members  individually  sued  constituted 
the  firm."'' 

§  807.  Defendants — Wife — Dower  interest. — In  deter- 
mining the  right  of  a  partner's  wife  to  dower  in  certain  prop- 
erty, it  is  first  necessary  to  ascertain  whether  the  property  is 
the  individual  property  of  the  husband,  or  the  property  of  the 
firm.  Consequently,  the  wife  is  a  necessary  party  to  a  com- 
plete determination  of  the  cause,  where  an  action  is  commenced 
to  dissolve  a  partnership,  where  there  is  real  property,  and  there 
is  a  question  whether  the  real  property  is  a  homestead  of  the 
husband  or  an  asset  of  the  firm.^  If  the  realty  is  in  fact  a  home- 
stead of  the  husband  and  is  so  retained,  and  not  interfered  with, 
she  retains  her  dower  therein,  regardless  of  the  outcome  of  the 
suit  otherwise,  and  she  has  no. interest  in  the  affairs  of  the  part- 
nership such  as  would  make  her  a  necessary  party.  If,  on  the 
contrary,  realty  has  been  converted  out  and  out  into  assets,  a 
lien  creditor  foreclosing,  need  not  make  the  wife  a  party  to 
the  suit.^ 

§  808.     Defendants — Representatives  of  deceased  partner. 

— Generally,  actions  at  law  to  enforce  obligations   of  a  part- 
es Foerster  v.  Kirkpatrick,  2  Minn.  ^^  Heyman  v.  Decatur  Street  Bank 

210.  (Ga.  App.),  84  S.  E.  483. 

^^  Asbestos   Mfg.   &   Supply  Co.  v.  i  Rhodes   v.   Williams,   12  Nev.  20. 

Lennig-Rapple    Engineering    Co.,    26  ^  Harrington  v.  Johnson,   10  Wash. 

Cat.  App.  177,  146  Pac.  188.  542,  39  Pac.  141.    See  ante  §  296 
98Darden   v.   Garrett,   130  La.  998, 

58  So.  857. 


1115 


ACTIONS    GENERALLY 


808 


nership  must  be  brought  against  the  surviving  partner  alone. ^ 
Except  when  modified  by  statutory  enactment,  contract  liabili- 
ties descend  to  the  survivors,  and,  in  case  of  the  death  of  all 
the  partners,  then  to  the  administrator  or  executor  of  the  last 
survivor.*  The  administrator  of  a  partner,  other  than  of  the 
last  survivor,  if  all  are  deceased,  is  not  a  necessary  party,  unless 
an  attempt  is  made  to  reach  the  partner's  separate  property,^  and 
a  suit  for  fraud  of  a  partnership  is  governed  by  the  same  rules 


3  Bischoffsheim  v.  Baltzer,  20  Fed. 
890;  Dixon  v.  Barclay,  22  Ala.  370; 
Stillwell  V.  Gray,  17  Ark.  473;  West 
Coast  Lumber  Co.  v.  Apfield,  86~Cal. 
335,  24  Pac.  993;  Smith  v.  Salomon, 
1  Colo.  176,  91  Am.  Dec.  711;  Van- 
denheuvel  v.  Storrs,  3  Conn.  203; 
Bennett  v.  Woolfolk,  15  Ga.  213; 
Belton  V.  Fisher,  44  111.  32;  Mcin- 
tosh V.  Zaring,  150  Ind.  301,  49  N.  E. 
164 ;  Childs  v.  Hyde,  10  Iowa  294,  11 
Am.  Dec.  113 ;  Broadfoot  v.  Rowe, 
14  Ky.  L.  895;  Southard  v.  Lewis,  4 
Dana  (Ky.)  148;  Strang  v.  Hirst, 
61  Maine  9;  Harwood  v.  Jones,  10 
Gill  &  J.  (Md.)  404,  32  Am.  Dec. 
180;  Stafford  v.  Gold,  9  Pick. 
(Mass.)  533;  Peters  v.  Davis,  7 
Mass.  257;  Van  Kleeck  y.  McCabe, 
87  Mich.  599,  49  N.  W.  872,  24  Am. 
St.  182 ;  O'Connell  v.  Schwanabeck, 
76  Mich.  517,  43  N.  W.  599;  Bassett 
V.  Miller,  39  Mich.  133 ;  Freeman  v. 
Stewart,  41  Miss.  138 ;  Hunt  v.  Drane, 
32  Miss.  243;  Bredow  v.  Mutual  Sav. 
Inst,  28  Mo.  181 ;  Parchen  v.  Peck,  2 
Mont.  567;  Union  Pacific  R.  Co.  v. 
Metcalf,  50  Nebr.  452,  69  N.  W.  961 ; 
Maples  V.  Geller,  1  Nev.  233;  Led- 
den  V.  Colby,  14  N.  H.  ZZ,  40  Am. 
Dec.  173 ;  Joyslin  v.  Taylor,  24  N.  H. 
268;  Rusling  v.  Brodhead,  55  N.  J. 
Eq.  200 ;  Secor  v.  Pendleton,  47  Hun 
(N.  Y.)  281,  13  N.  Y.  St.  387;  Far- 
well  V.  Davis,  66  Barb.   (N.  Y.)   12>\ 


Voohis  V.  Childs,  17  N.  Y.  354 ;  Fel- 
ton  V.  Reid,  52  N.  Car.  269 ;  Popple- 
ton  V.  Jones,  42  Ore.  24,  69  Pac.  919 ; 
Hoskinson  v.  Eliot,  62  Pa.  393 ;  Haw- 
kins V.  Capron,  17  R.  I.  679,  24  Atl. 
466;  Kinsler  v.  McCants,  4  Rich.  L. 
(S.  Car.)  46;  Trundle  v.  Edwards, 
4  Sneed  (Tenn.)  572;  Lovelady  v. 
Bennett  (Tex.  Civ.  App.),  30  S.  W. 
1124;  Watson  v.  Miller,  55  Tex.  289; 
Gaut  V.  Reed,  24  Tex.  46,  76  Am.  Dec. 
94;  Wood  v.  Rutland  &c.  Mut.  Fire 
Ins.  Co.,  31  Vt.  565;  Brighan-Hop- 
kins  Co.  V.  Gross,  30  Wash.  277,  70 
Pac.  480;  Barlow  v.  Coggan,  1  Wash. 
257;  Shields  v.  Fuller,  4  Wis.  102, 
65  Am.  Dec.  293;  Bolckow  v.  Foster, 
24  Grant's  Ch.    (U.  C.)    ZIZ. 

^Costley  V.  Wilkerson,  49  Ala.  210; 
Whitney  v.  Cook,  5  Mass.  139 ;  Copes 
V.  Fultz,  1  Smed.  &  M.  (Miss.)  623; 
Nehrboss  v.  Bliss,  88  N.  Y.  600,  2  Civ. 
Proc.  39,  2  McCarty  Civ.  Proc.  106; 
Carrere  v.  Spofford,  46  How.  Pr.  (N. 
Y.)  294;  Secor  v.  Pendleton,  47  Hun 
281,  13  N.  Y.  St.  387;  Bridge  v. 
Swain,  3  Redf.  Sur.  (N.  Y.)  487; 
Gere  v.  Clarke,  6  Hill  (N.  Y.)  350; 
Richards  v.  Heather,  1  B.  &  Aid.  29 ; 
Calder  v.  Rutherford,  3  Brod.  &  B. 
302,  7  E.  C.  L.  447;  Bates  Pleadings, 
Parties  and  Forms,  Vol.  I,  p.  78. 

""  Robertshaw  v.  Hanway,  52  Miss. 
713. 


§    809  LAW    OF    PARTNERSHIP  1116 

as  where  the  suit  is  upon  contract,  viz.,  that  the  defendant's 
representatives  need  not  be  joined.''  In  any  case  where  the 
question  is  raised  as  to  whether  property  is  firm  property  or  be-, 
longs  to  one  or  more  partners  individually,  then  the  representa- 
tives of  the  deceased  partner  should  be  joined,  as  their  interests 
are  then  directly  in  controversy.^ 

§  809.  Defendants — Outgoing  and  incoming  partners. — 
In  case  one  member  of  a  partnership  withdraws  therefrom,  and 
a  former  stranger  to  the  partnership  replaces  the  retiring  part- 
ner, the  question  arises  as  to  which  one  can  be  joined,  or  whether 
both  or  neither  may  be  made  parties  defendant  in  a  suit  against 
the  firm.  In  case  the  retiring  partner  was  a  member  of  the  firm 
while  the  indebtedness  was  incurred,  then,  by  the  rules  we  have 
heretofore  discussed,  he  is  liable  as  one  of  the  parties  thereto, 
and  should  be  made  a  party  defendant,  and  the  incoming  part- 
ner is  neither  a  proper  nor  necessary  party  defendant.^  The  same 
rule  applies,  even  if  the  indebtedness  was  incurred  after  his  with- 
drawal, if  the  creditor  had  dealt  with  the  old  firm,  and  believed 
the  withdrawing  partner  to  be  a  member  of  the  firm  when  he 
allowed  the  indebtedness  to  be  incurred,  and  further  providing 
that  the  retiring  partner  had  not  given  proper  notice  of  his  with- 
drawal.'* Both  of  the  above  propositions  are  subject  to  change 
by  contract,  and  it  is  undoubtedly  true  that,  all  parties  interested 
concurring,  the  outgoing  partner  may  be  relieved  from  liability, 
the  incoming  partner  becoming  liable.^®     Mr.  Bates  says,  that 

6  Berkey  v.  Judd,  22  Minn.  287.  St.  375 ;  Hayes  v.  Knox,  41  Mich.  529, 

7  Marble  v.  Marble,  4  Ky.  L.  360;  2  N.  W.  670;  Smith  v.  Douglass,  4 
Indiana  Pottery  Co.  v.  Bates,  14  Daly  (N.  Y.)  191;  Ayrault  v.  Cham- 
Ind.  8.  berlin,  26  Barb.   (N.  Y.)   83;  Gill  v. 

8  Hatchett  v.  Blanton,  72  Ala.  423 ;  Bickel,  10  Tex.  Civ.  App.  67,  30  S. 
Ringo  V.  Wing,  49  Ark.  457,  5  S.  W.  W.  919 ;  Maverick  v.  Maury,  79  Tex. 
787;  Bracken  v.  Dillon,  64  Ga.  243,  435,  15  S.  W.  686;  Vera  v.  Ashby, 
Zl  Am.  Rep.  70;  Dyas  v.  Dinkgrave,  10  B.  &  C.  288,  21  E.  C.  L.  288; 
15  La.  Ann.  502,  11  Am.  Dec.  196 ;  Young  v.  Hunter,  4  Taunt.  582 ;  Wils- 
Firemen's  Ins.  Co.  v.  Floss,  dl  Md.  ford  v.  Wood,  1  Esp.  N.  P.  182. 
403,  10  Atl.  139,  1  Am.  St.  398;  » See  ch.  18  ante,  §§  556,  563. 
Hughes  v.  Gross,  166  Mass.  61,  43  i^Tysen  v.  Somerville,  35  Fla. 
N.  E.  1031,  32  L.  R.  A.  620,  55  Am.  219,  17  So.  567;  Pfeiffer  v.  Hunt,  75 


1117  ACTIONS    GENERALLY  §    809 

"of  course,  the  outgoing  and  incoming  partners  can  not  both  be 
held,"  although  he  assents  to  the  proposition  that  a  retired  part- 
ner may  not  be  joined  if  the  opposite  party  has  consented  to  his 
release/^  However,  it  is  impossible  to  see  any  distinction  be- 
tween the  two  propositions,  as  in  both  cases  the  true  rule  of 
partnership  law  is  changed  by  contract.  Perhaps  the  correct 
manner  of  stating  the  rule  is  this:  From  a  standpoint  of  part- 
nership liability  alone,  the  outgoing  partner  is  liable  for  the  firm 
debts  incurred  while  he  was  an  actual  member,  or  before  he  had 
terminated  his  partnership  liability  by  proper  notice,  and  should 
be  made  a  party,  and  the  incoming  partner  is  not  liable  for  any 
debts  preceding  his  entrance  into  the  firm,  and  should  not  be 
made  a  party.  By  proper  contract,  however,  the  true  rule  of 
partnership  liability  may  be  changed,  and  either  the  incoming  or 
outgoing  partner,  or  both,  or  neither,  may  be  liable,  and  may 
be  made  parties.  There  is,  however,  aside  from  contract  there- 
upon, one  situation  where  both  may  be  liable  upon  the  same  con- 
tract, upon  partnership  law  alone.  In  case  there  is  a  withdrawal 
by  one  partner,  without  sufficient  notice,  and  an  indebtedness  is 
incurred  thereafter,  and  after  the  incoming  partner  has  joined 
the  firm,  both  may  be  liable,  the  incoming  partner  as  a  partner 
proper,  and  the  outgoing  partner  by  reason  of  his  partnership 
liability  not  having  ceased.  In  states  where  one  party  can  sue 
upon  a  contract  made  in  his  favor  by  others,^"  the  new  partner 
may  be  liable,  if  the  new  firm  has  agreed  to  assume  the  debts 
of  the  old  firm,  even  though  the  creditor  was  unaware  of  the 
fact  at  the  time  it  was  done.  In  other  states,  where  the  right 
of  a  person  to  sue  upon  a  contract  made  in  his  favor  is  not 
recognized,  the  new  partner  would  not  be  so  liable  by  reason 
of  the  fact  alone  that  the  new  firm  had  assumed  the  debts  of 

Ga.  513;  Smith  v.  Shelden,  35  Mich.  Nichols,   64    N.    Y.    117;    Ayrault   v. 

42,  24  Am.  Rep.  529;  Osborn  v.  Os-  Chamberlin,  26  Barb.    (N.  Y.)    83. 

born,  36  Alich.  48 ;  Ellis  v.  Harrison,  "  Bates     Pleading,      Parties      and 

104  Mo.  270,  16  S.  W.  198;  Meyer  v.  Forms,    p.   238. 

Lowell,  44  Mo.  328 ;  Manny  v.  Frasier,  12  Bessemer    Sav.    Bank   v.    Rosen- 

27  Mo.  419 ;  Barlow  v.  Myers,  64  N.  baum  Grocery  Co.,  137  Ala.  530,  34  So. 

Y.  41,  21  Am.  Rep.  582 ;  Arnold  v.  609 ;  Ringo  v.  Wing,  49  Ark.  457,  5  S. 


§    810  LAW    OF    PARTNERSHIP  1118 

the  old,  unless  the  creditor  became  a  party  ^d  such  agreement, 
and  the  new  partner  should  not  be  made  a  party/^ 

§  810.     Defendants — Dormant    and    nominal    partners. — 

Both  dormant  and  nominal  partners  may  be  joined  as  parties 
defendant,  the  dormant  partners  because  they  are  principals,  even 
though  not  known,  and  the  nominal  partners  because  they  have 
incurred  partnership  liability.  In  the  latter  case  it  is  at  the  op- 
tion of  the  plaintiff  as  to  whether  or  not  he  will  make  a  nominal 
partner  a  party.  He  is  not  a  necessary  party,  inasmuch  as  he 
is  not  a  partner.  He  is  a  proper  party,  on  account  of  his  having 
incurred  the  same  liability,  to  the  plaintiff,  as  if  he  were  a  part- 
ner/* In  the  former  case,  the  dormant  partner  by  reason  of  the 
peculiar  nature  of  his  firm  connection,  and  of  the  usual  fact  of 
his  not  being  known  to  creditors,  is  not  a  necessary  party  unless 
he  becomes  known  to  the  plaintiff  as  a  partner,  and  his  non- 
joinder is  not  ground  for  a  plea  in  abatement.^^  In  all  cases 
where  he  is  known  by  the  plaintiff  as  a  partner,  he  should  be 
made  a  party  to  the  action,  and  it  has  been  held  that  if  any  part- 

W.  787;  Lehow  v.  SImonton,  3  Colo.  N.   W.   1072;    Manny  v.   Frazier,   27 

346;    Wright    v.    Brosseau,    IZ    Del.  Mo.   419;    Morehead   v.   Wriston,    12> 

381 ;  Morris  v.  Allarqueze,  74  Ga.  86 ;  N.  Car.  398 ;   Kountz    v.    Holthouse, 

Wheat    V.    Hamilton,    53    Ind.  256;  85  Pa.  St.  235;   McCarteney  v.  Wy- 

Doxey  v.  Service,  30  Ind.  App.   175,  oming  Nat.   Bank,    1    Wyo.  382;   Ex 

65  N.  E.  757;  Poole  v.  Hintrager,  60  parte  Appleby,  2  Deac.  482;  Ex  parte 

Iowa   180,    14  N.   W.   223;    Gillen  v.  Freeman,  Buck.  471. 

Peters,   39   Kans.   489,    18   Pac.   613;  i*  Hatch  v.  Wood,  43  N.  H.  633. 

Francis  v.  Smith,  1  Duv.   (Ky.)   121;  is  Desha   v.   Holland,    12   Ala.   513, 

Thompson  v.  Thornpson,  4  Ohio  St.  46  Am.  Dec.  261 ;  Tomlinson  v.  Spen- 

Z2,Z ;  Trimble  v.  Strother,  25  Ohio  St.  cer,    5    Cal.   291 ;    Goggin   v.    O'Don- 

378.     See  also  Arnold  v.  Nichols,  64  nell,  62  111.  66;  Hopkins  v.  Kent,  17 

N.  Y,   117;   Reynolds  v.   Lawton,  62  Md.  72;  Wright  v.  Herrick,  125  Mass. 

Hun  (N.  Y.)  596,  17  N.  Y.  S.  432,  43  154;  Wood  v.  Cullen,  13  Minn.  394; 

N.  Y.   St.  578;  McGibbon  v.  Walsh,  Pinschower  v.  Hanks,  18  Nev.  99,  1 

109  Wis.  670,  85  N.  W.  409;  Hine  v.  Pac.  454;   North  v.  Blass,  30  N.  Y. 

Beddome,  8  U.  C.  C.  P.  381.    But  see  374;   Arnold  v.   Morris,  7  Daly    (N. 

Canadian    Bank    v.    Marks,    19    Ont.  Y.)  498;  Nichols  v.  Cheairs,  4  Sneed 

450;  Lee  v.  Fountain,  10  Ala.  755,  44  (Tenn.)    229;   Jackson  v.  Alexander, 

Am.  Dec.  505.  8  Tex.  109;  Cleveland  v.  Woodward, 

13  Wild  V.  Dean,   3  Allen    (Mass.)  15    Vt.   302,   40   Am.    Dec.   682.     See 

579;  Ayres  v.  Gallup,  44  Mich,  13,  5  Keesey  v.  Old,  3  Tex.  Civ.  App.   1, 


1119 


ACTIONS    GENERALLY 


I  811 


ners  are  omitted,  it  must  appear  by  averment  that  their  legal 
obligations  have  ceased/^ 

§  811.     Nonjoinder  of  defendants  in  contract  obligations. 

— In  states  where  partners  are  jointly  liable,  they  must  be  so 
sued  in  actions  on  contract.  However,  nonjoinder  of  copart- 
ners is  waived  by  failure  of  the  opposing  party  to  plead  the 
same/^  At  common  law  such  nonjoinder  must  be  pleaded  in 
abatement ;^^  or  if  apparent  on  the  face  of  the  record,  by  de- 
murrer, motion  in  arrest,  or  on  error  ;^''  or  the  objection  is  waived. 
Under  the  codes  it  must  also  be  pleaded  in  abatement;""  or  if 


21  S.  W.  693 ;  Swan  v.  Steele,  7  East 
209;  Cox  V.  Hickman,  8  H.  L.  Cas. 
268. 

16  Hyde  v.  Van  Valkenburg,  1  Daly 
(N.  Y.)  416. 

17  Waits  V.  McClure,  10  Bush  (Ky.) 
763;  Albro  v.  Lawson,  17  B.  Mon. 
(Ky.)  642;  Davis  v.  Willis,  47  Tex. 
154 ;  Evans  &c.  Brick  Co.  v.  Hadfield, 
93  Wis.  665,  68  N.  W.  468. 

18  Jordan  v.  Wilkins,  3  Wash.  (U. 
S.)  110,  Fed.  Cas.  No.  7527;  Cofifee 
V.  Eastland,  Fed.  Cas.  No.  2945; 
Clementson  v.  Beatty,  Fed.  Cas.  No. 
2884,  1  Cranch  (C.  C.)  178;  Smith 
V.  Hunt,  2  Stew.  (Ala.)  222;  Hicks 
V.  Branton,  21  Ark.  186;  Hamilton 
V.  Buxton,  6  Ark.  24 ;  Beard  v.  Knox, 
5  Cal.  252,  63  Am.  Dec.  125 ;  Douglas 
V.  Chapin,  26  Conn.  76;  Shufeldt  v. 
Seymour,  21  111.  524 ;  Page  v.  Brant, 
18  111.  Zl ;  Sinsheimer  v.  William 
Skinner  Mfg.  Co.,  54  111.  App.  151, 
165  111.  116,  46  N.  E.  262;  Carico  v. 
Moore,  4  Ind.  App.  20,  29  N.  E.  928 ; 
Nichols  V.  Burton,  5  Bush  (Ky.) 
320;  Fogg  v.  Virgin,  19  Maine  352, 
36  Am.  Dec.  757 ;  Smith  v.  Cooke, 
31  Md.  174,  100  Am.  Dec.  58;  Purvis 
V.  Butler,  87  Mich.  248,  49  N.  W. 
564;  Campbell  v.  Wallace,  12  N.  H. 
362,  i1  Am.  Dec.  219;  Curran  v. 
William  Kendall  Boot  &c.  Co.,  8  N. 


Mex.  417,  45  Pac.  1120;  Kingsland 
V.  Braisted,  2  Lans.  (N.  Y.)  17;  Rob- 
ertson V.  Smith,  18  Johns.  (N.  Y.) 
459,  9  Am.  Dec.  227;  Witmer  v. 
Schlatter,  2  Rawle  (Pa.)  359;  Deal 
V.  Bogue,  20  Pa.  St.  228,  57  Am.  Dec. 
707;  Tynberg  v.  Cohen,  67  Tex.  220, 
2  S.  W.  734 ;  Cleveland  v.  Woodward, 
15  Vt.  302,  40  Am.  Dec.  682 ;  Wilson 
v.  McCormick,  86  Va.  995,  11  S.  E. 
976;  Brown  v.  Belches,  1  Wash. 
(Va.)  9;  Urton  v.  Hunter,  2  W.  Va. 
83 ;  King  v.  Hoare,  13  M.  &  W.  494 ; 
Rice  V.  Shute,  5  Burr  2611,  1  Smith 
Lead.  Cas.  287. 

19  Hamilton  v.  Buxton,  6  Ark.  24; 
Douglas  V.  Chapin,  26  Conn.  Id;  San- 
dusky V.  Sidwell,  173  111.  491  (affd. 
173  111.  493,  50  N.  E.  1003)  ;  Sins- 
heimer V.  William  Skinner  Mfg.  Co., 
156  111.  116,  165  111.  116,  46  N.  E.  262; 
Cummings  v.  People,  50  111.  132 ;  Mc- 
Gregor V.  Balch,  17  Vt.  562;  Wilson 
V.  McCormick,  86  Va.  995,  11  S.  E. 
976;  Shields  v.  Oney,  5  Munf.  (Va.) 
550. 

20  Simonton  v.  Rohm,  14  Colo.  51, 
23  Pac.  86;  Sandwich  Mfg.  Co.  v. 
Herriott,  Zl  Minn.  214,  ZZ  N.  W. 
782;  Tinkum  v.  O'Neale,  5  Nev.  93; 
Bridge  v.  Payson,  5  Sandf.  (N.  Y.) 
210;  Whiting  v.  Turley,  Dall.  (Tex.) 
453. 


§    812  LAW    OF    PARTNERSHIP  1120 

apparent  on  the  record  should  be  ralsea  y  demurrer;"^  or  by 
answer;"^  or  is  waived.  Some  states  have,  by  statutory  enact- 
ment, provided  that,  under  certain  conditions,  certain  partner- 
ships may  sue  and  be  sued  in  the  usual  or  ordinary  name  which 
it  has  assumed,  or  by  which  it  is  known,  without  alleging  each 
member  thereof.  This  is,  however,  not  exclusive,  but  simply 
permissive,  and  either  or  both  methods  may  be  adopted."'^  The 
above  provisions,  however,  usually  refer  merely  to  those  part- 
nerships formed  for  carrying  on  business  in  the  county  where 
the  action  is  brought,  and  do  not  extend  to  foreign  partner- 
ships, and  such  firms  should  be  sued  in  the  names  of  the  indi- 
vidual partners."*  An  exception  to  the  general  rule  just  stated 
is,  however,  recognized  when  an  attachment  suit  is  brought  in 
the  firm  name,  against  a  nonresident  partnership  formed  for  the 
purpose  of  doing  business  within  the  state,  and  with  a  place  of 
business  therein.  Service  may  be  had  on  such  firm  by  leaving 
a  copy  of  the  summons  at  such  place  of  business.^^ 

§  812.  Nonjoinder  of  defendants  in  tort. — Unlike  part- 
nership liability  in  contract,  the  liability  growing  out  of  partner- 
ship torts  is  universally  held  to  be  both  joint  and  several,  and 
all  the  partners  may  be  sued  jointly,  or  any  one  of  them  may 
be  sued  individually."^     All  the  partners  may  be  liable  for  the 

21  Whittaker   v.    Collins,   34   Minn.  33    How.    Prac.    174)  ;    Belshaw   v. 
299,  25  N.  W.  632,  57  Am.  Rep.  55;  CoHe,  1  E.  D.  Smith  (N.  Y.)  213. 
Hyrne  v.   Erwin,  23  S.  Car.  226,  55  ^3  Markham  v.  Buckingham,  21  Iowa 
Am.  Rep.  15.  494,  89  Am.   Dec.   590;   Whitman  v. 

22  Harrison  v.  McCormick,  69  Cal.  Keith,  18  Ohio  St.  134. 

616,    11    Pac.  456;   Carico  v.   Moore,  24  Critchell   v.   Cook,   7   Ohio   Dec. 

4  Ind.  App.  20,  29  N.  E.  928;  Alex-  314,  2  ,Vkly.  Cin.  Law  Bui.  97. 

ander  v.  ColHns,  2  Ind.  App.  176,  28  25  Byers    v.    Schlupe,    51    Ohio    St. 

N.  E.   190;  Albro  v.  Lawson,   17  B.  300,  38  N.  E.  117,  25  L.  R.  A.  649. 

Mon.    (Ky.)   642;  Waits  v.  McClure,  26  Murphy   v.    Coppieters,    136   Cal. 

10  Bush    (Ky.)   763;   Sandwich  Mfg.  317,  68  Pac.  970;  Pratt  v.  Brewster,  52 

Co.  V.  Herriott,  Zl  Minn.  214,  2>2,  N.  Conn.  65;   Stevens  v.  Faucet,  24  111. 

W.    782;    Kingsland    v.    Braisted,    2  483;  Helm  v.  O'Rourke,  46  La.  Ann. 

Lans.  (N.  Y.)  17;  Zabriskie  v.  Smith,  178,  15  So.  400;  McCrilHs  v.  Hawes, 

13  N.  Y.  322,  64  Am.  Dec.  551;  Kay-  38  Maine  566;  Head  v.  Goodwin,  Zl 

ser  V.    Sichel,   34   Barb.    (N.   Y.)    84  Maine  181;   Stockton  v.  Prey,  4  Gill 

(affd.  42  N.  Y.  120,  4  Abb.  Dec.  592,  (Md.)  406,  45  Am.  Dec.  138;  Patten 


1121  ACTIONS    GENERALLY  §    812 

torts  of  one,  such  as  misrepresentations  made  in  the  course  of 
firm  business,"'^  and  the  same  rule  applies  to  other  torts  one  may 
commit  in  the  scope  of  the  partnership  business,  and  for  it. 
Likewise,  such  liability  in  tort  may  be  incurred  against  the  firm 
by  a  servant,  and  in  such  cases,  whether  the  tort  be  committed 
by  a  mere  servant,  or  by  a  partner,  and  when  the  firm  liability 
is  complete,  any  one  or  all  of  the  members  may  be  liable  upon 
the  tort."*  There  is  a  slightly  different  rule  if  the  tort  is  a 
breach  of  contract,  that  is,  consisted  in  the  breach  of  a  contract, 
through  malfeasance  or  misfeasance,  and  in  such  case  all  the 
partners  must  be  joined  as  defendants,  the  rules  as  to  contract 
liability  applying."''  "The  principle  running  through  all  the  cases 
seems  to  be  that  where  the  action  is  maintainable  for  the  tort 
simply,  without  reference  to  any  contract  between  the  parties, 
the  action  is  one  of  tort  purely,  although  the  existence  of  a  con- 
tract may  have  been  the  occasion  or  furnished  the  opportunity 
for  committing  the  tort.  But  where  the  action  is  not  maintain- 
able without  pleading  and  proving  the  contract, — where  the  gist 
of  the  action  is  a  breach  of  the  contract,  either  by  malfeasance 
or  nonfeasance, — it  is  in  substance,  whatever  may  be  the  form 
of  the  pleading,  an  action  on  the  contract,  and  hence  all  per- 
sons jointly  liable  must  be  sued.""'' 

V.  Gurney,  17  Mass.  182,  9  Am.  Dec.  27  Peckham  Iron  Co.  v.  Harper,  41 

141;  Randolph  v.  Daly,  16  N.  J.  Eq.  Ohio  St.  100.     See  ante  §§  503-507. 

313;    Roberts   v.   Johnson,    58   N.   Y.  28  Stockton   v.    Frey,   4    Gill    (Md) 

613;  Harris  v.  Schultz,  40  Barb.   (N.  406,    45    Am.    Dec.    138;    Roberts    v. 

Y.)  315;  Hutton  v.  Murphy,  9  Misc.  Johnson,    58    N.    Y.    613;    White    v. 

(N.  Y.)    151,  29  N.  Y.  S.  70,  59  N.  Smith,  12  Rich.  (S.  Car.)  595;  Hyrne 

Y.  St.  662 ;  Mode  v.  Penland,  93  N.  v.  Erwin,  23  S.  Car.  226,  55  Am.  Rep. 

Car.   292;    Barfield   v.    Coker,    11    S.  15;  Fletcher  v.  Ingram,  46  Wis.  191, 

Car.    181,   53   S.   E.    170;    Holden   v.  50  N.  W.  424. 

Lynn,  30  Okla.  (^Z,  120  Pac.  246,  38  29  whittaker   v.    Collins,   34    Minn. 

L.  R.  A.  (N.  S.)  239 ;  Holden  V.  Lynn,  299,  25  N.  W.  632,  57  Am.  Rep.  55; 

30    Okla.   663,    120    Pac.   246;    White  Harris  v.  Schultz,  40  Barb.    (N.  Y.) 

V.  Smith,  12  Rich.  L.   (S.  Car.)   595;  315;  Orange  Bank  v.  Brown,  3  Wend. 

Fletcher  v.  Ingram,  46  Wis.  191,  50  (N.  Y.)  158;  Buddie  v.  Willson,  6  T. 

N.   W.   424;    Edmonson    v.    Davis,    4  R.  369.    See  §  811  supra. 

Esp.  N.  P.  14;  Hudson  v.  Robinson,  so  whittaker    v.    Collins,    34    Minn. 

4  M.  &  S.  475.  299,  25  N.  W.  632,  57  Am.  Rep.  55. 


§    813  LAW    OF    PARTNERSHIP  1122 

§  813.  Suit  against  one  partner. — A  suit  can  not  be  com- 
menced against  one  member  of  a  partnership  on  a  contract  lia- 
bility, as  a  rule,  unless  all  the  members  of  the  firm  are  made 
codefendants,  unless  he  has  by  some  act  rendered  himself  sev- 
erally liable,^^  or  purchases  goods  from  a  third  party,  while  do- 
ing business  in  his  own  name  and  concealing  the  name  or  con- 
nection of  his  copartner  in  order  to  avoid  liability  of  the  copart- 
ner, in  which  case  the  contracting  partner  may  be  sued  alone  and 
the  goods  seized,^^  or  otherwise  contracts  for  the  firm  in  his  own 
name  and  upon  his  own  credit,  and  the  person  with  whom  he 
deals  does  not  know  of  the  existence  of  a  partnership,^^  or  where 
the  statute  provides  otherwise,  as,  for  example,  where  one  of 
the  partners  resides  out  of  the  state,  and  authority  is  given  in 
such  case  to  sue  the  resident  partner.^* 

§  814.     Equitable    actions    involving    partnerships. — The 

first  requisite  in  an  equitable  action  between  partners  and  third 
persons  is  to  show  that  no  adequate  remedy  exists  at  law.^^ 
Judge  Story  says  :^®  "It  may  be  stated  as  the  general  doctrine, 
that  the  same  remedies  in  equity  will  lie  for  the  vindication  of 
the  rights  and  the  redress  of  the  wrongs,  of  the  partnership,  as 
ordinarily  belong  to  private  individuals.  Thus,  for  example,  if 
one  partner  should  collude  with  a  third  person  to  defraud  the 

31  Cox    V.    Gille    Hdw.  &c.  Co.,    8  48  Fed.  795;  Pearson  v.  Keedy,  6  B. 

Okla.  483,  58  Pac.  645.  Mon.    (Ky.)    128;   Sneed  v.  Coyle,  4 

S2  Davis  V.  Bingham   (Tex.),  46  S.  Litt.    (Ky.)    163;   Cutler  v.   Cochran, 

W.  840.  13   La.   482;   Flack    v.    Charron,    29 

ssSettembre    v.    Putnam,    30    Cat.  Md.  311;   Bartlett  v.   Parks,   1   Cush. 

490;  Sylvester  v.  Smith,  9  Mass.  119;  (Mass.)    82;    Parish  v.   Lewis,   Free. 

Cookingham  v.  Lasher,  41  N.  Y.  454,  (Miss.)    299;    Penny    v.    Martin,    4 

1  Abb.  Dec.  436;  Clark  v.  Holmes,  3  Johns.   Ch.    (N.   Y.)    566;   Coster   v. 

Johns.     (N.    Y.)     148;    Brownlee    v.  Clarke,    3    Edw.    Ch.    (N.    Y.)    411; 

Lobenstein    (Tenn.    Ch.),    42    S.    W.  Robb  v.  Stevens,  Clarke  Ch.  (N.  Y.) 

467;    Hagar    v.    Stone,    20    Vt.    106;  191 ;    Leake    &c.    Orphan    House     v. 

Cleveland  v.  Woodward,  15  Vt.  302,  Lawrence,  11  Paige  (N.  Y.)  80;  Cop- 

40  Am.  Dec.  682.  cutt  v.  Merchant,  4  Bradf.  Sur.    (N. 

24  People's   Nat.   Bank  v.   Hall,   Id  Y.)   18;  Donaldson  v.  State  Bank,  16 

Vt.  280,  56  Atl.  1012.  N.  Car.  103,  18  Am.  Dec.  577. 

35  Rothwell    v.    Dewees,    2    Black.  '^  Story  Partnership,  §  259. 
(U.  S.)  613;  McCampbell  v.  Brown, 


1123  ACTIONS    GENERALLY  §    815 

partnership  by  wrongfully  using  the  partnership  name,  or  nego- 
tiating the  securities,  or  applying  the  property  thereof  for  im- 
proper purposes,  a  court  of  equity  would  by  an  injunction, 
restrain  him  from  so  doing.  So  if  a  third  person  should  violate 
a  copyright  or  patent  right  belonging  to  a  partnership,  an  injunc- 
tion would,  in  like  manner,  lie  to  restrain  him  from  such  illegal 
conduct.  So  if  a  separate  creditor  of  one  partner  should  know- 
ingly aid  in  the  misapplication  of  the  partnership  funds  to  his 
own  debts,  a  court  of  equity  would  restrain  him  from  so  aiding 
in  such  misconduct;  and  if  he  had  so  improperly  received  the 
funds  thereof,  it  would  compel  him  to  restore  the  same  to  the 
partnership.  So  a  court  of  equity  will  restrain  a  third  person 
by  injunction,  who  is  injuring  the  partnership  by  vending  an 
article  of  trade,  similar  to  that  manufactured  by  the  partner- 
ship, falsely,  under  the  name  of  the  partnership,  and  as  if  manu- 
factured by  the  same,  and  thus  misleading  the  public  and  divert- 
ing the  patronage  and  custom  from  the  partnership.  The  same 
rule  will  apply  to  any  other  false  and  wrongful  use  of  the  part- 
nership name  and  reputation,  by  deceptive  imitations  of  the  labels, 
devices,  or  ornaments  used  by  the  partnership  upon  their  own 
manufactured  cutlery,  or  vehicles,  or  medicinal  preparations,  or 
otherwise  in  the  course  of  their  business.  So  in  like  manner  an 
injunction  will  lie  for  a  partnership  to  prevent  a  third  person 
from  publishing  a  magazine,  or  other  periodical  in  their  names, 
after  they  have  ceased  to  have  any  connection  with  it." 

§  815.  Parties  in  equitable  actions. — Equity  may  take 
jurisdiction  in  a  suit  against  a  partnership  one  of  whose  mem- 
bers is  a  nonresident,  when  otherwise  the  remedy  would  have 
been  by  action  at  law.^^  All  the  partners  should  be  made  parties 
either  plaintiff  or  defendant,  to  an  action  in  equity  involving 
partnership  moneys  or  property.^^    An  unwilling  partner  in  an 

37Farrar  v.  Haselden,  9  Rich.  Eq.  Campbell    v.    Brown,    48    Fed.    795; 

(S.  Car.)  331;  Williams  v.  Donaghe,  Frost   v.    Schackleford,    57    Ga.    260; 

1  Rand.   (Va.)   300.  Gerard  v.   Bates,   124   111.    150,    16  N. 

ssWest  V.   Randall,   2   Mason    (U.  E.  258,   7  Am.   St.  350;   Lombard  v. 

S.)    181,   Fed.   Cas.   No.    17424;    Mc-  Johnson,    76   111.    599;    Postlewait   v. 


§  816 


LAW    OF    PARTNERSHIP 


1124 


action  by  the  other  partners  on  a  partnership  claim  should  be 
made  a  defendant.^''  The  fact  that  the  joining  of  one  partner 
would  oust  the  court  from  jurisdiction,  because  such  partner  is  a 
nonresident,  may  cause  his  nonjoinder  to  be  disregarded,*"  if  a 
decree  can  be  rendered  without  prejudice  to  the  interests  of  the 
nonresident  partner.*^  In  some  cases  where  the  partners  are  very 
numerous,  less  than  all  will  be  allowed  to  sue  or  be  sued  on  behalf 
of  the  firm.*"  It  seems  that  the  general  rule  in  actions  in  equity 
is  that  the  representatives  of  deceased  partners,  or  their  heirs, 
need  not  be  joined,*^  although  in  some  instances  according  to  cer- 
tain authorities  a  contrary  rule  is  held.** 

§  816,     Venue. — Where  a  firm  may  be  sued  by  its  firm 
name,  as  an  entity,  it  is  held  to  have  a  residence  in  any  county 


Howes,  3  Iowa  365;  Hoy  v.  McMur- 
ray,  1  Litt.  (Ky.)  364;  Fowle  v. 
Torrey,  131  Mass.  289;  Russel  v. 
Swan,  16  Mass.  314;  DeGreifif  v. 
Wilson,  30  N.  J.  Eq.  435;  Isham  v. 
Phelps,  54  N.  Y.  dlZ;  Gaither  v. 
Caldwell,  1  Dev.  &  Bat.  Eq.  (N. 
Car.)  504;  Noyes  v.  Sawyer,  3  Vt. 
160;  Dunbar  v.  Buck,  6  Alunf. 
(Va.)   34. 

39Edgell  V.  Felder,  84  Fed.  69,  28 
C.  C.  A.  382;  Fallowes  v.  William- 
son, 11  Ves.  Jr.  306;  Leigh  v.  Thom- 
as, 2  Ves.  313. 

40  West  V.  Randall,  2  Mason  (U. 
S.)  181,  Fed.  Cas.  No.  17424;  Carson 
V.  Robertson,  Chase  (U.  S.)  475,  Fed. 
Cas.  No.  2466. 

"Vose  V.  Philbrook,  3  Story  (U. 
S.)  335,  Fed.  Cas.  No.  17010;  Milli- 
gan  V.  Milledge,  3  Cranch  (U.  S.) 
220,  2  L.  ed.  417;  Palmer  v.  Stevens, 
100  Mass.  461 ;  Darwent  v.  Walton, 
2  Atk.  510. 

42  Story  Eq.  Plead.,  §  116;  Par- 
sons V.  Howard,  2  Woods  (U.  S.)  1; 
Goldman  v.  Page,  59  Miss.  404 ; 
Wall  V.  Boisgerard,  11  Smed.  &  M. 
(Miss.)    574;    Small    v.    Atwood,    1 


Younge  407;  Taylor  v.  Salmon,  4 
Myl.  &  C.  134;  Wallworth  v.  Holt, 
4  Myl.  &  C.  619;  Hichens  v.  Con- 
greve,  4  Russ.  562 ;  Walburn  v. 
Ingilby,  1  Myl.  &  K.  61 ;  Mare  v. 
Malachy,  1  Myl.  &  C.  559;  Cockburn 
V.  Thompson,  16  Ves.  Jr.  321 ;  Lloyd 
V.  Loaring,  6  Ves.  Jr.  ITS. 

43  Rothwell  V.  Dewees,  2  Black.  (U. 
S.)  613,  17  L.  ed.  309;  Bischofifsheim 
V.  Baltzer,  20  Fed.  890;  McCandless 
V.  Hadden,  9  B.  Mon.  (Ky.)  186; 
Folsom  V.  Detrich  Fertilizer  Co.,  85 
Md.  52,  36  Atl.  446 ;  Harwood  v.  Jones, 
10  Gill  &  J.  (Md.)  404,  32  Am.  Dec. 
180;  Robinson  v.  Thompson,  Smed. 
&  M.  Ch.  (Miss.)  454;  Robertshaw 
V.  Hanway,  52  Miss.  713 ;  Rusling  v. 
Brodhead,  55  N.  J.  Eq.  200,  35  Atl. 
841;  Waugh  v.  Mitchell,  1  Dev.  & 
Bat.  Eq.   (N.  Car.)   510. 

44  Story  Eq.  Plead.,  §  167,  criti- 
cized in  Robertshaw  v.  Hanway,  52 
Miss.  713.  See  also  Postlewait  v. 
Howes,  3  Iowa  365 ;  Pearce  v.  Bruce, 
38  Ga.  444;  Lockhart  v.  Harrell,  6 
La.  Ann.  530;  Carter  v.  Currie,  5 
Call  (Va.)   158. 


1125  ACTIONS    GENERALLY  §    817 

where  it  does  business  and  may  there  be  sued/^  In  other  juris- 
dictions the  venue  depends  on  the  residence  of  the  partners/*^ 
1  Where  there  was  a  diversity  of  citizenship  between  members  of 
a  firm  and  the  plaintiff,  service  on  one  member  would  confer 
federal  jurisdiction  on  the  firm  and  the  partner  served.*^  As  an 
action  for  the  price  of  goods  is  transitory,  service  on  a  partner 
in  the  county  where  the  action  is  brought  may  give  the  court  juris- 
diction of  a  copartner  who  was  served  in  another  county/- 
Equity  jurisdiction  may  extend  to  real  property  outside  the 
state  ;*°  or  be  invoked  in  actions  where  one  party  is  a  nonresi- 
dent,^*'  and  is  in  other  respects  broad.^^ 

§  817.  Process  and  service. — Ordinarily  in  an  action 
against  partners,  unless  the  statute  permits  suits  against  partner- 
ship by  its  firm  name,  the  names  of  all  the  members  of  a  partner- 
ship should  be  set  out  in  the  summons,^"  and  in  actions  by  partners 
the  process  should  name  all  the  partners  individually,^^  except  in 
case  of  dormant  partners.^*  Some  cases  hold  the  citation  may 
be  in  the  firm  name,  if  the  petition  contains  the  names  of  all  the 

45  Watson  V.  Coon,  247  III.  414,  93  (Tenn.  Ch.),  52  S.  W.  467;  Harris 
N.  E.  289;  Sketchley  v.  Smith,  78  v.  Fleming,  13  Ch.  D.  208;  Southern 
Iowa  542,  43  N.  W.  524;  Fitzgerald  v.  Harriman,  10  L.  T.  (N.  S.)  263 
V.  Grimmell,  64  Iowa  261,  20  N.  W.  ^i  Schick  v.  Corbett,  52  La.  Ann 
179;  Alarsh  v.  Marsh,  9  Rob.  (La.)  180,  26  So.  862;  Reed  v.  Johnson 
45;  Hobson  v.  Whittemore,  13  La.  24  Maine  322;  Eden  v.  Nash,  7  Ch 
422.     Contra:    Byers    v.    Schlupe,    51  D.  781. 

Ohio  St.  300,  38  N.  E.  117,  25  L.  R.        52  Xarlton  v.  Herbert,  4  Ala.  359 

A.  649.  Maritime    Bank    v.    Rand,    24    Conn 

46  Adams  v.  May,  27  Fed.  907 ;  9 ;  Gillett  v.  Walter,  74  Ga.  291 ;  Dun- 
Pyron  v.  Ruohs,  120  Ga.  1060,  48  S.  ham  v.  Shindler,  17  Ore.  256,  20  Pac 
E.  434;  Wadley  v.  Jones,  55  Ga.  329;  326;  Jones  v.  Fegoly,  1  Phila.  (Pa.) 
Kamp  V.  Bartlett,  164  111.  App.  338.  1 ;  Lash  v.  Morris  County  Bank  (Tex 

47  Empire   Rice   Mill   Co.   v.    Neu-  Civ.  App.),  54  S.  W.  806. 

mond,  199  Fed.  800.  53  Moore    v.    Burns,    60    Ala.    269 

48  George  Bohon  Co.  v.  Moren,  151  Lanford  v.  Palton,  44  Ala.  584 ; 
Ky.  811,  152  S.  W.  944.  Mitchell  v.  Dall,  2  Har.  &  G.   (Md.) 

4«  Jones  V.   Fletcher,  42   Ark.  422;  159;   Barber  v.   Smith,  41   Mich.   138, 

Griggs   V.    Clark,   23    Cal.   427;    God-  1    N.   W.   992;    Smith  v.   Canfield,   8 

frey  v.  White,  43  Mich.  171,  5  N.  W.  Mich.  493. 

243.  54  Mitchell    v.    Dall,    2    Har.    &    G. 

50  Gaines    v.    Nashville    &c.    Bank  (Md.)    159. 


§  817 


LAW    OF    PARTNERSHIP 


1126 


partners. ^^  Other  cases  hold  that  a  failure  to  set  out  the  indi- 
vidual names  of  the  partners  does  not  invalidate  the  judgment.^" 
If  a  warrant  would  not  lie  against  the  individual  members  of  a 
firm  it  is  not  proper  process  against  the  partnership.''^  The 
general  rule  is  that  in  the  absence  of  statute,  process  must  be 
served  upon  all  the  members  of  a  partnership  in  order  to  bind 
the  firm,  and  service  upon  one  partner  does  not  give  jurisdiction 
of  the  partners  who  were  not  served  or  of  the  partnership  as 
such.^^  In  Pennsylvania  it  has  always  been  held  that  service  on 
one  partner  binds  the  partnership  property.^^  And  in  most  states 
it  is  provided  by  statute  that  service  on  one  member  of  a  part- 
nership shall  bind  the  firm  in  actions  against  the  members  of  a 
partnership  as  such.''"  Under  most  of  such  statutes  a  judgment 
rendered  on  service  on  less  than  all  the  partners  binds  the  firm 
assets,  but  not  the  individual  assets  of  those  not  served,  though 


5^  Clayburg  v.  Ford,  3  III.  App. 
542 ;  Putman  v.  Wheeler,  65  Tex. 
522 ;  Andrews  v.  Ennis,   16  Tex.  45. 

sQKeathley  v.  Stump,  147  Ky.  406, 
144  S.  W.  87;  Fredlock  v.  Fredlock 
(W.  Va.),  74  S.  E.  865. 

^'  Faulkner  v.  Whitaker,  15  N.  J. 
L.  438. 

5s  In  re  Grossmayer,  177  U.  S.  48, 
44  L.  ed.  665 ;  Romona  Oolitic  Stone 
Co.  V.  Bolger,  179  Fed.  979;  Mc- 
Grew  V.  Earnest,  167  Ala.  531,  52 
So.  639;  Demott  v.  Swaim,  5  Stew. 
&  P.  (Ala.)  293;  Ingraham  v.  Gil- 
dermester,  2  Cal.  88 ;  Ellsberry  v. 
Block,  28  Colo.  477,  65  Pac.  629; 
Sherburne  v.  Hyde,  185  111.  580,  57 
N.  E.  116;  Siegel  v.  Moses,  159  111. 
App.  624 ;  Heavrin  v.  Lack  Malleable 
Iron  Co.,  153  Ky.  329,  155  S.  W. 
729;  Rice  v.  Doniphan,  4  B.  Mon. 
(Ky.)  123;  Scott  v.  Bogart,  14  La. 
Ann.  261 ;  Pitman  v.  Planters'  Bank, 
1  How.  (Miss.)  527;  Van  Natta  v. 
Harroun  Real  Estate  Co.,  221  Mo. 
Z1Z,    120    S.   W.   738;    People's    Nat. 


Bank  V.  Hall,  16  Vt.  280,  S(y  Atl. 
1012;  Carlon  v.  Ruffner,  12  W.  Va. 
297. 

^^  Taylor  v.  Henderson,  17  Serg. 
R.  (Pa.)  453;  Lipewitz  v.  Siglin,  17 
Pa.  Dist.  Ct.  655;  Walsh  v.  Kirby, 
228  Pa.  194,  11  Atl.  452. 

60  Empire  Rice  Mill  Co.  v.  Neu- 
mond,  199  Fed.  800;  Lippincott  v. 
Shaw  Carriage  Co.,  25  Fed.  577  (con- 
struing Indiana  statute)  ;  Ellsberry  v. 
Block,  28  Colo.  477,  65  Pac.  629; 
Hayman  v.  Weil,  SI  Fla.  127,  44  So. 
176 ;  Printup  v.  Turner,  65  Ga.  71 ; 
Fleshman  v.  Collier,  47  Ga.  253 ;  Den- 
ton V.  Hannah,  12  Ga.  App.  494 ;  Guy 
V.  Kaulman,  75  S.  E.  269,  11  Ga. 
App.  350;  Nixon  v.  Downey,  42 
Iowa  78 ;  Walker  v.  Clark,  8  Iowa 
474;  Parker  v.  Danforth,  16  Mass. 
299;  Hirsh  v.  Fisher,  138  Mich.  95, 
101  N.  W.  48,  11  Detroit  Leg.  N. 
483;  Brooks  v.  Mclntyre,  4  Mich. 
316;  Whitmore  v.  Shiverick,  3  Nev. 
288 ;  Lewinson  v.  Albuquerque  First 
Nat.  Bank,  11  N.  Mex.  510,  70  Pac. 


1127 


ACTIONS    GENERALLY 


§  817 


usually  the  partner  served  is  bound  personally.*'^  "Judgments  in 
cases  of  this  kind  against  the  parties  not  served  with  process  or 
who  do  not  appear  therein,  have  no  binding  force  upon  them 
personally.  The  principle  is  as  old  as  the  law,  and  is  of  uni- 
versal justice,  that  no  one  shall  be  personally  bound  until  he  has 
had  his  day  in  court,  which  means  until  citation  is  issued  to  him, 
and  opportunity  to  be  heard  is  afforded.'"'"  If  the  action  is  not 
brought  until  after  dissolution  of  the  firm,  the  same  rules  as  to 
service  apply,  and  service  on  one  partner  will  bind  the  firm  assets 


567;  Yerkes  v.  McFadden,  141  N. 
Y.  136,  36  N.  E.  7;  Crane  v.  French, 
1  Wend.  (N.  Y.)  311;  Staiger  v. 
Theiss,  19  Misc.  170,  43  X.  Y.  S. 
292 ;  Vandervoort  v.  Palmer,  4  Duer 
(N.  Y.)  677;  Oakley  v.  Aspinwall, 
4  N.  Y.  513;  Goldstein  v.  Peter  Fox 
Sons  Co.,  22  N.  Dak.  636,  135  N. 
W.  180,  40  L.  R.  A.  (N.  S.)  566n; 
Sayre  Commission  Co.  v.  Keen,  26 
Okla.  794,  110  Pac.  775;  Symms 
Grocer  Co.  v.  Burnham,  6  Okla.  618, 
52  Pac.  918;  Pierce  v.  Varn,  76  S. 
Car.  359,  57  S.  E.  184;  Whitfield  v. 
Hovey,  30  S.  Car.  117,  8  S.  E.  840; 
Guimond  v.  Nast,  44  Tex.  114;  Alex- 
ander V.  Stern,  41  Tex.  193;  Slaugh- 
ter V.  American  Baptist  Publication 
Society  (Tex.  Civ.  App.),  150  S. 
W.  224;  Blumenthal  v.  Youngblood, 
24  Tex.  Civ.  App.  266,  59  S.  W.  290; 
Livingston  v.  Lovgren,  27  Wash.  102, 
67  Pac.  599 ;  McCoy  v.  Bell,  1  Wash. 
504,  20  Pac.  595;  Young  v.  Krueger, 
92  Wis.  361,  66  N.  W.  355;  Fowler 
v.  Bailley,  14  Wis.  125. 

"1  Ratchford  v.  Covington  County 
Stock  Co.  (Ala.),  55  So.  806;  Den- 
ton v.  Hannah  (Ga.  App.),  11  S.  E. 
672 ;  Warren  Brick  Co.  v.  Lagarde 
Lime  &c.  Co.,  12  Ga.  App.  58,  76  S.  E. 
761 ;  Guy  v.  Kaulman,  11  Ga.  App. 
350,  75  S.  E.  269;  Rickman  v.  Rick- 
man,  180  Mich.  224,  146  N.  W.  609; 
Heaton  v.  Schaefer.  34  Ol-cla.  631,  126 


Pac.  797,  43  L.  R.  A.   (N.  S.)   S40n. 
See  cases  cited  in  preceding  note. 

62  Mason  v.  Eldred,  6  Wall.  (U. 
S.)  231,  18  L.  ed.  783.  See  also  Sugg 
V.  Thorton,  132  U.  S.  524,  ZZ  L.  ed. 
447,  10  Sup.  Ct.  163;  Ladiga  Saw- 
Mill  Co.  V.  Smith,  78  Ala.  108 ;  Booth 
V.  Gamble-Robinson,  139  Cal.  175,  72 
Pac.  908 ;  Barnes  v.  Colorado  Springs 
&c.  R.  Co.,  42  Colo.  461,  94  Pac.  570; 
Orlando  First  Nat.  Bank  v.  Greig, 
43  Fla.  412,  31  So.  239;  Fleshman 
V.  Collier,  47  Ga.  253;  Harford  v. 
Street,  46  Iowa  594 ;  Gaiennie  v. 
Akin,  17  La.  42,  36  Am.  Dec.  604; 
AlcGehee  v.  McCord,  14  La.  362; 
Bonesteel  v.  Todd,  9  Mich.  371,  80 
Am.  Dec.  90;  Rowland  v.  Shephard, 
27  Nebr.  494,  43  N.  W.  344;  Win- 
ters v.  Means,  25  Nebr.  241,  41  N. 
W.  157,  13  Am.  St.  489;  Crane  v. 
French,  1  Wend.  (N.  Y.)  311;  Oak- 
ley v.  Aspinwall,  4  N.  Y.  513; 
Symms  Grocer  Co.  v.  Burliam,  6 
Okla.  618,  52  Pac.  918;  Wliitfield  v. 
Hovey,  30  S.  Car.  117,  8  S.  E.  840 
Adickes  v.  Allison,  21  S.  Car.  245 
Patten  v.  Cunningham,  dZ  Tex.  666 
Hedges  v.  Armistead,  60  Tex.  276 
Blumenthal  v.  Youngblood,  24  Tex. 
Civ.  App.  266,  59  S.  W.  290;  Cough- 
lin  v.  Pinkerton,  41  Wash.  500,  84 
Pac.  14;  Fowler  v.  Bailley,  14  Wis. 
125. 


21 — Row.  ON  Partn. — Vol.  2 


§  817 


LAW    OF    PARTNERSHIP 


1128 


and  bind  him  personally.*'^  Some  statutes  permit  service  of 
process  on  a  partnership  by  leaving  a  copy  at  its  usual  place  of 
business  with  a  member  or  some  specified  agent/*  and  others  al- 
low service  by  publication  on  nonresident  partners.^^  Publication 
notice  to  a  partnership  in  its  firm  name,  gives  no  jurisdiction,  in 
a  state  where  a  partnership  may  not  be  sued  in  its  firm  name.®® 
But  there  are  a  few  cases  which  have  held  a  judgment  on  such 
service  valid  as  against  collateral  attack,*'^  or  have  permitted 
amendment  of  the  process  before  judgment.*'^  But  such  no- 
tice, if  the  individual  names  of  the  partners  are  given  properly 
therein  is  good  even  though  there  was  a  mistake  in  giving  the 
firni  name  of  the  firm  as  members  of  which  they  were  described.^^ 
Where  service  on  one  partner  is  sufficient  an  acceptance  or  waiver 
of  service  by  one  partner  is  enough.^^     An  acknowledgment  of 


C3  Thomas  v.  Nathan,  65  Fla.  386, 
62  So.  206 ;  Nathan  v.  Thomas,  63  Fla. 
235,  58  So.  247,  Ann.  Cas.  1914  A, 
387n ;  Harford  v.  Street,  46  Iowa 
594;  Hale  v.  Van  Saun,  18  Iowa  19; 
Van  Eps  v.  Dillaye,  6  Barb.  (N.  Y.) 
244;  Sanger  v.  Overmeier,  64  Tex. 
57;  Alexander  v.  Stern,  41  Tex.  193. 

^*In  re  Grossmayer,  177  U.  S.  48, 
44  L.  ed.  665,  20  Sup.  Ct.  535 ;  Ralya 
Market  Co.  v.  Armour,  102  Fed.  530; 
Mitchell  &c.  Furniture  Co.  v.  Samp- 
son, 40  Fed.  805 ;  Heyman  v.  Deca- 
tur Street  Bank  (Ga.  App.),  84  S. 
E.  483;  Kamp  v.  Bartlett,  164  111. 
App.  338;  Leslie  v.  Bartlett,  164  111. 
App.  346;  Watson  v.  Coon,  155  111. 
App.  158;  Hanna  v.  Emerson,  45 
Nebr.  708,  74  N.  W.  229;  Herron  v. 
Cole,  25  Nebr.  692,  41  N.  W.  765; 
Grady  v.  Fosline,  48  Ohio  St.  665, 
29  N.  E.  768;  First  Nat.  Bank  of 
Bandon  v.  Manassa  (Ore.),  150  Pac. 
258;  Coughlin  v.  Pinkerton,  41  Wash. 
500,  84  Pac.  14;  Pollexfen  v.  Sib- 
son,  16  Q.  B.  D.  792,  55  L.  J.  Q.  B. 
294,  54  L.  T.  Rep.  (N.  S.)  297,  34 
Wkly.  Rep.  534;  Ex  parte  Young,  19 


Ch.  D.  124,  51  L.  J.  Ch.  141,  45  L. 
T.  Rep,  (N.  S.)  493,  30  Wkly.  Rep. 
330. 

c^  Watson  V.  Coon,  155  111.  App. 
158,  93  N.  E.  289;  Nye  v.  Ruther- 
ford, 8  Ohio  Dec.  (Reprint)  224, 
6  Cin.  Wkly.  Law  Bui.  378;  Martin 
V.  Burns,  80  Tex.  676,  16  S.  W. 
1072;  Likens  v.  McCormick,  39  Wis. 
313. 

66  Moses  P.  Johnson  Machinery 
Co.  V.  Watson,  57  Mo.  App.  629; 
Smith  V.  Hoover,  39  Ohio  St.  249; 
Perry-Rice  Grocery  Co.  v.  W.  E. 
Craddock  Grocery  Co.,  34  Tex.  Civ. 
App.  442,  78  S.  W.  966. 

67  Neiswanger  v.  Ord,  81  Kans.  63, 
105  Pac.  17,  29  L.  R.  A.  (N.  S.) 
287n.  See  also  Fox  v.  Blue  Grass 
Grocery  Co.,  61  S.  W.  265,  22  Ky. 
L.  169 ;  Deleon  v.  Heller,  77  Ga.  740 ; 
George  Norris  Co.  v.  Levin,  81  S. 
Car.  36,  61  S.  E.  1103. 

68  Frisk  v.  Reigelman,  75  Wis.  499, 
43  N.  W.  1117,  44  N.  W.  766,  17  Am. 
St.  198. 

69Tabler  v.  Mitchell,  62  Miss.  437. 
70McCaskey    v.    Pollock,    82    Ala. 


1129  ACTIONS    GENERALLY  §    817 

service  made  by  one  partner,  or  affidavit  may  sometimes  be  suf- 
ficient/^ In  New  York  service  on  an  agent  of  a  partnership  is 
insufficient  to  bind  the  partners/^  It  has  been  held  that  if  one 
partner  is  duly  serv^ed  in  an  action  against  a  partnership  he  is  in 
court  both  as  a  partner  and  an  individual  and  as  surviving  partner 
if  he  is  such/^  Proper  service  may  be  presumed  from  an  answer 
in  the  firm  name/*  A  judgment  rendered  against  all  the  members 
of  a  partnership  where  less  than  all  have  been  served  with  process, 
though  valid  in  the  state  where  rendered  is  not  binding  in  the 
courts  of  another  state  against  a  nonresident  partner  not  served/^ 
"That  countries  foreign  to  our  own  disregard  a  judgment  merely 
against  the  person,  where  he  has  not  been  served  with  process  nor 
had  a  day  in  court,  is  the  familiar  rule ;  national  comity  is  never 
thus  extended.  The  proceeding  is  deemed  an  illegitimate  assump- 
tion of  power  and  resisted  as  mere  abuse.  Nor  has  any  faith  and 
credit,  or  force  and  effect,  been  given  to  such  judgment  by  any 
state  of  this  union  so  far  as  we  know;  the  state  courts  have  uni- 
formly, and  in  many  instances,  held  them  to  be  void,  and  resisted 
their  execution  by  a  second  judgment  thereon. "'^'^  Usually,  if  a 
partnership  in  an  action  against  partners  is  erroneously  described 
in  the  process  as  a  corporation,  the  court  will  permit  amendment 
to  be  made  to  correct  the  error,  since  the  error  is  not  in  suing  the 
wrong  party,  but  in  a  misdescription  of  the  party  sued,  and  the 
names  of  the  individual  partners  may  be  added,"  but  in  some  ju- 

174,  2  So.  674;  Demott  v.  Swaim,  5  23   L.   ed.   271;    D'Arcy  v.    Ketchum, 

Stew.  &  P.    (Ala.)   293;   Southard  v.  11  How.   (U.  S.)    165,  13  L.  ed.  648; 

Steele,    3    T.    B.    Mon.     (Ky.)     445;  United  States  v.  American  Bell  Tele- 

Sanger  v.  Overmier,  64  Tex.  57.  phone    Co.,    29    Fed.    17;    Conley    v. 

'1  Bowin  V.  Sutherlin,  44  Ala.  278 ;  Chapman,     74    Ga.    709 ;     Phelps    v. 

Freeman    v.     Carhart,     17    Ga.    348;  Brever,  9  Cush.  (Mass.)  390,  57  Am. 

Gale  V.  Townsend,  45  Minn.  357,  47  Dec.  56;   Wright  v.   Boynton,   Z7   N. 

X.  W.   1064.  H.   9,   72  Am.   Dec.   319;   Wilson   v. 

"2  Sherman  v.   Oelsner,    135   X.   Y.  Xiles,  2  Hall   (X.  Y.)   358. 

S.  592.  76  D'Arcy    v.    Ketchmn,     11     How. 

"Bingham  Coal  &c.   Co.  v.   Blom,  (U.  S.)   165,  13  L.  ed.  648. 

43  Utah  584,  137  Pac.  630.  ^7  Farmers   &   Merchants'    Bank   v. 

"^Houssels     V.     Coe      (Tex.     Civ.  Bank  of  Glen   Elder,  46  Kans.  2,76; 

App.),   159  S.  W.  864.  Anglo-American    Packing  &c.    Co.   v. 

"Hall  V.   Lauming,  91   U.    S.    160,  Turner   Casing  Co.,   34  Kans.  340,  8 


§  818 


LAW    OF    PARTNERSHIP 


1130 


risdictions  this  is  not  permitted,  on  the  theory  that  the  wrong 
party  is  sued,'^  or  that  the  writ  runs  against  nobody,  there  being 
no  such  party  as  the  one  described.'^^  If  a  suit  is  first  brought  as 
against  a  corporation  and  later  amended  to  charge  individuals 
as  partners,  it  has  been  held  they  may  take  advantage  of  the 
statute  of  limitations  as  not  being  brought  into  court  by  the 
original  process.^" 

§  818.  Appearance. — An  appearance  by  one  partner  will 
bind  the  firm  property,  if  service  on  one  member  is  sufficient.®^ 
But  one  partner  has  no  implied  authority  to  enter  an  appear- 
ance which  will  bind  another  partner  personally,^^  especially  an- 
other partner  who  was  not  served,^^  unless  authority  is  shown 
or  may  be  presumed   from  the  facts.®*     A  forthcoming  bond 


Pac.  403;  Standard  Hay  &  Grain  Co. 
V.  Ratliff,  144  Ky.  161,  137  S.  W. 
1035;  Teets  v.  Snider  Heading  Mfg. 
Co.,  120  Ky.  653,  87  S.  W.  803,  27 
Ky.  L.  1061 ;  Munzinger  v.  Courier 
Co.,  82  Hun  575,  31  N.  Y.  S.  Ill; 
Evoy  V.  Expressmen's  Aid  Soc,  dd 
Hun  636,  21  N.  Y.  S.  641,  51  N.  Y. 
St.  38;  Skoog  v.  New  York  Novelty 
Co.,  4  N.  Y.  Civ.  Proc.  R.  144 ;  Gold- 
stein V.  Peter  Fox  Sons  Co.,  22  N. 
Dak.  636,  135  N.  W.  180,  40  L.  R.  A. 
(N.  S.)  566n ;  Blue  Grass  Canning 
Co.  V.  Wardman,  103  Tenn.  179,  52 
S.  W.  137. 

78Wliite  Co.  V.  Fayette  Auto  Co., 
43  Pa.  Super.  Ct.  532. 

79Schiele  v.  Dillard,  94  Ark.  277, 
126  S.  W.  835;  Bartram  v.  Collins 
Mfg.  Co.,  69  Ga.  751 ;  Maisch  v.  Or- 
der of  Americus,  223  Pa.  199,  12  Atl. 
528;  Sawyer  v.  New  York  State 
Clothing  Co.,  58  Vt.  588,  2  Atl.  483 ; 
Halbert  v.  Soule,  57  Vt.  358. 

^0  Leatherman  v.  Times  Co.,  88 
Ky.  291,  11  S.  W.  12,  10  Ky.  L.  896, 
3  L.  R.  A.  324,  21  Am.  St.  342. 

siBowin  v.  Sutherlin,  44  Ala.  278; 
Wheatley    v.    Tutt,    4     Kans.     240; 


Southard  v.  Steele,  3  T.  B.  Mon. 
(Ky.)  435;  Phelps  v.  Brewer,  9  Gush. 
(Mass.)  390,  57  Am.  Dec.  56;  San- 
ger v.  Overmier,  64  Tex.  57. 

s2Hall  V.  Lanning,  91  U.  S.  160, 
23  L.  ed.  271 ;  Atchison  Sav.  Bank 
V.  Templar,  26  Fed.  580;  Heavrin 
v  Lack  Malleable  Iron  Co.,  153  Ky'. 
329,  155  S.  W.  729;  Phelps  v.  Brew- 
er, 9  Gush.  (Mass.)  390,  57  Am. 
Dec.  56;  Bean  v.  Mather,  1  Daly 
(N.  Y.)  440.  Compare  Binney  v. 
Le  Gal,  1  Abb.  Pr.  238,  19  Barb.  (N. 
Y.)  592;  Percival  v.  Fuller,  S  Wkly. 
Notes  Gas.  (Pa.)  273;  Haslet  v. 
Street,  2  McCord  (S.  Gar.)  310,  13 
Am.  Dec.  274 ;  Bright  v.  Sampson,  20 
Tex.  21 ;  Munster  v.  Cox,  10  App. 
Gas.  680,  55  L.  J.  Q.  B.  108,  53  L. 
T.  (N.  S.)  474,  34  Wkly.  Rep.  461 ; 
Mason  v.  Cooper,  15  Ont.  Pr.  418. 

83  Heavrin  v.  Lack  Malleable  Iron 
Co.,  153  Ky.  329,  155  S.  W.  729. 

s*  Dennison  v.  Hyde,  6  Conn.  508 ; 
Freeman  v.  Carhart,  17  Ga.  348 ; 
Hollingsworth  v.  Atkins,  46  La.  Ann. 
515,  15  So.  11;  Marks  v.  Fordyce,  5 
Ohio  Dec.  81 ;  Tomlinson  v.  Broad- 
smith   [1846],  1  Q.  B.  386. 


1131  ACTIONS    GENERALLY  §    819 

given  by  a  resident  partner  to  secure  firm  goods  attached  is,  it  is 
held,  not  an  appearance  of  a  nonresident  partner.^^  Nor  where 
suit  may  be  had  against  a  partnership  in  the  firm  name,  will  the 
acts  of  partners  in  employing  counsel,  giving  testimony,  and 
attending  trial,  be  held  a  personal  appearance,  so  as  to  bind  them 
personally.*"  Where  a  partner  voluntarily  appears  at  any  time 
in  a  suit  against  a  firm,  as  he  may,*'^  it  is  a  waiver  of  objections  to 
the  service  or  form  of  process,*^  but  not  a  waiver  of  jurisdiction 
as  to  the  subject-matter.*^ 

§  819.  Dismissal  and  discontinuance. — W^here  action  is 
brought  against  partners  there  may  usually  be  a  discontinuance 
or  dismissal  at  any  time  as  to  those  not  sensed,  without  affect- 
ing the  right  to  proceed  to  judgment  against  the  others.^"  If 
some  of  the  persons  sought  to  be  charged  as  partners  are  not 
such,  the  action  may  be  discontinued  as  to  them  at  any  time.^^ 
If  an  action  is  brought  as  to  a  firm  and  its  members  it  may  be 
dismissed  as  to  the  members,  w^ithout  affecting  rights  to  proceed 
against  the  firm.*^"  A  dismissal  as  to  a  defendant  partner  who 
died  pending  action  does  not  abate  a  suit."^    A  dismissal  as  to  one 

S5  First  Nat.  Bank  v.  Sanders  Bros.  Mfg.   Co.  v.   Mitchell    (Tex.),   36   S. 

162  Ky.  374,  172  S.  W.  689.  W.  757;  Brown  v.  Belches,   1  Wash. 

SG  Lansing  v.  Bever  Land  Co.,- 158  (Va.)    9;   Carlon  v.   Ruffner,    12  W. 

Iowa  693,   138  N.  W.  833.  Va.  297.     Contra:    Storm  v.  Roberts, 

S'Oatio    V.    Brown,    59    Ga.    711;  54  Iowa  677,  7  N.   W.   124;   Nail  v. 

State    V.    Cloudt    (Tex.    Civ.    App.),  Adams,   7  Ala.  475;   Lyons  v.  Jack- 

84  S.  W.  415.  son,  1  How.    (Miss.)   474;   Moore  v. 

ssBowin  V.  Sutherlin,  44  Ala.  278;  Otis,  18  Mo.  1118;  Hawkins  v.  Tin- 
Anglo-American  Packing  &c.  Co.  v.  nen,  10  Tex.  188;  Scalfi  v.  State,  96 
Turner  Casing  Co.,  34  Kans.  340,  8  Tex.  559,  31  Tex.  Civ.  App.  671,  73 
Pac.  403 ;  Crieff  v.  Kirk,  15  La.  Ann.  S.  W.  441. 

320;     Blue     Grass     Canning     Co.    v.  "i  Wheeler     v.     Bullard,     6     Port. 

Wardman,   103   Tenn.   179,   52   S.  W.  (Ala.)     352;    Johnson    v.    Green,    4 

137.  Port.    (Ala.)    127;    Stoddart   v.    Van 

so  Lackett    v.    Rumbaugh,    45    Fed.  Dyke,  12  Cal.  437. 

23.  s'2  Frank  v.  Tatum,  87  Tex.  204,  25 

so  Mason  v.  Connors,  129  Fed.  831;  S.   W.   409;    Burnett  v.    Sullivan,    58 

Taft  V.  Church,  164  Mass.  504,  41  N.  Tex.  535. 

E.  671  ;   Root  v.   Herman,  2   City  Ct.  "^^  Dinecn  v.  Lanning,  92  Nebr.  545, 

R.    (N.    Y.)    409;    Link    v.    Allen,    1  138  N.  W.  759. 
Heisk     (Tenn.)    318;    Kingsland   &c. 


§    820  LAW    OF    PARTNERSHIP  1132 

partner  who  was  a  defendant  in  a  suit  by  a  partnership  may  ter- 
minate the  suit  of  a  partnership  as  such.^^  Even  though  one  part- 
ner has  a  right  to  discontinue  an  action  by  a  partnership  he  will 
not  be  permitted  to  do  so,  if  in  collusion  with  a  third  party,  so  as 
to  injure  a  copartner.®^  If  a  statute  makes  liability  joint  and  sev- 
eral a  dismissal  of  tort  action  by  one  partner  and  release  of  his 
interest  will  not  prevent  another  partner  recovering  damages  to 
his  interest.^^ 

§  820.  Attachment  and  garnishment. — The  rights  to  at- 
tachment or  garnishment  in  actions  either  by  or  against  a  part- 
nership are  governed  almost  wholly  by  statute  in  the  various 
jurisdictions.  It  has  been  said  that  attachment  will  not  lie 
against  a  partnership  or  a  partner,  for  a  partnership  debt,  ex- 
cept by  statute.^^  Transfer  of  firm  property  in  fraud  of  cred- 
itors will  support  an  attachment.  ^^  In  no  case  will  attachment 
lie  against  a  partnership  unless  grounds  for  it  lie  against  every 
member.  The  most  common  grounds  of  attachment  are  either 
the  nonresidence  or  absconding  of  a  debtor  or  transfer  of  prop- 
erty in  fraud  of  creditors.  It  is  not  ground  for  attachment  that 
one  partner,  or  less  than  all,  are  nonresidents  or  have  absconded, 
when  at  least  one  partner  is  a  resident.^^    If  all  the  partners  are 

^*  Storrie  v.  Ft.  Worth  Stockyards  Citizens'   Bank  v.   Williams,   59  Hun 

Co.  (Tex.  Civ.  App.),  143  S.  W.  286.  617,   12   N.   Y.   S.  678,  35   N.   Y.   St. 

05  Arnold  v.  Greene,   15   R.   I.  348,  542;  Heye  v.  Bolles,  2  Daly  (N.  Y.) 

5  Atl.  503.     Citing  Noonan  v.  Orton,  231 ;  Friend  v.  Michaelis,  15  Abb.  N. 

31    Wis.    265;    Winslow    v.    Newlan,  Cas.    (N.  Y.)    354;    Sellew  v.   Chris- 

45    111.    145;    Loring    v.    Brackett,    3  field,  1  Handy   (Ohio)   86;  Evans  v. 

Pick.    (Mass.)   403;  Holkirk  v.  Hoi-  Virgin,  69  Wis.   153,  33  N.  W.  569; 

kirk,  4  Madd.  50.  Keith  v.  Armstrong,  65  Wis.  225,  26 

96  Hoover   v.    Missouri    P.    R.    Co.  N.  W.  445. 

(Mo.),    16    S.    W.    480;    McPike    v.  ^^  Conklin   v.    Harris,    5    Ala.   213; 

McPherson,  41  Mo.  522.  Inderrieden  v.  Frost,  155  111.  App.  575  ; 

"■J"  Williams    v.     Muthersbaugh,    29  Smith  v.  Spinnenweber,  114  Ark.  384, 

Kans.    730;    Leach   v.    Cook,    10   Vt.  170  S.  W.  84;  Wiley  v.  Sledge,  8  Ga. 

239.  532;    Boorum    v.    Ray,    72    Ind.    151; 

98  Keith  v.   Fink,  47  111.  272;   Col-  Williams  v.  Muthersbaugh,  29  Kans. 

fier   V.   Hanna,   71    Md.   253,    17   Atl.  730;  Wilcox  v.  Carey,  9  Dana  (Ky.) 

1017;  Hirsch  v.  Hutchison,  64  How.  297;   Thomas   v.    Lusk,    13   La.   Ann. 

Pr.    (N.  Y.)    366,   3   Civ.    Proc.    106;  277;  Shirley  v.  The  Bride,  5  La.  Ann. 


1133 


ACTIONS    GENERALLY 


§    820 


nonresidents  or  have  absconded  or  some  ground  of  attachment 
exists  against  each,  then  attachment  of  firm  property  will  lie/ 
or  if  the  sole  surviving  partner  is  a  nonresident  or  an  absconder." 
Under  some  statutes  the  individual  property  of  a  nonresident 
may  not  be  attached  for  a  firni  debt.^  In  the  states  where  joint 
debts  are  considered  joint  and  several  a  creditor  may  sue  one 
partner  on  a  firm  debt,  and  may  attach  his  separate  property  as 
an  incident  to  such  right/  Any  disposition  of  firm  property 
for  which  the  firm  is  liable,  amounting  to  a  fraud  upon  firm 
creditors  is  a  ground  for  attachment  of  firm  property,  even 
though  the  act  of  disposition  was  originally  that  of  one  partner/ 
If  the  firm  assets  are  insufficient  to  pay  its  debts,  a  nonresident 
partner  has  been  held  to  have  no  interest  in  such  assets  which  will 


260 ;  Munroe  v.  Frosh,  2  La.  Ann.  962, 
963;  Johnston  v.  Mathews,  32  Md. 
363;  Edwards  v.  Hughes,  20  Mich. 
289;  Scruggs  v.  Blair,  44  Miss.  406; 
Curtis  V.  Hollingshead,  14  N.  J.  L. 
402;  Faulkner  v.  Whitaker,  IS  N.  J. 
L.  438;  HolHngshead  v.  Curtis,  14  N. 
J.  L.  402;  In  re  Smith,  16  Johns.  (N. 
Y.)  102 ;  In  re  Chipman,  14  Johns. 
(N.  Y.)  217;  Bogart  v.  Dart,  25  Hun 
(N.  Y.)  395;  Decker  v.  Bryant,  7 
Barb.  (N.  Y.)  182;  Sears  v.  Gearn, 
7  How.  Pr.  (N.  Y.)  383;  Cowdin  v. 
Hurford,  4  Ohio  132;  Taylor  v.  Mc- 
Donald, 4  Ohio  149;  White's  Case, 
10  Watts  (Pa.)  217;  Remington  v. 
Howard  Express  Co.,  8  R.  I.  406; 
Robinson  v.  Crowder,  1  Bailey  (S. 
Car.)  185;  Wallace  v.  Galloway,  5 
Coldw.  (Tenn.)  510;  Leach  v.  Cook, 
10  Vt.  239.  Compare  Faulkner  v. 
Brigel,  101  Ind.  329;  Staats  v.  Bris- 
tow,  IZ  N.  Y.  264;  Goodman  v. 
Henry,  42  W.  Va.  526,  26  S.  E.  528, 
35  L.  R.  A.  847;  Fretz  v.  Johnson, 
15  Wkly.  Notes  Cas.  (Pa.)  208;  An- 
drews V.  Mundy,  36  W.  Va.  22,  14 
S.  E.  414. 


1  Starr  v.  Mayer,  60  Ga.  546 ;  Will- 
iams V.  Muthersbaugh,  29  Kans.  730 ; 
Curtis  V.  Hollingshead,  14  N.  J.  L. 
402 ;  Leach  v.  Cook,  10  Vt.  239. 

2  Wiley  V.  Sledge,  8  Ga.  532 ;  Roach 
V.  Brannon,  57  Miss.  490. 

3  Johnson  v.  Jones,  39  Okla.  323, 
135  Pac.  12. 

4Pearce  v.  Shorter,  50  Ala.  318; 
Conklin  v.  Harris,  5  Ala.  213 ;  Con- 
non  V.  Dunlap,  64  Ga.  680 ;  Williams 
V.  Muthersbaugh,  29  Kans.  730 ; 
Stevens  v.  Perry,  113  Mass.  380;  Alil- 
ler  V.  Bay  Circuit  Judge,  41  Mich. 
326;  Moore  v.  Otis,  20  Mo.  153; 
Staats  V.  Bristow,  IZ  N.  Y.  268; 
Vankirk  v.  Wilds,  11  Barb.  (N.  Y.) 
520;  White  v.  Schnebly,  10  Watts 
(Pa.)    217. 

^Bryant  v.  Simoneau,  51  111.  324; 
Reynolds  v.  Radke,  112  111.  App.  575 ; 
Wilcox  V.  Carey,  9  Dana  (Ky.)  297; 
Globe  Woolen  Co.  v.  Carhart,  67 
How.  Pr.  (N.  Y.)  403;  Edick  v. 
Green,  38  Hun  (N.  Y.)  202;  John- 
son V.  Rankin  (Tenn.  Ch.),  59  S. 
W.  638;  Winner  v.  Kuehn,  97  Wis. 
394,  72  N.  W.  227 


§  820 


LAW    OF    PARTNERSHIP 


1134 


sustain  an  attachment  against  him.^  Some  states  have  refused 
to  allow  an  attachment  of  firm  property  because  of  one  part- 
ner's fraud.'  Generally,  the  individual  property  of  an  inno- 
cent partner  can  not  be  attached  for  a  partnership  debt  fraudu- 
lently contracted  by  his  copartner.^  In  many  cases  it  has  been 
held  that  attachment  may  be  had  in  a  suit  against  the  firm,  of  the 
separate  property  of  each  partner,**  and  that  in  an  action  against 
a  partner  individually,  his  interest  in  firm  property  may  be  at- 
tached,^°  though  not  his  interest  in  a  debt  due  the  firm,  as  long 
as  firm  liabilities  are  unpaid/^  Nor  can  the  interest  of  a  partner 
in  a  debt  due  the  firm  be  garnisheed  without  showing  from  a 
final  settlement  of  firm  accounts  that  the  firm  was  solvent,  and 
the  amount  of  the  defendant  partner's  interest,  and  that  there 
is  no  possible  legal  method  of  compelling  a  settlement  of  ac- 


'^  First  Nat.  Bank  v.  Sanders 
162  Ky.  374,  172  S.  W.  689. 

■'■  Edwards  v.  Hughes,  20  Mich. 
289;  Wilson  Obear  Grocery  Co.  v. 
Cole,  26  Mo.  App.  5 ;  Bogart  v.  Dart, 
25  Hun  (N.  Y.)  395. 

s  Williams  v.  Muthersbaugh,  29 
Kans.  730;  Jafifray  v.  Jennings,  101 
Mich.  515,  60  N.  W.  52,  25  L,  R.  A. 
645. 

9  Dollins  V.  Pollock,  89  Ala.  351,  7 
So.  904;  Orlando  First  Nat.  Bank 
V.  Greig,  43  Fla.  412,  31  So.  239; 
Lewis  V.  Conrad,  11  Iowa  153;  Cun- 
ningham V.  Gushee,  73  Maine  417; 
Allen  V.  Wells,  22  Pick.  (Mass.) 
450,  33  Am.  Dec  757.  See  also 
Davis  V.  Werden,  13  Gray  (Mass.) 
305 ;  Jaffray  v.  Jennings,  101  Mich. 
515,  60  N.  W.  52,  25  L.  R.  A.  645; 
Daly  V.  Bradbury,  46  Minn.  396,  49  N. 
W.  190;  Benedict  v.  Benedict,  15  N. 
J.  Eq.  150;  Kleinsmith  v.  Kempner, 
37  Tex.  Civ.  App.  246,  83  S.  W^.  409 ; 
Evans  v.  Virgin,  69  Wis.  153,  33  N. 
W.  569 ;  Miller  v.  Mynn,  1  El.  &  El. 
1075,  102  E.  C.  L.  1075. 

1°  Stevens    v.     Stevens,    39    Conn. 


474;  Burgess  v.  Atkins,  5  Blackf. 
(Ind.)  337;  Marston  v.  Dewberry, 
21  La.  Ann.  518;  Thompson  v.  Lewis, 
34  Maine  167;  Phillips  v.  Bridge,  11 
Mass.  242;  Day  v.  McQuillan,  13 
Minn.  205;  Fleisher  v.  Hinde  (Mo. 
App.),  93  S.  W.  1126;  Dow  v.  Say- 
ward,  14  N.  H.  9;  Atkins  v.  Saxton, 
77    N.    Y.    195;    Stewart   v.    Hunter, 

1  Handy  22,  12  Ohio  Dec.  6;  Traf- 
ford  V.  Hubbard,  15  R.  L  326,  4  Atl. 
762,  8  Atl.  690;   Schatzill  v.  Bolton, 

2  McCord  (S.  Car.)  478,  13  Am. 
Dec.  748;  Saunders  v.  Bartlett,  12 
Heisk.    (Tenn.)    316;   Snell  v.   Crow, 

3  Utah  26,  5  Pac.  522;  Brande  v. 
Bond,  63  Wis.  140,  23  N.  W.  101. 

11  Winston  v.  Ewing,  1  Ala.  129, 
34  Am.  Dec.  768;  People's  Bank  v. 
Shryock,  48  Md.  427,  30  Am.  Rep. 
476  (overruling  Wallace  v.  Patter- 
son, 2  Har.  &  McH.  (Md.)  463); 
Bulfinch  V.  Winchenbach,  3  Allen 
(Mass.)  161 ;  Fisk  v.  Herrick,  6 
Mass.  271;  Stone  v.  Dowling,  119 
Mich.  476,  78  N.  W.  549;  Day  v. 
AicQuillan.  13  Minn.  205;  Allis  v. 
Day,  13  Minn.   199;  Bar*-y  v.  Fisher, 


1135 


ACTIONS    GENERALLY 


820 


counts.^'  A  few  cases  have  allowed  such  a  garnishment."  Some 
decisions  have  allowed  the  garnishment  of  a  debt  due  the  firm 
by  a  creditor  of  the  surviving  partner,  subject  to  the  equities  of 
firm  creditors/*  The  interest  of  one  partner  which  may  be  reached 
by  an  attachment  of  his  individual  creditors  is  his  share  of  the 
assets  remaining  after  the  firm  debts  have  been  paid  and  the 
accounts  of  the  partners  settled  among  themselves/^  the  general 
rule  is  that  the  attaching  ofificer  may  take  possession  of  the  whole 
property  and  upon  sale  deliver  to  a  purchaser  who  takes,  how- 


8  Abb.  Pr.  (N.  S.)  (N.  Y.)  369,  39 
How.  Pr.  521 ;  Jarvis  v.  Hyer,  15 
N.  Car.  367;  Home  v.  Petty,  192  Pa. 
St.  32,  43  Atl.  404;  McCoombe  v. 
Dunch,  2  Dall.  (Pa.)  IZ,  1  L.  ed. 
294;  Brenton  v.  Thompson,  20  Leg. 
Int.  (Pa.)  133;  Raley  v.  Smith  (Tex. 
Civ.  App.),  1Z  S.  W.  54;  Lacy  v. 
Greenlee  (W.  Va.),  84  S.  E.  921; 
Menard  v.  Brouillet,  16  Quebec 
Super.  Ct.  148.  See  also  Church  v. 
Knox,  2  Conn.  514. 

12  Winston  v.  Ewing,  1  Ala.  129, 
34  Am.  Dec.  768;  Church  v.  Knox, 
2  Conn.  514.  See  also  Atkins  v. 
Prescott,  10  N.  H.  120;  Crescent 
Ins.  Co.  V.  Bear,  23  Fla.  50,  1  So. 
318,  11  Am.  St.  331;  Ripley  v.  Peo- 
ple's Sav.  Bank,  18  111.  App.  430; 
Trickett  v,  Moore,  34  Kans.  755,  10 
Pac.  147;  Ursuline  Nuns  v.  Con- 
nelly, 22  La.  Ann.  51 ;  White  Moun- 
tain Bank  v.  West,  46  Maine  15; 
Smith  V.  Barker,  10  Maine  458; 
People's  Bank  v.  Shryock,  48  Md. 
427,  30  Am.  Rep.  476;  Stillings  v. 
Young,  161  Mass.  287,  Zl  N.  E.  175; 
Fisk  V.  Herrick,  6  Mass.  271 ;  Mob- 
ley  V.  Lonbat,  7  How.  (Miss.)  318; 
Sheedy  v.  Second  Nat.  Bank,  62  Mo. 
17,  21  Am.  Rep.  407;  Stoutenburgh 
V.  Vandenburgh,  7  How.  Pr.  (N.  Y.) 
229;  Barry  v.  Fisher,  8  Abb.  Pr.  (N. 
S.)  (N.  Y.)  369,  39  How.  Pr.  521; 
Myers   v.    Smith,   29   Ohio    St    120; 


Sweet  V.  Read,  12  R.  I.  121;  John- 
son V.  King,  6  Humph.  (Tenn.)  233; 
Seaton  v.  Brooking,  1  Tex.  Civ.  App. 
1041;  Brande  v.  Bond,  63  Wis.  140, 
23  N.  W.  101 ;  Singer  v.  Townsend, 
53  Wis.  126,  10  N.  W.  365. 

13  Wallace  v.  Hull,  28  Ga.  68;  Mar- 
lin  v.  Kirksey,  23  Ga.  164;  Harlan 
v.  Moriarty,  2  G.  Greene  (Iowa) 
486 ;  Wallace  v.  Patterson,  2  Harr. 
&  M.,  H.  (Md.)  463;  Hill  v.  Beach, 
12  N.  J.  Eq.  31 ;  McCoombe  v.  Dunch, 
2  Dal.  (Pa.)  11,  1  L.  ed.  294.  See 
note  59  L.  R.  A.  378. 

1*  Thompson  v.  Lewis,  34  Alaine 
167;  Berry  v.  Harris,  22  Md.  30,  85 
Am.  Dec.  639 ;  Brenner  v.  Hirsche, 
69  Miss.  309,  13  So.  730;  Knox  v. 
Schepler,  2  Hill  (S.  Car.)  595.  Com- 
pare Rich  v.  Solari,  6  Mackey  (17 
D.  C.)   371. 

15  Lyndon  v.  Gorham,  1  Gall.  (U. 
S.)  367;  Filley  v.  Phelps,  18  Conn. 
294;  Witter  v.  Richards,  10  Conn. 
Zl ;  Thomas  v.  Winchester  Bank,  17 
Ky.  L.  194,  28  S.  W.  774,  31  S.  W. 
732 ;  New  Orleans  v.  Gauthreaux,  32 
La.  Ann.  1126;  Henderson  v.  Cashr 
man,  85  Maine  437,  27  Atl.  344 ;  Peo- 
ple's Bank  v.  Shryock,  48  Md.  427, 
30  Am.  Rep.  476;  Phillips  v.  Bridge, 
11  Mass.  242;  Pierce  v.  Jackson,  6 
Mass.  242 ;  Armistead  v.  Cocke,  62 
Miss.  198;  Hill  v.  Bell,  111  Mo.  35, 
19  S.  W.  959;  Wright  v.  Radcliflfe,  61 


LAW    OF    PARTNERSHIP 


1136 


ever,  only  the  one  partner's  interest.^®  There  are  some  decisions 
refusing  the  right  to  such  sale,  and  the  right  upon  attachment 
by  creditors  of  one  partner  to  deprive  other  partners  of  pos- 
session/^ An  attachment  of  firm  assets  by  a  firm  creditor,  takes 
precedence  over  a  prior  attachment  by  a  creditor  of  an  individual 
partner.^^  An  attachment  by  a  creditor  of  an  individual  partner 
can  not  affect  the  lien  acquired  by  an  attaching  firm  creditor/^ 
A  partner  who  has  a  claim  against  another  partner  on  partnership 
matters  has  a  lien  prior  to  that  of  individual  creditors  of  another 


Mo.  App.  257;  Newman  v.  Bean,  21 
N.  H.  93;  Morrison  v.  Blodgctt,  8 
N.  H.  238,  29  Am.  Dec.  653;  Clem- 
ents V.  Jessup,  36  N.  J.  Eq.  569;  At- 
kins V.  Saxton,  n  N.  Y.  195;  Souls 
V.  Cornell,  15  App.  Div.  151,  44  N. 
Y.  S.  194;  Abels  v.  Westervelt,  24 
How.  Pr.  (N.  Y.)  284,  15  Abb.  Pr. 
230;  Cogswell  v.  Wilson,  17  Ore.  31, 
21  Pac.  388;  Lucas  v.  Laws,  27  Pa. 
St.  211;  Lewis  v.  Paine,  1  Leg.  Gaz. 
(Pa.)  508;  Randall  v.  Johnson,  13 
R.  I.  338 ;  Warren  v.  Wallis,  38  Tex. 
225 ;  Snell  v.  Crowe,  3  Utah  26,  5 
Pac.  522;  Miner  v.  Pierce,  38  Vt. 
610;  Baer  v.  Wilkinson,  35  W.  Va. 
422,  14  S.  E.  1. 

i^Newhall  v.  Buckingham,  14  111. 
405;  Hershfield  v.  Claflin,  25  Kans. 
166,  Zl  Am.  Rep.  237.  Compare  Rus- 
sell V.  Smith,  14  Kans.  366;  Lee  v. 
Bullard,  3  La.  Ann.  462;  Walker  v. 
Fitts,  24  Pick.  (Mass.)  191;  Atkins 
V.  Saxton,  17  N.  Y.  195;  Hergman 
V.  Dettleback,  11  How.  Pr.  (N.  Y.) 
46;  Morgan  v.  Watmough,  5  Watts 
(Pa.)  125;  Morrow  v.  Fossick,  3  Lea 
(Tenn.)  129;  Saunders  v.  Bartlett, 
12  Heisk.  (Tenn.)  316;  Snell  v. 
Crowe,  3  Utah  26,  5  Pac.  522;  Reed 
V.  Shepardson, .  2  Vt.  120,  19  Am. 
Dec.  697;  Shaver  v.  White,  6  Munf. 
(Va.)  110,  8  Am.  Dec.  730;  North- 
west Bank  v.  Taylor,  16  Wis.  609. 


i"  Carlisle  v.  McAlester,  3  Ind. 
Ten  164,  53  S.  W.  531;  Garvin  v. 
Paul,  47  N.  H.  158;  Donald  v.  Car- 
penter, 8  Tex.  Civ.  App.  321,  27  S. 
W.  1053;  Jones  &  Nixon  v.  First 
State  Bank  of  Hamlin  (Tex.),  173 
S.  W.  202. 

IS  Bullock  V.  Hubbard,  23  Cal.  495, 
83  Am.  Dec.  130 ;  Conroy  v.  Woods, 
13  Cal.  626,  IZ  Am.  Dec.  605 ;  Witter 
V.  Richards,  10  Conn.  Zl ;  Fargo  v. 
Ames,  45  Iowa  491 ;  Cox  v.  Russell, 
44  Iowa  556;  V/alter  v.  Herman,  110 
Ky.  800,  62  S.  W.  857,  22  Ky.  L.  741 ; 
Montross  v.  Byrd,  6  La.  Ann.  518; 
Smith  V.  Barker,  10  Maine  458;  Peck 
V.  Fisher,  7  Cush.  (Mass.)  386;  Phil- 
lips v.  Bridge,  11  Mass.  242;  Pierce 
V.  Jackson,  6  Mass.  242;  First  Nat. 
Bank  v.  Brenneisen,  97  Mo.  145,  10  S. 
W.  884;  Hargadine-McKittrick  Dry 
Goods  Co.  V.  Sappington,  105  Mo. 
App.  655,  78  S.  W.  1049;  Tenney  v. 
Johnson,  43  N.  H.  144;  Putnam  v. 
Loeb,  2  Ohio  Cir.  Ct.  R.  110,  1  Ohio 
Cir.  Dec.  391 ;  Adams  v.  Hunter,  42 
Leg.  Int.  (Pa.)  205;  Straus  v.  Kern- 
good,  21  Grat.  (Va.)  584;  Powers 
V.  Large,  69  Wis.  621,  35  N.  W.  5.3, 
2  Am.  St.  767. 

19  Cunningham  v.  Gushee,  IZ  Maine 
417;  Allen  v.  Wells,  22  Pick.  (Mass.) 
450,  ZZ  Am.  Dec.  757. 


1137  ACTIONS    GENERALLY  §    820 

partner.-'*  And  in  equity  it  seems  the  creditors  of  an  insolvent 
partnership  have  a  prior  right  to  the  firm  assets  over  creditors 
of  individual  partners  who  have  attached  such  assets."^  An  at- 
tachment to  secure  a  partnership  debt  is  preferred  to  a  subse- 
quent attachment  to  secure  an  individual  debt,  subsequently  con- 
tracted.^" An  attachment  by  a  firm  creditor  takes  precedence 
over  a  mortgage  by  one  partner  of  his  interest  to  secure  his  indi- 
vidual debt."  Where  one  partner  furnished  material  for  the 
partnership  business,  title  to  which  was  to  remain  in  him  until 
he  was  repaid,  such  property  could  not  be  attached  for  the  other 
partner's  debt.-*  If  there  is  a  wrongful  attachment  against  a 
p^artnership,  as  where  one  partner  colludes  with  a  creditor,  the 
wronged  partners  may  sue  for  damages.^^  Where  an  attach- 
ment employed  in  the  collection  of  a  firm  claim  is  wrongful,  all 
the  partners  will  be  liable  in  damages.-*'  A  garnishment  of  one 
member  of  a  partnership  by  a  plaintiff  in  an  action  against  one 
to  whom  the  firm  is  indebted,  will  not  hold  the  debt  due  the 
firm.-^  But  if  all  the  partners  are  made  garnishees,  service  on 
the  resident  partners  will  hold  funds  in  their  hands  due  the 
debtor.-^     In  some  states  service  on  one  partner  is  sufficient.-^ 

20  Purely  V.  Hood,  5  Mart.  (X.  S.)  McLeod,  20  Ala.  576;  Hoskins  v. 
(La.)    626.  Johnson,  24  Ga.  625;  Wilson  v.  Al- 

21  Washburn  v.  Bellows  Falls  Bank,  bright,  2  G.  Greene  (Iowa)  125;  Nash 
19  Vt.  278.  V.    Brophy,    13    Mete.    (Mass.)    476; 

22  Miles  V.  Pennock,  SO  N.  H.  564.  Warner  v.  Perkins,  8  Gush.   (Mass.) 

23  Harvey  V.  Stephens,  159  Mo.  486,  518;  Hoyt  v.  Robinson,  10  Gray 
60S.  W.  1055.  (Mass.)     371;    Jewett    v.    Bacon,    6 

24  Day  V.  Weyant,  U  Ore.  215,  143  Mass.  60;  Hirth  v.  Pfeifle,  42  Mich. 
Pac.  891.  31,  3  N.  W.  239;  Wetherwax  v.  Paine. 

25  Grimes  v.  Bowerman,  92  Mich.  2  Mich.  555  ;  Hudson  v.  Hunt,  5  N.  H. 
258,  52  N.  W.  751;  Vandenburgh  v.  538;  Rix  v.  Elliot,  1  N.  H.  184.  Con- 
Bassett,  4  Minn.  242;  Trafiford  v.  tra:  Brealsford  v.  Meade,  1  Yeates 
Hubbard,  15  R.  I.  326,  4  Atl.  762,  8  (Pa.)  488. 

Atl.  690;    Barker   v.   Abbott,   2  Tex.  2s  Macomber  v.  Wright,   35   Maine 

Civ.  App.  147,  21  S.  W.  72.  156;    Warner    v.    Perkins,    8    Gush. 

26Kuhn  V.  Weil,  11  Mo.  213;  Gurler  (Mass.)   518;  Parker  v.  Danforth,  16 

v.  Wood,  16  N.  H.  539.  Mass.  299;  Atkins  v.  Prescott,  10  N. 

27  Ellicott  V.  Smith,  Fed.  Gas.  No.  H.  120 ;  Peck  v.  Barnum,  24  Vt.  75. 

4387,  2  Cranch   (G.  G.)  543;  Reid  v.  29  Hinkley    v.    St.    Anthony    Falls 


§    821  LAW    OF    PARTNERSHIP  1138 

If  a  void  (as  by  less  than  all  members  or  not  Including  indi- 
vidual property)  or  fraudulent  assignment  has  been  made  of 
partnership  property  for  benefit  of  creditors,  this  does  not  pre- 
vent creditors  of  the  partnership  from  attaching  the  property.^" 
Nor  will  proceedings  in  insolvency  by  one  partner  dissolve  an 
attachment  against  firm  property.^^  A  void  or  fraudulent  assign- 
ment of  his  property  by  one  partner  will  not  prevent  its  attach- 
ment for  firm  debts.^" 

§  821.  Charging  partner's  interest  under  Uniform  Part- 
nership Act. — The  Uniform  Partnership  Act  makes  some 
notable  changes  in  the  rights  of  creditors  of  a  partner  to  sub- 
ject firm  property  to  individual  debts.  Partnership  property 
may  be  attached  only  for  firm  debts,  and  is  not  subject  to  attach- 
ment or  execution  for  the  debt  of  an  individual  partner.^^  In 
lieu  of  attachment  or  execution  the  act  provides  for  the  issuance 
of  a  charging  order  by  a  competent  court,  entitling  the  creditor 
of  a  partner  to  receive  his  share  of  the  profits  until  the  debt  is  paid. 
The  provisions  of  the  act  are :  Section  28.  "(1)  O^  ^^^^  applica- 
tion to  a  competent  court  by  any  judgment  creditor  of  a  partner, 
the  court  which  entered  the  judgment,  order,  or  decree,  or  any 
other  court,  may  charge  the  interest  of  the  debtor  partner  with 
payment  of  the  unsatisfied  amount  of  such  judgment  debt  with 
interest  thereon ;  and  may  then  or  later  appoint  a  receiver  of  his 
share  of  the  profits,  and  of  any  other  money  due  or  to  fall  due 
to  him  in  respect  of  the  partnership,  and  make  all  other  orders, 
directions,  accounts  and  inquiries  which  the  debtor  partner  might 
have  made,  or  which  the  circumstances  of  the  case  may  require. 

Water  Power  Co.,  9  Minn.  55 ;  State  450,  33  Am.  Dec.  757 ;  Still  v.  Focke, 

V.  Linaweaver,   3   Head    (Tenn.)    51,  66  Tex.  715,  2  S.  W.  59. 

75  Am.  Dec.  757.  32  Collier  v.  Hanna,  71  Md.  253,  17 

3f>  Kennedy   v.    McKee,    142    U.    S.  Atl.    1017;     Sellew    v.    Chrisfield,     1 

606,  35  L.  ed.  1131,  12  Sup.  Ct.  303;  Handy  (Ohio)  86,  12  Ohio  Dec.  41; 

May  V.  Walker,  35  Minn.  194,  28  N.  Cleveland  v.  Battle,  68  Tex.  Ill,  3  S. 

W.    252;    Wyles    v.    Beals,    1     Gray  W.  681. 

(Mass.)  233.  33  Uniform      Partnership      Act,      § 

31  Fern  v.  dishing,  4  Cush.  (Mass.)  25    (c). 
357;  Allen  v.  Wells,  22  Pick.  (Mass.) 


1139  ACTIONS   GENERALLY  §    823 

(2)  The  interest  charged  may  be  redeemed  at  any  time  before 
foreclosure,  or  in  case  of  a  sale  being  directed  by  the  court  may 
be  purchased  without  thereby  causing  a  dissolution:  (a)  With 
separate  property,  by  any  one  or  more  of  the  partners,  or  (b) 
with  partnership  property,  by  any  one  or  more  of  the  partners 
with  the  consent  of  all  the  partners  whose  interests  are  not  so 
charged  or  sold.  (3)  Nothing  in  this  act  shall  be  held  to  deprive 
a  partner  of  his  right,  if  any,  under  the  exemption  laws,  as  re- 
gards his  interest  in  the  partnership." 

§  822.  Arrest. — The  members  of  a  firm  are  subject  to 
arrest  in  a  proper  case  and  each  partner  who  has  been  guilty  of 
any  wrongdoing  in  the  course  of  firm  business  for  which  arrest  is 
authorized,  may  be  thus  apprehended  and  taken  into  custody.^* 
But  an  innocent  partner  who  took  no  part  in  an  act  of  his  copart- 
ner in  the  course  of  firm  business,  which  would  authorize  the 
latter's  arrest,  and  who  has  not  ratified  it,  not  being  actually  and 
intentionally  guilty,  is  not  subject  to  arrest  for  his  copartner's 
act.^' 

§  823.  Injunction  and  receiver. — Generally,  a  creditor  of 
a  partnership  who  has  not  obtained  a  judgment  or  levy  has  no 
right  to  an  injunction  against  a  sale  by  individual  creditors  of 
firm  property.^®  But  partnership  creditors  who  have  a  valid  at- 
tachment have  been  held  entitled  to  an  injunction  against  such 
sale.^"  In  some  jurisdictions  it  is  held  that  when  an  attachment  is 

34  Faulkner  V.  Whitaker,  15  N.  J.  L.  114  N.  Car.  89,  19  S.  E.  106.  But  see 
438;  Hitchcock  v.  Peterson,  14  Hun  Townsend  v.  Bogart,  11  Abb.  Pr.  (N. 
(N.  Y.)  389;  Townsend  v.  Bogart,  Y.)  355;  Sherman  v.  Smith,  42  How. 
11    Abb.    Pr.    (N.    Y.)    335;    Boykin  Pr.   (N.  Y.)   198. 

V.  Maddrey,  114  N.  Car.  89,  19  S.  E.  s^jones    v.    Lusk,    2    Met.     (Ky.) 

106;    Gregg   v.   Hilsen,   34   Leg.   Int.  356;    Young   v.    Frier,   9   N.    J.    Eq. 

20,  12  Phila.  (Pa.)  348.  465;  Henderson  v.  Haddon,  12  Rich 

35  Watson  V.  Hinchman,  42  Mich.  27,  Eq.  (S.  Car.)  393;  Lamoille  Valley 
3  N.  W.  236;  Bacon  v.  Kendall,  49  N.  R.  Co.  v.  Bixby,  55  Vt.  235. 

Y.    Super.    Ct.    123 ;    National    Bank  37  Schuster  v.  Rader,  13  Colo.  329, 

V.    Temple,    39    How.    Pr.     (N.    Y.)  22  Pac.  505;  Fairbanks  v.  Kraft,  43 

432 ;  Hanover  Co.  v.  Sheldon.  9  Abb.  Mo.  App.  121. 
Pr.  (N.  Y.)  240;  Boykin  v.  Maddrey, 


§    823  LAW    OF    PARTNERSHIP  1140 

levied  on  firm  property  for  the  debts  of  an  individual  partner,  the 
other  partners  have  the  right  to  a  bill  for  an  accounting,  and  an 
injunction  against  the  seizure  and  sale  of  the  property  under  the 
attachment  prior  to  the  accounting.^^  In  other  jurisdictions  there 
is  no  right  to  such  injunction.^^  While  in  others  it  is  allowed  only 
where  the  firm  is  insolvent  and  the  partner  has  no  interest  in  the 
firm  property.'"'  Where  the  partners  have  all  surrendered  their 
interest  to  a  third  person  agreeing  not  to  interfere  in  his  man- 
agement of  the  business,  the  purchaser  of  a  partner's  interest  may 
have  injunction  to  prevent  their  interference.*^  A  general  cred- 
itor of  the  firm  ordinarily  has  no  right  to  have  a  receiver  ap- 
pointed,*" unless  it  is  apparent  that  he  would  sustain  great  and 
irreparable  injury  because  of  fraudulent  misconduct  of  the  firm 
or  of  some  partners.*^  If  the  firm  is  insolvent,  the  appointment 
of  a  receiver  is  in  effect  an  assignment  for  benefit  of  creditors.** 
The  duty  of  a  receiver  ordinarily  is  to  take  charge  of  all  the 
firm  assets,  to  collect  debts  of  the  firm  and  use  such  money  to 
pay  expenses  of  the  receivership,  and  liquidate  creditor's  claims.*^ 
A  receiver  may  be  authorized  to  continue  the  business,**'  and 
where  a  receiver  continues  business  with  the  consent  of  creditors, 
creditors  of  the  receiver  are  entitled  to  priority.*^   Failure  of  one 

38  Parker  v.   Merritt,    105   111.   293 ;  ^i  Young  v.  Mock,  79  Miss.  714,  31 

Hubbard  v.  Curtis,  8  Iowa  1,  74  Am.  So.  423. 

Dec.    283;    Crocker    v.    Crooker,    46  *- Crippen  v.  Hudson,  13  N.  Y.  161. 

Maine    250;    Place    v.    Sweetzer,    16  •^^  Sanderson  v.   Stockdale,   11    Md. 

Ohio  142 ;  White  v.  Parish,  20  Tex.  563 ;  State  v.  Dickinson,  59  Nebr.  753, 

688,    1Z    Am.    Dec.    204;    Jackson    v.  82     N.     W.     16;     Sobernheimer     v. 

Stanhope,  10  Jur.  (O.  S.)  676;  Bevan  Wheeler,   45    N.   J.    Eq.  614,    18   Atl. 

V.  Lewis,  1  Sim.  Zld.  234 ;  Jones  v.  Meyer  Bros.  Drug  Co., 


39  Daniel  v.  Owens,  70  Ala.  297 
Brewster  v.  Hammet,  4  Conn.  540 
Wickham    v.    Davis,    24    Minn.    167 


25  Tex.  Civ.  App.  234,  61  S.  W.  553. 
4*Winslow  V.  Wallace,  116  Ind.  317, 
17  N.  E.  923,  1  L.  R.  A.  179. 


Moody  V.    Payne,  2   Johns.   Ch.    (N.  ^5  Wallace  v.  Milligan,  110  Ind.  498, 

Y.)  548.  11    N.    E.   599;    Fogg   v.   Tyler,    111 

40  Peck  V.    Schultze,   1    Holmes  28,  Maine  546,  90  Atl.  481. 

Fed.  Cas.  No.  10895 ;  Turner  v.  Smith,  4g  Blythe  v.  Gibbons,   141   Ind.  Z2>2. 

1    Abb.    Pr.    (N.    S.)     (N.    Y.)    304;  35  N.  E.  557. 

Mowbray  v.  Lawrence,  22  How.  Pr.  ^''  Ivie  v.    Blum,    159   N.    Car.    121, 

107,  13  Abb.  Prac.   (N.  Y.)  317.  74  S.  E.  807. 


1141  ACTIONS    GENERALLY  §    824 

member  of  a  firm  to  join  in  a  deed  of  assignment  for  benefit  of 
creditors  and  his  denial  of  membership  in  the  firm,  is  not  ground 
for  a  receivership.** 

§  824.  Defenses. — If  one  of  the  partners  is  disqualified 
to  sue  on  a  firm  claim  an  action  at  law  can  not  be  maintained 
thereon.*®  As  said  in  a  representative  case  :^^  "The  principle 
that  all  the  partners  must  be  entitled  to  recover,  or  the  action  can 
not  be  maintained,  is  fully  recognized  in  the  American  courts, 
and  indeed,  so  far  as  I  have  observed,  has  never  been  denied 
where  the  common  law  of  England  prevails. ^^  As  it  is  the  estab- 
lished rule  that  all  the  partners  must  be  entitled  to  recover,  in 
order  to  maintain  the  suit,  any  act  of  one  partner,  whether  done 
before  or  after  the  dissolution  of  the  firm,  that  will  bar  him,  will 
equally  preclude  the  partnership  from  bringing  an  action  at  law 
in  the  name  of  all  the  partners.  The  transfer  of  the  judgment 
to  Cunningham  is  binding  on  Estill,  and  he  therefore  can  not 
recover  of  the  defendant  on  the  ground  that  he  had  a  lien  on 
the  judgment  for  fees  due  to  the  firm  of  Cochran  &  Estill;  and 
as  Estill  can  not  recover,  it  follows  that  a  suit  at  law  can  not  be 
maintained  in  the  name  of  Cochran  &  Estill."  The  reason  is 
that  a  cause  of  action  by  a  partnership  is  joint,  all  must  be  enti- 
tled to  recover  in  order  to  sue,  and  if  one  partner  has  done  some- 
thing by  reason  of  which  he  would  not  be  entitled  to  sue,  he  can 
not  acquire  such  right  by  joining  others  with  him.  So  if  one 
partner  has  assented  to  a  trespass  in  firm  property,  the  others  can 

48  Wilson  V.  Hawker  Lumber  Co.,  (N.    Car.)    484;    Salmon  v.   Davis,   4 

74  W.  Va.  65,  81  S.  E.  568.  Binn.    (Pa.)    375,    5   Am.    Dec.   410; 

4°  Cochran  v.  Cunningham,  16  Ala.  Cornells    v.    Stanhope,    14    R.    I.    97 ; 

448,    50    Am.    Dec.    186;    McLane    v.  Estabrook   v.    Messersmith,    18    Wis. 

Sharpe,  2  Harr.    (Del.)   481;   Church  545;  Wallace  v.  Kelsall,  7  M.  &  W. 

V.  First  Nat.  Bank,  87  111.  68 ;  Blodg-  264 ;  Jones  v.  Yates,  9  B.  &  C.  532, 

ett  V.  Sleeper,  67  Maine  499;  Farley  17  E.  C.  L.  532. 

V.  Lovell,   103  Mass.  387 ;   Myrick  v.         ^o  Cochran  v.  Cunningham,   16  Ala. 

Dame,  9  Cush.  (Mass.)  248;  Weaver  448,  50  Am.  Dec.  186. 
V.   Rogers,  44  N.  H.   112;   Morse  v.         siQting:  Story  Partnership,  ch.  12, 

Bellows,  7  N.   H.  549,  28  Am.   Dec.  pp.  360-365 ;  The  Society  v.  Wheeler, 

372 ;  Craig  V.  Hulschizer,  34  N.  J.  L.  2    Gall.    (U.    S.)     105;    Griswoid    v. 

363;    Wells    v.    Mitchell,    1    Ired.    L.  Waddington,  15  Johns.  (N.  Y.)  438. 


§    824  LAW    OF    PARTNERSHIP  1142 

not  recover.^^  If  persons  sue  as  partners  it  is  a  defense  that  they 
had  formed  a  corporation,  and  the  habihty  was  contracted  with 
the  corporation."  Ordinarily  a  judgment  against  a  partnership 
sued  as  a  corporation,  is  not  binding  on  the  partners.^*  It  may  be 
a  defense  as  to  one  partner  that  he  has  given  notice  to  the  party 
bringing  the  action  that  he  will  not  be  bound  by  the  acts  of  his 
copartner.  "It  is  a  well  established  principle  that  the  contract 
of  a  partner  is  obligatory  on  his  copartner,  by  virtue  of  an  implied 
authority  which  may  be  rebutted  by  a  refusal  to  be  bound  by  his 
acts.  By  legal  consequence,  the  partner  whose  authority  is  thus 
declined  can  not  bind  the  copartnership  in  favor  of  those  who 
have  knowledge  of  this  fact.  Nothing  can  be  more  reasonable 
than  that  a  person  may  protect  himself  in  this  manner  against  the 
fraud  and  misconduct  of  his  associate.  The  principle  under  con- 
sideration is  not  founded  at  all  on  any  supposed  waiver  by  the 
creditor;  but  solely  and  exclusively  on  the  declaration  of  the  per- 
son declining  to  be  bound.  The  implied  authority  of  his  partner 
he  has  annihilated;  and  the  contract  in  the  name  of  the  firm  is 
of  no  validity  beyond  the  personal  obligation  it  infers  on  the 
individual  making  it."^^  Usually,  when  one  partner  interposes 
the  defense  of  the  statute  of  limitations  in  an  action  against  him 
and  his  copartners,  it  is  held  that  such  defense  does  not  inure  to 
the  benefit  of  an}^  copartners  as  to  whom  the  statute  has  not 
run.^*'  But  if  one  partner  by  concealment  prevents  the  statute 
from  running  as  to  him,  it  will  not  run  in  favor  of  a  copart- 
ner.^'^  A  creditor  by  long  delay  or  laches  may  lose  his  right  to 
assert  a  claim  against  a  retiring  partner,  as  where  he  has  ac- 
cepted a  continuing  partner  for  the  debt.°* 

"Sindelar  v.  Walker,  35  111.  App.  Matthew,   1    Campb.  403;   Gallway  v. 

607    (affd.    137   III.  43,  27   N.   E.   59,  Mathew,  10  East  264;  Willis  v.  Dyson. 

31  Am.  St.  353).  1    Stark.    164. 

^3  Hamilton  v.  James  A.  Cushman  ^'■'  Harrison  v.  McCormick,  122  Cal. 

Mfg.  Co.,  15  Tex.  Civ.  App.  338,  39  651,  55  Pac.  592 ;  Fish  v.  Farwell,  160 

S.  W.  641.  111.  236,  43  N.  E.  367. 

54  Sinsabaugh   v.   Dun,   214   111.   70,  "  McCoon  v.  Galbraith,  29  Pa.  St. 
IZ  N.  E.  390.  293. 

55  Leavitt  v.   Peck,  3   Conn.   125,  8  ^s  Consaulus  v.  McConihe,  49  Hur 
Am.    Dec.    157.      Citing:    Gahvay    v.  609,  2  N.  Y.  S.  89,  17  N.  Y.  St.  538. 


1143 


ACTIONS    GENERALLY 


§  825. 


§  825.  Trial. — Questions  of  law  presented  by  pleadings  or 
undisputed  evidence  are  to  be  determined  by  the  court. '""'^  Ques- 
tions of  fact  are  for  the  jury.""  If  the  facts  are  undisputed  it 
is  a  question  of  law  as  to  what  is  a  partnership,  and  the  court 
must  determine  whether  there  is  evidence  on  that  cjuestion  suffi- 
cient to  go  to  the  jury.'^^  If  there  is  any  conflict  in  the  evidence 
or  if  it  is  susceptible  of  more  than  one  inference,  it  is  for  the 
jury  to  say  in  a  particular  case,  under  instructions  from  the 
court  whether  a  partnership  exists.''"  The  intention  of  the  parties 


^'9  Desha  v.  Stewart,  6  Ala.  852; 
Janney  v.  Springer,  78  Iowa  67,  43 
N.  W.  461,  16  Am.  St.  460 ;  Cook  v. 
Blake,  98  Mich.  389,  57  N.  W.  249; 
Sedalia  Third  Nat.  Bank  v.  Faults, 
115  Mo.  App.  42,  90  S.  W.  755;  El- 
mira  Iron  &c.  Rolling-Mill  Co.  v.  Har- 
ris, 124  N.  Y.  280,  26  N.  E.  541,  3 
Silvernail  Ct.  App.  351 ;  Harris  v. 
Wilson,  7  Wend.  (N.  Y.)  57;  Miner 
V.  Downer,  19  Vt.  14 ;  Hogan  v.  dish- 
ing, 49  Wis.  169,  5  N.  W.  490. 

<50  Dorough  V.  Harrington,  148  Ala. 
305,  42  So.  557;  Ellis  v.  Allen,  80 
Ala.  515,  2  So.  676;  Bonnell  v.  Cham- 
berlin,  26  Conn.  487;  Leavitt  v.  Peck, 
3  Conn.  124,  8  Am.  Dec.  157;  May- 
nard  v.  Ponder,  75  Ga.  664 ;  Gray's 
Harbor  Commercial  Co.  v.  Weise,  86 
111.  App.  125;  McMillan  v.  Hadley, 
78  Ind.  590;  Flower  v.  Williams,  1 
La.  22 ;  Duran  v.  Ayer,  67  Maine  145 ; 
Berry  v.  Pelneault,  188  Mass.  413, 
74  N.  E.  917;  Woods  v.  Woods,  127 
Mass.  141;  Beckwith  v.  Mace,  140 
Alich.  157,  103  N.  W.  559;  Davis  v. 
Smith,  27  Minn.  390,  7  N.  W.  731; 
Blackston  Mercantile  Co.  v.  McPher- 
son,  77  Miss.  403,  27  So.  523 ;  Frowein 
V.  Haysler,  87  Mo.  App.  310 ;  Ball  v. 
Beaumont,  73  Nebr.  174,  102  N.  W. 
264;  Webster  v.  Stearns,  44  N.  H. 
498;  Lowry  v.  Tivy.  71  N.  J.  L.  681, 
60  Atl.  1134  (afifg.  70  N.  J.  L.  457,  57 
Atl.  267)  ;   Sterrett  v.  Buffalo  Third 

22 — Row.  ON  Partn. — Vol.  2 


Nat.  Bank,  122  N.  Y.  659,  25  N.  E. 
913  (affg.  26  Hun  (N.  Y.)  22); 
Bulger  V.  Rosa,  119  N.  Y.  459,  24 
N.  E.  853 ;  Pirie  v.  Gillitt,  2  N.  Dak. 
255,  50  N.  W.  710 ;  Cassidy  v.  Saline 
County  Bank,  14  Okla.  532,  78  Pac. 
324 ;  Sweeney  v.  Girolo,  154  Pa.  St. 
609,  26  Atl.  .600 ;  Gates  v.  Watt.  127 
Pa.  St.  20,  17  Atl.  451 ;  O.  S.  Kelly 
Co.  V.  Zarecor  (Tenn.  Ch.  App.),  62 
S.  W.  189;  Hunter  v.  Hubbard, 
26  Tex.  537;  Jones  v.  Booth,  10 
Vt.  268;  Standard  Bank  v.  Frind, 
14   Ont.    Pr.   355. 

f'l  Stundon  v.  Dahlenberg,  184  ^lo. 
381,  171  S.  W.  37 ;  Thornton  v.  Mer- 
sereau,  168  Mo.  App.  1,  151  S.  W. 
212;  Goody  v.  Shawver  (Tex.  Civ. 
App.),  161  S.  W.  935.  See  ante 
§   103. 

62  Watson  V.  Farley,  85  Conn.  705, 
82  Atl.  189;  Doggett  v.  Jordan,  2 
Fla.  541 ;  Hutchinson  Shoe  Co.  v. 
Elko  Mercantile  Co.,  143  Ga.  170,  84 
S.  E.  453 ;  Gary  v.  Simpson,  15  Ga. 
App.  280,  82  S.  E.  918;  McMullan 
v.  Mackenzie,  2  Greene  (Iowa)  368; 
Robertson  v.  Willhoite,  157  Ky.  58, 
162  S.  W.  563;  Negaunee  First  Nat. 
Bank  v.  Freeman,  47  Mich.  408,  11  N. 
W.  219;  McGray  v.  Cobb,  130  Minn. 
434,  152  N.  W.  262;  Simmons  v.  In- 
gram, 78  Mo.  App.  603  ;  Carson  v.  Cul- 
ver, 78  Mo.  App.  597;  Waggoner  v. 
Creighton  First  Nat.  Bank,  43  Nebr. 


§  825 


LAW    OF    PARTNERSHIP 


1144 


may  be  a  question  of  fact  for  the  jury;*'^  likewise  the  question 
as  to  whether  certain  property  was  intended  to  be  held  as  firm 
property;*'*  or  whether  a  transaction  by  a  partner  is  within  the 
scope  of  his  authority;*'^  or  whether  a  partner  ratified  a  copart- 
ner's act;*'*'  or  had  by  his  conduct  estopped  himself  from  denying 
partnership  liability.*'^  It  is  the  court's  duty  to  instruct  the  jury 
correctly  in  the  law  applicable  to  the  rights  and  liabilities  of  part- 
ners in  the  particular  case  being  tried/^  to  refuse  requests  for 


84,  61  N.  W.  112;  Benoliel  v.  Homac 
(N.  J.),  94  Atl.  605;  Seabury  v. 
Bolles,  51  N.  J.  L.  103,  16  Atl.  54, 
11  L.  R.  A.  136;  Sheehan  v.  Fleet- 
ham,  58  Hun  605,  12  N.  Y.  S.  158, 
34  N.  Y.  St.  665;  Drake  v.  Elwyn, 
1  Caines  (N.  Y.)  184;  Mendonca  v. 
Russel  (Okla.),  150  Pac.  1061;  Provi- 
dence Mach.  Co.  V.  Browning,  68  S. 
Car.  1,  46  S.  E.  550;  Dulany  v.  El- 
ford,  22  S.  Car.  304;  Texas  &c.  R. 
Co.  V.  Missouri  Iron  &  Metal  Co. 
(Tex.  Civ.  App.),  178  S.  W.  597; 
Look  V.  Bailey  (Tex.  Civ.  App.),  164 
S.  W.  407;  Manegold  v.  Grange,  70 
Wis.  575,  36  N.  W.  263 ;  Gurney  v. 
Evans,  3  H.  &  N.  122,  27  L.  J.  Exch. 
166. 

63  Branch  v.  Doane,  17  Conn.  402 ; 
Phillips  V.  Trowbridge  Furniture  Co., 
92  Ga.  596,  20  S.  E.  4;  Hartwell  v. 
Becker,  181  Mo.  App.  408,  168  S.  W. 
837 ;  Meriden  Nat.  Bank  v.  Gallaudet, 
120  N.  Y.  298,  24  N.  E.  994;  Van 
Tassel  v.  Williams,  76  Hun  (N.  Y.) 
503,  59  N.  Y.  St.  369,  27  N.  Y.  S. 
1067. 

6*  Gossett  V.  Morrow,  187  Ala.  387, 
65  So.  826;  Dorough  v.  Harrington, 
148  Ala.  305,  42  So.  557;  City  Bank's 
Appeal,  54  Conn.  269;  Heidenreich 
V.  Bremner,  260  111.  439,  103  N.  E. 
275;  Ernest  v.  Wible,  10  Pa.  Super. 
Ct.  576;  Alerchants'  Nat.  Bank  v. 
Stebbins,  15  S.  Dak.  280,  89  N.  W. 
674. 


65  Irwin  V.  Williar,  110  U.  S.  499, 
4  S.  Ct.  160,  28  L.  ed.  225 ;  Jones  v. 
Burks,  110  Ark.  108,  161  S.  W.  177; 
Morris  v.  Marqueze,  74  Ga.  86;  Jor- 
dan V.  Ingram,  57  Ga.  92 ;  Lynch 
v.  Hillstrom,  64  Minn.  521,  67  N.  W. 
636;  Hefferlin  v.  Karlman,  29  Mont. 
139,  74  Pac.  201;  G.  H.  Haulenbeck 
Advertising  Agency  v.  November,  27 
Misc.  836,  60  N.  Y.  S.  573;  Loudon 
Sav.  Fund.  Soc.  v.  Hagerstown  Sav. 
Bank,  36  Pa.  St.  498,  78  Am.  Dec. 
390. 

66  Wile,  Weill  &  Co.  v.  Denison 
Clothing  Co.,  158  Iowa  109,  138  N.  W. 
1098. 

67Phipps  V.  Little,  213  Mass.  414, 
100  N.  E.  615;  Brown  v.  First  Nat. 
Bank,  35  Okla.  726,   130   Pac.   140. 

esLevy  v.  Alexander,  95  Ala.  101, 
10  So.  394;  Planters'  Trading  Co. 
v.  Moore,  7  Ala.  App.  393,  62  So.  302 ; 
Herman  Kahn  &  Co.  v.  Bowden,  80 
Ark.  23,  96  S.  W.  126;  Ashenfelter 
V.  Williams,  12  Colo.  App.  345,  55 
Pac.  734;  Crane  v.  Tierney,  175  111. 
79,  51  N.  E.  715;  Jones  v.  Austin, 
26  Ind.  App.  399,  59  N.  E.  1082; 
Sheldon  v.  Bigelow,  118  Iowa  586, 
92  N.  W.  701 ;  Weeks  v.  Hutchinson, 
135  Mich.  160,  97  N.  W.  695;  Mc- 
pherson V.  Bristol,  115  Mich.  258, 
73  N.  W.  236;  Conely  v.  Wood,  73 
Mich.  203,  41  N.  W.  259;  Connolly 
V.  Davidson,  15  Minn.  519,  2  Am. 
Rep.   154;  A.  Graf.  Distilling  Co.  v. 


1145 


ACTIONS    GENERALLY 


§  825 


improper  instructions;^'"  to  tell  the  jnry  what  questions  are  to  be 
decided  by  it,  and  what  are  for  the  court  to  decide  ;^°  and  in  some 
jurisdictions  to  explain  to  the  jury  the  probative  force  of  the 
evidence.''^  If  a  verdict  is  unsupported  by  evidence  the  court  may 
set  it  aside/^  or  direct  a  verdict  where  but  one  conclusion  is  pos- 
sible from  the  evidence  ;^^  or  decide  whether  the  verdict  is  in 


Wilson,  172  Mo.  App.  612,  156  S.  W. 
23;  Watts  v.  Pierson,  170  Mo.  App. 
532,  156  S.  W.  724;  Lawrence  v. 
Westlake,  28  Mont.  503,  73  Pac.  119; 
McKibbin  v.  Day,  71  Nebr.  280,  98 
N.  W.  845;  Knickerbocker  Ice  Co. 
V.  Theiss,  23  Misc.  (N.  Y.)  625,  52 
N.  Y.  S.  163;  Entwisle  v.  Carey,  9 
Sad.  (Pa.)  423,  12  Atl.  768;  Moore 
V.  Williams,  26  Tex.  Civ.  App.  142, 
62  S.  W.  977,  31  Tex.  Civ.  App.  287, 
72  S.  W.  222;  Haight  v.  Turner, 
44  Tex.  Civ.  App.  595,  99  S.  W.  196; 
Cary  v.  Simpson  &  Harper,  15  Ga.  App. 
280,  82  S.  E.  918;  Coody  v.  Shaw- 
ver  (Tex.  Civ.  App.),  161  S.  W.  935. 

f'9  Rector  v.  Robins,  74  Ark.  437, 
86  S.  W.  667 ;  Clark  v.  Ball,  34  Colo. 
22Z,  82  Pac.  529,  114  Am.  St.  154, 
2  L.  R.  A.  (N.  S.)  100;  McDonald 
v.  Clough,  10  Colo.  59,  14  Pac.  121; 
Boardman  v.  Adams,  5  Iowa  224 ; 
Humphrey  v.  Mattox,  19  Ky.  L.  1053, 
42  S.  W.  1100;  Smith  v.  Smith,  93 
Maine  253,  44  Atl.  905;  White  v. 
AlcPeck,  185  Mass.  451,  70  N.  E. 
463;  Hodel-Mutti  Mfg.  Co.  v.  Ham, 
112  Mo.  App.  718,  87  S.  W.  608; 
Tamblyn  v.  Scott,  111  Mo.  App.  46, 
85  S.  W.  918;  Costet  v.  Jeantet,  108 
App.  Div.  201,  95  N.  Y.  S.  638 ;  Teller 
v.  Patten,  20  How.  (U.  S.)  125,  15 
L.  ed.  831 ;  Winston  v.  Ibanez 
(Alass.),  106  N.  E.  141;  Coody  v. 
Shawver  (Tex.  Civ.  App.),  161  S. 
W.  935. 

^"Edwards  v.  Parker,  88  Ala.  356, 


6  So.  684 ;  Schmidt  v.  Balling,  91  111. 
App.  388;  Hewes  v.  Parkman,  20 
Pick.  (Mass.)  90;  Conely  v.  Wood, 
72,  Mich.  203,  41  N.  W.  259;  Chase 
V.  Stevens,  19  N.  H.  465;  McVicker 
V.  Cone,  21  Ore.  353,  28  Pac.  76; 
Moore  v.  May,  117  Wis.  192,  94  N. 
W.  45 ;  De  Alantort  v.  Saunders,  1 
B.  &  Ad.  398. 

''■I  Robinson  v.  Parker,  11  App.  Cas. 
(D.  C.)  132;  Daugherty  v.  Heckard, 
189  111.  239,  59  N.  E.  569;  Shapard 
Grocery  Co.  v.  Hynes,  3  Ind.  Ten 
74,  53  S.  W.  486 ;  Humphrey  v.  Mat- 
tox, 19  Ky.  L.  1053,  42  S.  W.  1100; 
Woodward  v.  Winship,  12  Pick. 
(Mass.)  430;  Weeks  v.  Hutchinson, 
135  Mich.  160,  97  N.  W.  695;  Hag- 
mayer  v.  Armbrust-er,  35  Misc.  (N. 
Y.)  378,  71  N.  Y.  S.  1029;  Barrett 
V.  McCrummen,  128  N.  Car.  81,  38 
S.  E.  286;  Frisbie  v.  McFarlane,  196 
Pa.  St.  110,  46  Atl.  359;  Nolan 
County  V.  Simpson,  74  Tex.  218,  11 
S.  W.  1098;  Breeze  v.  International 
Banking  Corporation,  25  Cal.  App. 
437,  143  Pac.  1066. 

"Bosworth  V.  West,  68  Ga.  825; 
O.  S.  Kelly  Co.  v.  Zarecor  (Tenn. 
Ch.  App.),  62  S.  W.  189. 

73  M.  W.  Powell  Co.  V.  Finn,  198 
III.  567,  64  N.  E.  1036  (affg.  101 
111.  App.  512)  ;  Thompson  v.  Piot.  52 
Pa.  Super.  Ct.  305;  Holliday  v.  Peg- 
ram,  89  S.  Car.  73,  71  S.  E.  367,  Ann. 
Cas.  1913  A,  33n. 


§  826 


LAW    OF    PARTNERSHIP 


1146 


proper  form  f  ^  or  whether  the  evidence  supports  the  verdict.'^'' 

§  826.  Judgment. — Generally  speaking,  judgment  in  an 
action  against  a  partnership  should  be  rendered  against  the  indi- 
vidual partners/^  though  if  the  statute  provides  that  a  judgment 
may  be  entered  against  a  partnership  in  its  firm  name,  it  can 
not  be  entered  against  an  individual  partner,'^**  but  an  action  may 
be  brought  on  the  judgment  against  an  individual  partner. ''^  A 
judgment  against  the  Wahounia  Drug  Company  is  sufficient  un- 
der the  Alabama  statute,  the  name  importing  a  partnership,^"  and 
a  judgment  against  W  &  J,  "former  partners  doing  business  un- 
der the  name  and  style  of  the  H  company"  is  against  the  part- 
ners individually,  as  well  as  the  firm.^^  The  general  rule  is  that 
where  a  plaintiff  brings  an  action  against  a  number  of  persons, 
charging  them  as  partners,  and  proves  partnership  liability  as  to 
only  a  part  of  them,  he  is  entitled  to  judgment  against  those  as  to 
whom  liability  is  proved,®"  and  this  more  especially  if  the  action 


75  Austin  V.  Appling,  88  Ga.  54,  13 
S.  E.  955;  Gill  v.  Bickel,  10  Tex. 
Civ.  App.  Q,  30  S.  W.  919;  Matthies 
V.  Herth,  31  Wash.  665,  72  Pac.  480; 
Cornhauser  v.  Roberts,  75  Wis.  554, 
44  N.  W.  744. 

^^Ziegenhein  v.  Smith,  116  111.  App. 
80;  Masterson  v.  Heitmann  (Tex. 
Civ.  App.),  87  S.  W.  227;  Mitchell 
V.  Jensen,  29  Utah  346,  81  Pac.  165. 

"Meyer  v.  Wilson,  166  Ind.  651, 
16  N.  E.  748;  Glasscock  v.  Price,  92 
Tex.  271,  47  S.  W.  965;  Weimer  v. 
Rector,  43  W.  Va.  735,  28  S.  E.  716; 
Moore  v.  Dickson,  121  Wis.  591,  99 
N.  W.  322. 

78  Ellsberry  v.  Block,  28  Colo.  477, 
65  Pac.  629;  Howes  v.  Patterson,  16 
Ga.  689;  Marsh  v.  Mead,  57  Iowa 
535,  10  N.  W.  922;  Adkins  v.  Ar- 
thur, 2)2)  Tex.  431 ;  Jackson  v.  Litch- 
field, 8  Q.  B.  D.  474. 

"  Cox  V.  Harris,  48  Ala.  538 ;  Ruth 
V.   Lowry,    10   Nebr.   260,   4   N.   W. 


977;  Clark  v.  Cullen,  9  Q.  B.  Div. 
355. 

^•^Wahouma  Drug  Co.  v.  Clay 
(Ala.),  69  So.  82. 

^1  Clark  V.  Johnson,  7  Ala.  App. 
507,  61  So.  34. 

82Longstreet  v.  Rea,  52  Ala.  195; 
Salomon  v.  Hopkins,  61  Conn.  47, 
23  Atl.  716;  Doody  Co.  v.  Jeffcoat, 
127  Ga.  301,  56  S.  E.  421;  Silvers 
V.  Foster,  9  Kans.  56;  Fersner  v. 
Bradley,  87  Md.  488,  40  Atl.  58; 
Taft  v.  Church,  164  Mass.  504,  41 
N.  E.  671,  under  Pub.  Stat.  ch.  117, 
§  5,  changing  the  rule  in  Tuttle  v. 
Cooper,  10  Pick.  (Mass.)  281.  See 
also  Jewison  v.  Dieudonne,  127  Minn. 
163,  149  N.  W.  20;  Bunce  v.  Pratt, 
56  Minn.  8,  57  N.  W.  160;  Crews 
v.  Lackland,  61  Mo.  619;  Tirry  v. 
Hogan  (Mo.  App.),  163  S.  W.  873; 
Roggenkamp  v.  Hargreaves,  39  Nebr. 
540,  58  N.  W.  162:  Gay  v.  Johnson. 
32  N.  H.  167;  Pruyn  v.  Black,  21  N. 


1147 


ACTIONS   GENERALLY 


§    826 1 


is  in  tort,^^  but  this  is  not  allowed,  where  plaintiff  has  counted  on 
a  joint  promise  of  all  the  partners.®*  And  if  the  proof  establishes 
liability  of  all,  there  is  no  right  to  a  judgment  against  part  of 
them,  unless  permitted  by  statute.^^  If  the  suit  is  against  part- 
ners the  judgment  should  not  be  rendered  in  the  firm  name. 
Though  the  full  names  of  partners  should  appear  in  the  judg- 
ment,***' irregularities  in  such  respect  are  not  always  held  mate- 
rial." Where  plaintiffs  sued  as  a  firm  in  an  action  for  damages 
to  a  shipment  of  horses  consigned  by  the  firm,  a  joint  judgment 
in  favor  of  them  as  the  individual  members  of  the  firm  was  not 
erroneous,  the  evidence  being  conflicting  as  to  whether  the  horses 
belonged  to  the  firm,  or  part  of  them  belonged  to  one  partner 
and  the  rest  to  the  other.®®    The  nature  and  extent  of  the  liability 


Y.  300;  Rogers  v.  Ingersoll,  103  App. 
Div.  490,  93  N.  Y.  S.  140  (affd.  185 
N.  Y.  592,  78  N.  E.  1111)  ;  Moses 
V.  Dulles,  8  Leg.  Int.  (Pa.)  14;  North 
Star  Boot  &c.  Co.  v.  Stebbins,  3  S. 
Dak.  540,  54  N.  W.  593;  Willis  v. 
Alorrison,  44  Tex.  27;  Armour  v. 
Ward,  78  Vt.  60,  61  Atl.  765;  Little 
V.  Staples,  98  Wis.  344,  IZ  N.  W.  653 ; 
Darwent  v.  Walton,  2  Atk.  510,  26 
Eng.  Reprint  707;  Walker  v.  La- 
moureux,  13  Quebec  K.  B.  209. 

S3  Austin  V.  Appling,  88  Ga.  54,  13 
S.  E.  955 ;  Swenson  v.  Erickson,  90 
111.  App.  358;  In  re  Blackford,  35 
App.  Div.  330,  54  N.  Y.  S.  972. 

s^Blythe  v.  Cordingly,  20  Colo. 
App.  508,  80  Pac.  495;  Gribbin  v. 
Thompson,  28  111.  61 ;  Rose  v.  Corn- 
stock,  17  Ind.  1;  Beatty  v.  O'Con- 
nor, 2  Ind.  App.  ZZ1,  27  N.  E.  446; 
Ogle  V.  Miller,  128  Iowa  474,  104  N. 
W.  502;  Brandagee  v.  Cleary,  152 
N.  Y.  S.  628. 

8s  New  York  Fastener  Co.v.  Wilatus, 
65  App.  Div.  467,  12>  N.  Y.  S.  67; 
Teller  v.  Gerry,  30  Misc.  126,  61  N. 
Y.  S.  864;  Nelson  v.  Lloyd,  9  Watts 
(Pa.)  22;  Pope  Mfg.  Co.  v.  Charles- 


ton Cycle  Co.,  55  S.  Car.  528,  Z2>  S. 
E.  20;  Geddes  v.  Simpson,  2  Bay  (S. 
Car.)  533;  La  Societe  Francaise  v. 
Weidmann,  97  Cal.  507,  32  Pac.  583 ; 
Poswa  v.  Jones,  21  Cal.  App.  664,  132 
Pac.  629;  Tramel  v.  Guaranty  State 
Bank  &c.  Co.  (Tex.  Civ.  App.),  176 
S.  W.  65;  Olson  v.  Veazie,  9  Wash. 
481,  n  Pac.  677,  43  Am.  St.  855. 

SGLanford  v.  Patton,  44  Ala.  584; 
Gardner  v.  Austin,  14  Pa.  Co.  Ct. 
549 ;  Wright  v.  McCampbell,  75  Tex. 
644,  13  S.  W.  293.  ■ 

87  McNamee  v.  Huffman,  3  Harr. 
(Del.)  425;  Loyd  v.  Hicks,  31  Ga. 
140;  Downard  v.  Sluder,  5  Blackf. 
(Ind.)  559;  Commonwealth  v.  Miller, 
6  Dana  (Ky.)  315;  McCouns  v. 
Holmes,  4  Litt.  (Ky.)  389;  Presley 
v.  Anderson,  42  Miss.  274 ;  Davis  v. 
Kline,  76  Mo.  310;  Lash  v.  Arnold, 
53  N.  Car.  206;  Brooks  v.  Ratcliff, 
ZZ  N.  Car.  321 ;  Rice  v.  Summers,  2 
Pa.  Dist.  31 ;  Justice  v.  Meeker,  30 
Pa.  Super.  Ct.  207;  Mclndoe  v.  Ha- 
zelton,  19  Wis.  567,  88  Am.  Dec.  701. 

ssQuanah  A.  &  P.  R.  Co.  v. 
Chumliley  (Tex.  Civ.  App.),  169  S. 
W.  1107. 


§  826 


LAW    OF    PARTNERSHIP 


1148 


of  partners  on  firm  judgments  has  been  previously  treated  in  the 
chapter  on  habihties  as  to  third  persons,  where  it  was  seen  that 
such  judgment  can  be  enforced  as  to  the  firm  property,  or  as  to 
the  separate  property  of  each  partner,^**  and  that  where  the  lia- 
bility of  partners  on  an  obligation  is  joint,  a  judgment  against 
part  of  the  partners  extinguishes  the  liability  of  the  others.'*'^  At 
common  law  there  can  be  no  valid  judgment  against  a  partner 
not  served  with  process."^  A  contrary  rule  prevails  under  statute 
in  many  states,  and  in  some  states  the  plaintiff  who  proceeds 
against  the  number  of  joint  defendants  served  is  entitled  to  judg- 
ment against  all  the  defendants  jointly  indebted  which  may  be 
enforced  against  the  joint  property  of  all  and  the  individual  prop- 
erty of  those   served, ^^  while  under  other  statutes  judgment 


S3  Hamsmith  v.  Espy,  13  Iowa  439 ; 
Stevens  v.  Perry,  113  Mass.  380; 
Meech  v.  Allen,  17  N.  Y.  300,  72  Am. 
Dec.  465 ;  Abbott  v.  Smith,  2  W.  Bl. 
947.     See  ante  §  495  et  seq.      . 

90  Mason  v.  Eldred,  6  Wall.  (U.  S.) 
231,  18  Law  ed.  783;  Waun  v. 
McNulty,  7  111.  355,  43  Am.  Dec. 
58 ;  Crosby  v.  Jeroloman,  Z7  Ind. 
264;  North  v.  Mudge,  13  Iowa 
496,  81  Am.  Dec.  441;  Robert- 
son V.  Smith,  18  Johns.  (N.  Y.)  459, 
9  Am.  Dec.  227;  Kendall  v.  Ham- 
ilton, 4  App.  Cas.  504.    See  ante  §  499. 

»iOpelika  v.  Daniel,  49  Ala.  211; 
Golden  State  &c.  Iron  Works  v.  Da- 
vidson, 73  Cal.  389,  15  Pac.  20 ;  Wea- 
ver V.  Carpenter,  42  Iowa  343 ;  Scott 
V.  Dun  lop,  2  Munf.  (Va.)  349;  Mc- 
Coy V.  Bell,  1  Wash.  504,  20  Pac. 
595.  See  also  Williamson  v.  Mc- 
Ginnis,  11  B.  Mon.  (Ky.)  74,  52  Am. 
Dec.  561;  Scott  v.  Bogart,  14  La. 
Ann.  261 ;  Southmayd  v.  Backus,  3 
Conn.  474 ;  Dennett  v.  Chick,  2 
Greenl.  (Maine)  191,  11  Am.  Dec. 
59;  Landsberg  v.  Bullock,  79  Mich. 
278,  44  N.  W.  608. 

92Fowlkes  V.  Baldwin,  2  Ala.  705; 


Kelly  V.  Bandini,  50  Cal.  530;  Tay 
V.  Hawley,  39  Cal.  93 ;  Welsh  v.  Kirk- 
patrick,  30  Cal.  202,  89  Am.  Dec.  85 ; 
Bishop  V.  Vose,  27  Conn.  1 ;  Hirsch 
V.  Fisher,  138  Mich.  95,  101  N.  W. 
48;  Gunzberg  v.  Miller,  39  Mich.  80; 
Brooks  V.  Mclntyre,  4  Mich.  316; 
Johnson  v.  Lough,  22  Minn.  203; 
Flannery  v.  Anderson,  4  Nev.  437; 
Yerkes  v.  McFadden,  141  N.  Y.  136, 
36  N.  E,  7;  Sternberger  v.  Bern- 
heimer,  121  N.  Y.  194,  24  N.  E.  311 ; 
Brandagee  v.  Cleary,  152  N.  Y.  S. 
628;  Maneely  v.  Mayers,  43  Misc. 
380,  87  N.  Y.  S.  471 ;  Mason  v.  Den- 
ison,  15  Wend.  (N.  Y.)  64;  Leahey 
V.  Kingon,  13  Abb.  Pr.  (N.  Y.)  192, 
22  How.  Pr,  209;  Emery  v.  Emery, 
9  How.  Pr.  (N.  Y.)  130;  Kidd  v. 
Brown,  2  How.  Pr.  (N.  Y.)  20; 
Pardee  v.  Haynes,  10  Wend.  (N.  Y.) 
630;  Lippman  v.  Joelson,  1  N.  Y. 
Code  (N.  S.)  161,  note;  Daniel  v. 
Bethell,  167  N.  Car.  218,  83  S.  E. 
307;  Goldstein  v.  Peter  Fox  Sons 
Co.,  22  N.  Dak.  6Z6,  135  N.  W.  180, 
40  L.  R.  A.  (N.  S.)  566n;  Heaton 
V.  Schaefer,  34  Okla.  631,  126  Pac. 
797,    43    L.    R.    A.     (N.    S.)     540n; 


1149 


ACTIONS   GENERALLY 


826 


against  only  those  served  is  proper."^  As  a  general  rule,  a  judg- 
ment against  a  firm  by  its  firm  name  binds  only  partnership  prop- 
erty.®* A  verdict  against  a  partnership  has  been  held  to  be  a 
verdict  for  each  partner,®^  but  a  verdict  against  C.  &  S.  is  not 
necessarily,  because  of  the  use  of  their  names  in  conjunction,  a 
verdict  against  them  as  a  partnership,  where  they  were  also  sued 
as  individuals.®*^  If  the  petition  in  an  action  against  a  firm  was 
sufficient  to  support  a  judgment  against  each  partner  personally, 
and  also  against  the  firm,  a  partner  against  whom  a  personal 
judgment  was  rendered  has  no  right  to  complain  because  no  per- 
sonal judgment  was  rendered  against  his  copartners.®^  A  judg^ 
ment  for  two  partners,  one  of  whom  was  not  a  party  to  the  action, 
is  invalid.®^  Where  it  is  in  issue  whether  one  defendant  is  a  mem- 
ber of  a  partnership  and  liable  as  such,  a  judgment  which  merely 
awards  damages  against  the  partnership  in  the  firm  name  and  does 


Symms  Grocer  Co.  v.  Burnham,  6 
Okla.  618,  52  Pac.  918;  Pierce  v. 
Varn,  76  S.  Car.  359,  57  S.  E.  184; 
Gessner  v.  Roening,  135  Wis.  535, 
116  N.  W.  171;  Young  v.  Krueger, 
92  Wis.  361,  66  N.  W.  355. 

93Ladiga  Saw  Mill  Co.  v.  Smith, 
78  Ala.  108;  Sliapard  v.  Liglitfoot, 
56  Ala.  506;  Smith  v.  Robinson,  11 
Ala.  270;  Oliver  v.  Hutto,  5  Ala. 
211;  Burnett  v.  Menifee,  4  Ark.  140; 
Edwards  v.  Hellings,  103  Cal.  204, 
j7  Pac.  218 ;  Feder  v.  Epstein,  69  Cal. 
456,  10  Pac.  785;  Bacon  v.  Green,  36 
Fla.  325,  18  So.  870;  Raney  v.  McRae, 
14  Ga.  589,  60  Am.  Dec.  660 ;  Fincher 
V.  Hanson,  12  Ga.  App.  608,  77  S.  E. 
1068;  Warren  Brick  Co.  v.  Lagarde 
Lime  &c.  Co.,  12  Ga.  App.  58,  76  S. 
E.  761;  Rehm  v.  Halverson,  94  111. 
App.  627;  Fender  v.  Stiles,  31  111. 
460;  Reeves  v.  Mercer,  155  111.  App. 
57;  Hunt  v.  Adamson,  4  Ind.  108; 
Lansing  v.  Bever  Land  Co.,  158 
Iowa  693,  138  N.  W.  833;  Per- 
sons V.  Oldfield,  101  Miss.  110.  57 
So.  417;  Dineen  v.  Lanning,  92  Nebr 


545,  138  N.  W.  759;  Van  Zandt  v. 
Winters,  22  Pa.  Super.  Ct.  181 ;  Dil- 
lard  V.  Turner,  87  Va.  669,  14  S.  E. 
123;  Norfolk  &  W.  R.  Co.  v.  Ship- 
pers' Compress  Co.,  83  Va.  272,  2 
S.  E.  139;  Armstrong  v.  Poole,  30 
W.  Va.  666,  5  S.  E.  257;  Carlon  v. 
Ruflfner,  12  W.  Va.  297;  Merchants' 
&c.  Bank  v.  Evans,  9  W.  Va.  Z7Z. 

^*  Ratchford  v.  Covington  County 
Stock  Co.,  172  Ala.  461,  55  So.  806; 
Baldridge  v.  Eason,  99  Ala.  516,  13 
So.  74 ;  Lansing  v.  Bever  Land  Co., 

158  Iowa  693,  138  N.  W.  833;  An- 
derson v.  Wilson,  142  Iowa  158; 
Houssels  V.   Coe   (Tex.  Civ.   App.), 

159  S.  W.  864. 

95  Port  Arthur  Rice  Milling  Co.  v. 
Beaumont  Rice  Mills  (Tex.),  152  S. 
W.  629. 

^•^  Lilly  v.  Yeary  (Tex.  Civ.  App.), 
152  S.  W.  823. 

^"^  First  Bank  of  Springtown  v.  Hill 
(Tex.),  151  S.  W.  652. 

9s  Western  Grocery  Co.  v.  Jata 
(Tex.  Civ.  App.),  173  S.  W.  518. 


826 


LAW    OF    PARTNERSHIP 


1150 


not  mention  the  members  will  be  reversed  at  the  instance  of  such 
defendant. °^  A  partnership  in  Louisiana  is  a  separate  entity  and 
must  sue  and  be  sued  in  the  firm  name,  but  its  members  may  be 
joined  and  judgment  rendered  against  the  firm  and  the  partners 
in  solido.^  At  common  law  a  judgment  against  all  the  members 
of  a  firm  binds  not  only  the  firm  property,  but  also  the  indi- 
vidual property  of  each  partner."  A  judgment  against  a  partner 
for  an  individual  debt  binds  his  individual  property  and  his  inter- 
est in  firm  property,^  and  is  therefore,  as  respects  firm  property, 
subordinate  to  any  judgment  of  firm  creditors  later  obtained. ■* 
The  form  of  a  judgment  by  default  against  a  partnership  is  de- 
termined mainly  by  statute.^  Where  liability  of  partners  is  joint 
and  several,  judgment  against  the  firm  does  not  extinguish  the 
liability  of  the  partners.^  A  judgment  against  a  firm  or  partner 
is  not  subject  to  collateral  attack  for  invalidity,^  but  upon  proper 


^9  Paul  V.  Commercial  Bank  of 
Ocala,  66  Fla.  83,  63  So.  265. 

1  Empire  Rice  Mill  Co.  v.  Neumond, 
199  Fed.  800. 

2  In  re  Codding,  9  Fed.  849 ;  Griffin 
V.  Colonial  Bank,  7  Ga.  App.  126,  66  S. 
E.  382 ;  Louden  v.  Ball,  93  Ind.  232 ; 
McDonald  v.  McDonald,  62  Hun  621, 
17  N.  Y.  S.  230 ;  Cardington  First  Nat. 
Bank  v.  Stiles,  8  Ohio  Cir.  Ct.  532, 
4  Ohio  Cir.  Dec.  481 ;  Holt's  Appeal, 
98  Pa.  St.  257;  Cumming's  Appeal, 
25  Pa.  St.  268,  64  Am.  Dec.  695; 
House  V.  Thompson,  3  Head  (Tenn.) 
512 ;  Reid  v.  House,  2  Humph. 
(Tenn.)  576;  State  v.  Cloudt  (Tex. 
Civ.  App.),  84  S.  W.  415;  Pitts  v. 
Spotts,  86  Va.  71,  9  S.  E.  501. 

3  Ex  parte  Stebbins,  R.  M.  Charlt. 
(Ga.)  11 ;  Gowan  v.  Tunno,  Rich,  Eq. 
(S.  Car.)  369. 

*  Johnson  v.  Rogers,  Fed.  Cas.  No. 
7408,  15  Nat.  Bankr.  Reg.  1,  14  Alb. 
L.  J.  427;  Coster  v.  Bank  of  Georgia, 
24  Ala.  37;  Whelan  v.  Shain,  115  Cal. 
326,  47  Pac.  57 ;  Westbrook  v.  Hays, 
89  Ga.   101,   14   S.   E.  879;   Green  v. 


Ross,  24  Ga.  613;  Dennis  v.  Green, 
20  Ga.  386;  Freedman  v.  Holberg, 
89  Mo.  App.  340;  Bowen  v.  Billings, 
13  Nebr.  439,  14  N.  W.  152 ;  Page  v. 
Thomas,  43  Ohio  St.  38,  1  N.  E.  79, 
54  Am.  Rep.  788;  Gunnison  v.  Erie 
Dime  Sav.  &c.  Co.,  157  Pa.  St.  303, 
27  Atl.  747. 

5  Williams  v.  Hurley,  135  Ala.  319, 
ZZ  So.  159;  Hobson  v.  Emanuel,  8 
Port.  (Ala.)  442;  Phillips  v.  Wheeler, 
2  Hun  603,  6  Thomp.  &  C.  (N.  Y.) 
306;  Taylor  v.  Henderson,  17  Serg. 
&  R.  (Pa.)  453;  Owen  v.  Kuhn  (Tex. 
Civ.  App.),  72  S.  W.  432. 

^  Ratchford  v.  Covington  County 
Stock  Co.,  172  Ala.  461,  55  So.  806. 

7MacVeagh  v.  Wild,  95  Fed.  84; 
Belcher  v.  Curtis,  119  Mich.  1,  V  N. 
W.  310,  75  Am.  St.  376;  Wells  v. 
Clarkson,  5  Mont.  ZZd,  5  Pac.  894; 
Hough  V.  Stover,  46  Nebr.  588,  65 
N.  W.  189;  Jaques  v.  Greenwood,  12 
Abb.  Pr.  (N.  Y.)  232;  Wright  v. 
Ewen,  19  Phila.  (Pa.)  312,  24  Wkly. 
Notes  Cas.  Ill;  Bates  v.  Wills  Point 
Bank,    11    Tex.    Civ.   App.    11,   32    S. 


1151  ACTIONS   GENERALLY  §    826 

grounds-  such  judgment  may  be  vacated  or  set  aside  in  equity.^ 
Thus,  in  an  early  case,  in  which  this  question  arose,  the  court 
said:**  "It  is  a  well-settled  principle  that  one  partner  can  not 
charge  the  firm  by  his  writing  under  seal,  unless  he  is  authorized 
to  do  so  by  the  articles  of  copartnership,  or  by  the  express  con- 
sent of  his  copartners.  But  equity  can  relieve  against  a  judgment 
at  law  on  such  instrument  against  the  firm,  if  obtained  without 
surprise,  fraud  or  connivance;  because  the  copartners,  who  had 
not  consented  to  the  instrument,  might  have  made  full  and  ef- 
fectual defense  at  law.  But  against  an  improper  judgment  sur- 
reptitiously or  collusively  obtained,  it  is  the  peculiar  province 
of  a  court  of  equity  to  afford  relief ;  for  without  the  aid  of  equity 
the  complainant  would  be  remediless,  having  had  no  opportunity 
to  defend  at  law.  The  demurrer  admits  the  truth  of  all  the 
charges  and  allegations  in  the  bill,  therefore  I  can  not  hesitate 
in  concluding  that  this  instrument  of  writing  was  intended  as  a 
fraud  on  the  complainant,  and  that  the  judgment  was  obtained 
without  his  having  any  knowledge  of  the  pendency  of  the  suit, 
or  any  opportunity  of  making  a  defense.  The  complainant  had 
also  the  right  to  apply  to  a  court  of  equity  for  a  discovery  of  the 
amount  of  the  credits  which  ought  to  have  been  entered  on  the 
execution,  and  to  compel  the  plaintiff  at  law  to  enter  satisfaction 
pro  tanto."  Judgment  against  ostensible  partners  only  merges 
and  extinguishes  a  claim  against  dormant  partners,"  but  binds 

W.  339;   Pfister  v.  Graton  &c.  Mfg.  Proc.    150,  25   N.  Y.   St.   Zld;   Bean 

Co.,  97  Wis.  208,  72  N.  W.  883.  v.    Mather,    1    Daly    (N.    Y.)    440; 

8  Morgan    v.    Scott,    Minor    (Ala.)  Groesbeck  v.  Brown,  2  How.  Pr.  (N. 

81,   12  Am.  Dec.  35;  Ramsbottom  v.  Y.)    21;    Franks    v.    Lockey,    45    Vt. 

Bailey,   124   Gal.  259,   56   Pac.   1036;  395;  Fore  St.  Warehouse  Co.  v.  Dur- 

Baltzell    V.    Randolph,    9    Fla.    366;  rant,  10  Q.  B.  D.  471. 

KHng   V.    Taylor,    90    111.    App.    165;  » Morgan    v.    Scott,    Minor    (Ala.) 

Marsh  v.  Mead,  57  Iowa  535,  10  N.  81,  12  Am.  Dec.  35. 

W.    922;    Sneed    v.    Coyle,    4    Litt.  lo  Pgnny  v.    Martin,   4   Johns.    Ch. 

(Ky.)     163;    Granit    v.    Abramowitz,  (N.  Y.)  566;  Smith  v.  Black,  9  Serg. 

112  N.  Y.  S.  1081;  Helios-Upton  Co.  &   R.    (Pa.)    142,    11    Am.   Dec.   686; 

V.  Thomas,  96  App.  Div.  401,  89  N.  Munster  v.  Railton.  11  Q.  B.  D.  435, 

Y.  S.  222;  Utter  v.  McLean,  53  Hun  52  L.  J.  Q.  B.  409,  48  L.  T.  Rep.  (N. 

568,  6  N.  Y.  S.  281,  17  N.  Y.  Civ.  S.)  624. 


§    827  LAW    OF    PARTNERSHIP  1152 

the  firm  assets  as  much  as  if  the  dormant  partner  were  a  party/^ 

§  827.  Execution. — At  common  law  liability  on  a  judg- 
ment against  partners  for  a  firm  debt  is  not  joint,  as  is  the  liability 
on  the  debt,  but  is  joint  and  several,  and  the  execution  may  be 
levied  on  either  firm  property  or  the  property  of  any  partner/^ 
As  said  in  one  case:^^  "The  statute  (Code,  section  1369)  re- 
quires the  sheriff  to  satisfy  an  execution  against  property  'out  of 
the  personal  property  of  the  judgment  debtor,'  and  if  sufficient 
personal  property  can  not  be  found,  then  out  of  the  real  property 
belonging  to  him.  There  is  no  statute  or  rule  of  law  which  re- 
quires the  sheriff  to  satisfy  a  joint  execution  out  of  the  joint 
property  of  the  execution  debtors,  or  out  of  the  separate  prop- 
erty of  each  debtor.  He  may  satisfy  such  an  execution  out  of 
the  joint  property,  or  out  of  the  separate  property  of  any  one  or 
more  of  the  debtors.  In  1  Lindley  on  Part.  515,  it  is  said  that 
'although  the  writ  of  execution  on  a  joint  judgment  must  be  joint 
in  form,  it  may  be  levied  upon  all  or  any  one  or  more  of  the  per- 
sons named  in  it,'  and  that  'the  consequence  of  this  is,  that  the 
sheriff  may  execute  a  writ  issued  against  several  partners  jointly, 
either  on  their  joint  property  or  on  the  separate  property  or  any 
one  or  more  of  them,  or  both  on  their  joint  or  their  respective  sep- 
arate property.  And  so  long  as  there  is  within  the  sheriff's  baili- 
wick any  property  of  the  partners  or  any  of  them,  a  return  of 
nulla  bona  is  improper.'  And  the  rules  have  now  been  embodied 
in  section  1935  of  the  Code."  In  Alabama  it  is  held  that  the 
lien  of  a  recorded  partnership  judgment,  is,  as  to  the  individual 
property  of  one  partner,  prior  to  the  rights  of  his  individual  cred- 
it Pinschower  v.  Hanks,  18  Nev.  61  So.  34 ;  Martin  v.  Davis,  21  Iowa 
99,  1  Pac.  454;  Elliot  v.  Stevens,  38  535;  Stout  v.  Baker,  Z2  Kans.  113, 
N.  H.  311 ;  King's  County  Bank  v.  4  Pac.  141 ;  Wisham  v.  Lippincott, 
Courtney,  69  Hun  152,  23  N.  Y.  S.  9  N.  J.  Eq.  353;  Hunter  v.  Martin, 
542,  53  N.  Y.  St.  324;  Tynburg  v.  2  Rich.  L.  (S.  Car.)  541;  DeCamp 
Cohen,  67  Tex.  220,  2  S.  W.  734;  v.  Bates  (Tex.  Civ.  App.),  2,1  S.  W. 
How  V.  Kane,  2  Pinn.  (Wis.)  531,  644.  See  ante  §  495. 
2  Chandl.  222,  54  Am.  Dec.  152.  is  Saunders  v.  Reilly,  105  N.  Y.  12, 

12  Clark  V.  Johnson,  7  Ala.  App.  507,     12  N.  E.  170,  59  Am.  Rep.  472. 


1153  ACTIONS    GENERALLY  §    828 

itors.^*  But  execution  on  a  judgment  against  a  partnership  in 
the  firm  name,  where  statute  permits  such  judgment,  may  be 
levied  only  on  the  firm  property/^  And  where  statute  allows 
judgment  against  the  partners  served,  where  not  all  of  the  part- 
ners can  be  brought  into  court,  such  judgment  may  be  enforced 
only  against  firm  property  and  the  property  of  the  partners 
served/*^  This  rule  also  holds  where  judgment  has  been  con- 
fessed by  less  than  all  the  partners/^  But  under  some  statutes 
a  partner  not  served  may  be  brought  in  after  judgment  and  his 
property  bound/® 

§  828.  Injunction  against  enforcement  of  judgment 
against  firm. — An  injunction  may  be  granted  against  the 
enforcement  of  a  judgment  against  the  firm  confessed  by  one 
partner  without  his  copartner's  consent/^  But  the  right  to  such 
injunction  has  been  denied  to  a  dormant  partner,-*'  and  in  some 
jurisdictions  it  is  held  the  remedy  by  motion  to  vacate  precludes 
an  injunction.-^    Injunctions  have  sometimes  been  denied  against 

1*  Clark   V.   Johnson,   7   Ala.   App.  Robinson,    1    Hoffm.    Ch.     (N.    Y.) 

507,  61  So.  34.  524;  Union  Pottery  Co.  v.  Cinder,  2 

isYarbrough  V.  Bush,  69  Ala.  170;  Lane.    L.    Rev.    (Pa.)    345;    Lowber 

Flowers  v.  Strickland,  10  Ga.  App.  739,  v.  Richardson,  1  Clark  263,  2  Pa.  L 

Th   S.   E.   1092;   Capital  Food   Co.  v.  J.   203;    Lee   v.    Hassett,   41    W.    Va 

Globe  Coal  Co.,  142  Iowa  134,  120  N.  368,  23  S.  E.  559.     See  ante  §  817. 

W.  704;   Fritche  v.  Liddell,  6  Ohio  "Grant  v.  Hyatt,  22  La.  Ann.  411 

Dec.  971,  9  Am.  L.  Rec.  309 ;  Halsell  v.  Ross    v.    Howell,    84    Pa.    St.    129 

McMurphy,  86  Tex.  100,  23  S.  W.  647 ;  Hershey   v.    Fulmer,    3    Pa.    Co.    Ct 

Rogers    v.    Bradford,    56    Tex.    630;  442;  Hoover  v.  Diffenderfer,  5  Lane 

Hamner  v.  Ballantyne,   16  Utah  436,  L.  Rev.   (Pa.)  245;  Bank  of  Shelton 

52  Pac.  770,  67  Am.  St.  643.     See  as  v.  Willey,  7  Wash  535,  35  Pac.  411 

to     effect     of     judgment     obtained  is  Daniel   v.    Bethell,    167    N.    Car 

against  a  partnership  as  a  corpora-  218,  83  S.  E.  307. 

tion  in  which  the  partners  defended  i"  Christy    v.    Sherman,     10    Iowa 

as  real  parties  in  interest.     Heavrin  535;    Blackwell    v.    Rankin,    7    N.    J. 

v.  Lack  Malleable  Iron  Co.,  153  Ky.  Eq.  152;   Shedd  v.  Bank  of  Brattle- 

329,  155  S.  W.  729 ;  Lansing  v.  Bever  boro,  32  Vt.  709. 

Land  Co.,  158  Iowa  693,  138  N.  W.  20  Cammack   v.    Johnson,    2    N.    J. 

833.  Eq.  163. 

1°  Inbusch  V.  Farwell,  1  Black   (U,  21  McKee  v.  Bank  of  Mt.  Pleasant, 

S.)    566,   17  L.  ed.   188;   Flannery  v.  7  Ohio  522. 
Anderson,    4    Nev.    437;    Waring    v. 


§    829  LAW    OF    PARTNERSHIP  1154 

tlie  enforcement  of  a  judgment  rendered  on  service  of  process  on 
one  partner  only  when  the  other  was  out  of  the  state,"^  but  the 
contrary  is  also  held."^  Injunction  against  the  enforcement  of  a 
judgment  has  been  denied  against  one  member  of  a  firm  and  a 
codefendant,  instead  of  the  firm  and  the  codefendant  where  en- 
tered by  agreement/^  or  where  appearance  of  one  partner  was 
entered  without  his  authority,"^  the  court  holding  that  the  remedy 
at  law  is  adequate  in  these  cases,  or  the  judgment  was  in  fact 
valid. 

§  829.  Injunction  against  sale  of  partnership  property, 
under  levy  against  one  partner. — It  is  sometimes  held  that 
partners  may  in  equity  prevent  a  sale  of  firm  property  under  an 
execution  against  one  partner  until  an  accounting  is  had."*'  As 
said  in  one  case:""  "If  the  property  is  sold  before  an  account  is 
taken,  of  course  the  interest  of  the  debtor  is  liable  to  be  sacri- 
ficed on  account  of  the  uncertainty,  and  the  purchaser  is  bur- 
dened with  the  settlement  of  the  business  of  the  firm.  In  the 
other  mode  of  proceeding,  the  creditor  takes  this  upon  himself, 
and  if  there  is  no  balance,  there  is  nothing  to  sell.  The  rule  is 
clearly  summed  up  and  stated  in  Eden  on  Injunctions,  53-55. 
Having  stated  that  the  subject  had  undergone  an  elaborate  dis- 
cussion in  the  case  in  the  exchequer"''  he  states  the  conclusion  as 
there  held :  'Whether  the  partner,  for  valuable  consideration, 
sells  his  interest  in  the  partnership,  or  his  representatives  take 
it  upon  his  death,  or  a  creditor'takes  it  in  execution,  or  assigns 
under  a  commission,  the  party  coming  in  in  the  right  of  the  part- 
ner takes  nothing  more  than  an  interest  in  the  partnership,  which 
is  not  tangible,  and  can  not  be  made  available  except  under  an 

22  Winters  v.  Means,  25  Nebr.  241,  v.    Means,   25    Nebr.   241,   41    N.   W. 
41  N.  W.  157,  13  Am.  St.  489.  157,  13  Am.  St.  489. 

23  Pvirviance    v.    Edwards,    17    Fla.  2g  ;Rgg(j  y_  Johnson,  24  Maine  322; 
140.  Thompson  V.  Frist,  15  Md.  24;  Krupp 

2-1  Crenshaw     v.     Wickersham,     15  v.  Adams,   124  Alich.  215,  82  N.  W. 

Iowa  154.  894. 

25  Lucas    V.     Bank    of     Darien,     2  27  j^ubbard  v.  Curtis,  8  Iowa  1,  74 

Stew.      (Ala.)      280;     Walworth     v.  Am.  Dec.  283. 

Henderson,  9  La.  Ann.  339 ;  Winters  ^s  Taylor  v.  Fields,  4  Ves.  396. 


1155 


ACTIONS    GENERALLY 


§    829 


account  between  the  partnership  and  the  partner.  The  creditor 
will  accordingly,  be  restrained  from  proceeding  until  such  account 
has  been  taken.'  This  seems  to  be  the  more  consistent  rule,  and 
supported  by  the  greater  weight  of  authority.""'*  But  the  con- 
trary is  also  held.^''  Under  this  rule  it  seems  that  to  obtain  an 
injunction  against  the  sale  of  partnership  property  on  an  execu- 
tion issued  against  one  member,  it  should  be  made  to  appear  that 
the  partner  will  have  nothing  coming  to  him  upon  settlement  and 
an  offer  to  make  an  accounting  should  appear.^^  In  several  cases 
an  injunction  has  been  granted  against  the  sale  of  specific  articles 
of  firm  property  for  the  debt  of  one  partner.^"  But  in  many 
other  cases  the  right  to  any  injunction  to  stop  execution  sale  of 
firm  property  for  a  partner's  debt,  has  been  denied,  the  cases 
holding  that  the  risk  of  such  sale  is  assumed  in  the  partnership 
undertaking,^^  nor,  under  the  Texas  statute,  can  a  partnership 


29  Fox  V.  Hanbury,  Cowp.  445 ; 
Richardson  v.  Gooding,  2  Vern.  293 ; 
West  V.  Skip,  1  Ves.  sen.  239 ;  Han- 
key  V.  Garrat,  3  Bro.  C.  C.  457; 
Hankey  v.  Garrat,  1  Ves.  (Jr.)  236; 
particularly  Barker  v.  Goodair,  11 
Ves.  78;  Young  v.  Keighly,  15  Ves. 
557;  Button  v.  Morrisson,  17  Ves. 
193. 

30  Moody  V.  Payne,  2  Johns.  Cli. 
(N.  Y.)  548. 

31  Cropper  v.  Coburn,  2  Curt.  C. 
C.  465,  Fed.  Cas.  No.  3416;  Blood 
V.  Martin,  21  Ga.  127;  Williams  v. 
Lewis,  115  Ind.  45,  17  N.  E.  262,  7 
Am.  St.  403;  Hubbard  v.  Curtis,  8 
Iowa  1,  74  Am.  Dec.  283 ;  Crooker 
V.  Crooker,  46  Maine  250 ;  Harney 
V.  First  Nat.  Bank,  52  N.  J.  Eq.  697, 
29  Atl.  221 ;  Turner  v.  Smith,  1  Abb. 
Pr.  (N.  S.)  (N.  Y.)  304;  Read  v. 
McLanahan,  15  Jones  &  Spenc.  (N. 
Y.)  275 ;  Place  v.  Seweetzer,  16  Ohio 
142 ;  Rogers  v.  Nichols.  20  Tex.  719 ; 
Washburn  v.  Bank,  19  Vt.  278. 

32  Crane  v.  Morrison,  4  Sawy.  (U. 
S.)   138,  Fed.  Cas.  No.  3355;  Moore 


V.  Sample,  3  Ala.  319 ;  Jones  v. 
Thompson,  12  Cal,  191 ;  Newhall  v. 
Buckingham,  14  111.  405;  Williams  v. 
Lewis,  115  Ind.  45,  17  N.  E.  262,  7 
Am.  St.  403;  White  v.  Woodward, 
8  B.  Mon.  (Ky.)  484;  Thompson  v. 
Lewis,  34  Maine  167 ;  Sanders  v. 
Young,  31  Miss.  Ill  ;  Dow  v.  Say- 
ward,  14  N.  H.  9;  Phillips  v.  Cook, 
24  Wend.  (N.  Y.)  389;  Sutcliffe  v. 
Dohrman,  18  Ohio  181,  51  Am.  Dec. 
450;  Nixon  v.  Nash,  12  Ohio  St.  647, 
80  Am.  Dec.  390;  Clark  v.  Lyman, 
8  Vt.  290. 

33  Peck  V.  Schultze,  Holmes  (U. 
S.)  28;  Daniel  v.  Owens,  70  Ala. 
297 ;  Jones  v.  Thompson,  12  Cal.  191  ; 
Brewster  v.  Hammet,  4  Conn.  540 ; 
Hardy  v.  Donellan.  33  Ind.  501; 
Stout  V.  Fortner,  7  Iowa  183 ;  Chap- 
pell  V.  Cox,  18  Md.  513;  Wickham 
V.  Davis,  24  Minn.  167;  Sitler  v. 
Walker,  Freem.  Ch.  (Miss.)  77; 
Mittnight  V.  Smith,  17  N.  J.  Eq.  259, 
88  Am.  Dec.  233;  Young  v.  Frier,  9 
N.  J.  Eq.  465 ;  Moody  v.  Payne,  2 
Johns.  Ch.  (N.  Y.)  548;  Saunders  v. 


LAW    OF    PARTNERSHIP 


1156 


enjoin  the  levy  of  such  execution,  even  if  it  would  result  in  sus- 
pending the  business.^* 

§  830.  Levy  on  partnership  property  for  individual  debt 
of  a  partner. — A  judgment  against  a  partner  on  his  individual 
debt  is  enforcible  against  firm  property  only  to  the  extent  of  his 
interest,^^  and  a  subsequent  levy  of  an  execution  on  a  firm  debt 


Irwin,  17  Hun  (N.  Y.)  342;  Mow- 
bray V.  Lawrence,  22  How.  Pr.  107, 
13  Abb.  Pr.  (N.  Y.)  317;  Ketchum 
V.  Durkee,  1  Barb.  Cli.  (N.  Y.)  480, 
45  Am.  Dec.  412;  Smyth  v.  Barbee, 
9  Lea  (Tenn.)  173;  Lamoille  Valley 
R.  Co.  V.  Bixby,  55  Vt.  235;  Bow- 
man V.  McGregor,  6  Wash.  118,  32 
Pac.  1059. 

34  J.  M.  Radford  Grocery  Co.  v. 
Owens  (Tex.  Civ.  App.),  161  S.  W. 
911. 

35  United  States  v.  Williams,  4  Mc- 
Lean (U.  S.)  236,  Fed.  Cas.  No. 
16719;  Taylor  v.  Bemis,  4  Biss.  (U. 
S.)  406,  Fed.  Cas.  No.  13779;  An- 
drews V.  Keith,  34  Ala.  722;  Moore 
V.  Sample,  3  Ala.  319 ;  Jones  v. 
Fletcher,  42  Ark,  422;  Robinson  v. 
Tevis,  38  Cal.  611;  Jones  v.  Thomp- 
son, 12  Cal.  191;  Filley  v.  Phelps, 
18  Conn.  294;  Poswa  v.  Jones,  21 
Cal.  App.  664,  132  Pac.  629;  Weber 
V.  Hertz,  188  111.  68,  58  N.  E.  676; 
Swan  V.  Gilbert,  175  111.  204,  51  N. 
E.  604,  Q  Am.  St.  208;  James  v. 
Stratton,  32  111.  202;  Newhall  v. 
Buckingham,  14  111.  405;  Hardy  v. 
Donellan,  ZZ  Ind.  501 ;  Shaw  v.  Rob- 
erts, 144  Iowa  215,  122  N.  W.  932; 
Choppin  V.  Wilson,  27  La.  Ann.  444; 
Beauchamp  v.  Chachere,  12  La.  Ann. 
851 ;  Smith  v.  McMicken,  3  La.  Ann. 
319;  Croft  v.  McKneely,  1  La.  Ann. 
101  ;  Cucullu  V.  Manzenal,  4  Mart. 
(N.  S.)  (La.)  183;  Aloore  v.  Pen- 
nell,  52  Maine  162,  83  Am.  Dec.  500; 
Thompson  v.  Lewis,   34   Maine   167; 


Peck  V.  Fisher,  7  Cush.  (Mass.)  386 
Fisk  V.  Herrick,  6  Mass.  271 ;  Sitler 
V.  Walker,  Freem.  Ch.  (Miss.)  11 
Richards  v.  Leveille,  44  Nebr.  38,  62 
N.  W.  304;  Dow  v.  Sayward,  14  N 
H.  9;  Morrison  v.  Blodgett,  8  N.  H 
238,  29  Am.  Dec.  653;  Gibson  v 
Stevens.,  7  N.  H.  352 ;  Clements  v, 
Jessup,  36  N.  J.  Eq.  569;  Mowbray 
V.  Lawrence,  22  How.  Pr.  (N.  Y.) 
107,  13  Abb.  Pr.  317;  Waddell  v. 
Cook,  2  Hill  (N.  Y.)  47,  Zl  Am. 
Dec.  Z12;  Sutcliffe  v.  Dohrman,  18 
Ohio  181,  51  Am.  Dec.  450;  Nixon 
v.  Nash,  12  Ohio  St.  647,  80  Am. 
Dec.  390;  Knerr  v.  Hofifman,  65  Pa. 
St.  126;  Lothrop  v.  Wightman,  41 
Pa.  St.  297;  Bank  v.  Allen,  1  Del. 
County  (Pa.)  277;  Bogue  v.  Steel, 
7  Leg.  Int.  (Pa.)  162.  1  Phila.  90; 
Knox  V.  Schepler,  2  Hill  (S.  Car.) 
595 ;  Jones  v.  Richardson,  99  Tenn. 
614,  42  S.  W.  440;  Haskins  v.  Ever- 
ett, 4  Sneed  (Tenn.)  531;  Weaver 
v.  Ashcroft,  50  Tex.  427;  Russ  v. 
Fay,  29  Vt.  381 ;  Graden  v.  Turner, 
15  Wash.  136,  45  Pac.  1Z2>;  Bum- 
garner  V.  First  Nat.  Bank  (W.  Va.), 
74   S.   E.  996;  Holmes  v.   Mentze,  4 

A.  &  E.  127,  5  N.  &  M.  563,  4  D.  P. 
C.  300,   1   H.  &  N.  608,   5   L.  J.   K. 

B.  62 ;  Dutton  v.  Morrison,  17  Ves. 
Jr.  193,  1  Rose  213,  11  Rev.  Rep. 
56 ;  Rennie  v.  Quebec  Bank,  3  Ont. 
L.  Rep.  541;  Smith  v.  Thiesen,  20 
Manitoba  120.  See  generally  note 
57  Am.  St.  436;  note  46  L.  R.  A.  481. 


1157  ACTIONS    GENERALLY  §    830 

takes  precedence  over  it.^"  It  was  said  in  a  leading  case^''  as  to  the 
partner's  interest:  "It  would  be  superfluous  labor  to  trace  the 
history  of  the  changes  w^hich  have,  from  time  to  time,  taken 
place  in  the  views  of  the  courts  respecting  the  nature  of  the  inter- 
ests of  individual  partners  in  the  common  stock  of  a  firm,  and  the 
respective  rights  of  separate  and  joint  creditors;  but  it  is  suffi- 
cient to  observe  that  they  have  resulted  in  a  general  recognition 
of  the  doctrine,  that  as  between  a  firm  and  its  creditors  the  prop- 
erty is  vested  in  the  firm,  and  that  no  individual  partner  has  an 
exclusive  right  to  any  part  of  the  joint-stock  until  the  firm  debts 
are  paid  and  a  balance  of  account  is  struck  between  him  and  his 
copartners,  and  the  amount  of  his  interest  accurately  ascertained. 
The  corpus  of  the  effects  is  joint  property,  and  neither  partner 
separately  has  anything  in  that  corpus;  but  the  interest  of  each 
is  only  his  share  of  what  remains  after  the  partnership  debts  are 
paid  and  accounts  are  taken. ^^  Partnership  effects  can  not  be 
taken  by  attachment  or  sold  on  execution  to  satisfy  a  creditor  of 
one  of  the  partners  except  to  the  extent  of  the  interest  of  such 
separate  partner  in  the  effects,  subject  to  the  payment  of  the  firm 
debts  and  settlement  of  all  accounts.^^  Purchasers  of  the  share 
of  an  individual  partner  can  only  take  his  interest.  That  interest, 
and  not  a  share  of  the  partnership  eft'ects,  is  sold,  and  it  consists 
merely  of  the  share  of  the  surplus  which  shall  remain  after  the 

36  Hubbard  v.  Curtis,  8  Iowa  1,  74  s?  Menagh   v.   Whitwell,   52   N.   Y. 

Am.  Dec.  283;  Thompson  v.  Frist,  15  146,  11  Am.  Rep.  683. 

Md.    24;    Barrett    v.   McKenzie,    24  ss  citing    Witter    v.    Richards,    10 

Minn.  20;   Lester  v.  Givens,  74  Mo.  Conn.  37;  Pierce  v.  Jackson,  6  Mass. 

App.  395;  Tappan  v.  Blaisdell,  5  N.  243;  Crane  v.  French,   1  Wend.   (N. 

H.  190;  Harney  v.  Jersey  City  First  Y.)  311;  Doner  v.  Stauffer,  1  Pa.  St. 

Nat.  Bank,  52  N.  J.  Eq.  697,  29  Atl.  198;  West  v.   Skip,   1  Ves.   Sr.  239; 

221 ;    Saunders  v,   Reilly,   105   N.   Y.  Fox   v.   Hanbury,    Cowp.   445 ;    Tay- 

12,  12  N.  E.  170,  59  Am.  Rep.  472;  lor   v.    Fields,   4   Ves.    396,    15    Ves. 

New    York    Eighth    Nat.    Bank    v.  559,   note;    Collyer    Partnership,    3rd 

Fitch,  49  N,  Y.  539;  Dunham  v.  Mur-  Am.   ed.    (Perkins),   notes   to   §   822, 

dock,  2  Wend.   (N.  Y.)   553;  Wilson  pp.    704    to    710;    Story    Partnership, 

V.    Conine,    2    Johns.    (N.    Y)    280;  notes  to   §§   261,  262,  263;  2  Kent's 

Coover's    Appeal,    29    Pa.    St.    9,    70  Com.   (11th  ed.)  78,  note. 

Am.    Dec,     149;     Davis    v.    Hyman  s^  Citing  3  Kent's  Com.   (11th  ed.) 

(1903),  1  K.  B.  854.  76. 


§    831  LAW    OF    PARTNERSHIP  1158 

payment  of  the  debts  and  settlement  of  the  accounts  of  the  firm.'*'' 
No  more  property  can  be  carried  out  of  the  firm  by  the  assignee 
of  one  partner  than  the  partner  himself  could  extract  after  all 
the  accounts  are  taken/^  No  person  deriving  under  a  partner 
can  be  in  a  better  condition  than  the  partner  himself/^  A  partner 
has  no  right,  by  an  assignment  of  his  interest,  to  take  from  the 
creditors  or  other  partners  the  right  to  have  their  claims  against 
the  partnership  satisfied  out  of  its  property.  A  mortgage  made 
by  one  partner,  of  his  undivided  interest,  can  not  avail  against 
the  creditors  of  the  partnership  who  attach  the  partnership  prop- 
erty."*^ "Each  partner  has  a  legal  interest  and  right  of  posses- 
sion as  to  all  the  joint  assets,  and  it  would  be  strange,  indeed, 
and  contrary  to  public  policy,  if  such  an  interest  could  not  be 
seized  and  subjected  to  the  payment  of  any  judgment  against 
him.  To  hold  otherwise  would  place  it  in  the  power  of  an  un- 
scrupulous debtor,  by  entering  into  such  relations  to  screen  his 
property,  or  to  so  hedge  the  approaches  to  it,  as  to  render  it 
almost,  if  not  altogether,  inaccessible  to  his  creditor.  This,  jus- 
tice and  sound  policy  will  not  permit,  and  accordingly  we  find 
it  universally  admitted  that  the  interest  of  a  partner  in  the  tan- 
gible property  of  a  firm  is  liable  to  seizure  upon  execution,  in 
favor  of  his  separate  creditor."'** 

§  831.     Procedure  in  sale  of  partner's  interest  for  one  part- 
ner's debt. — The  court  said  in  the  opinion  in  an  early  case,*° 

40  Citing  3  Kent's  Com.  (11th  ed.)  484;  Phillips  v.  Cook,  24  Wend.  (N. 
78,  note  b.  Y.)   389;  Walsh  v.  Adams,  3  Denio 

41  Citing  West  v.  Skip,  1  Ves.  Sr.  (N.  Y.)  125;  Scrugham  v.  Carter,  12 
241  (Am.  ed.),  note;  Young  v.  Wend.  (N.  Y.)  131;  Place  v.  Sweet- 
Keighly,  15  Ves.  557.  zer,  16  Ohio  142;  Knox  v.  Summers, 

42  Citing  Fox  v.  Hanbury,  Cowp,  4  Yeates  (Pa.)  477 ;  Deal  v.  Bogue,  20 
445.  Pa.  St.  228,  57  Am.  Dec.  702 ;  Whitney 

43  Citing  Lovejoy  v.  Bowers,  11  N.  v.  Ladd,  10  Vt.  165;  Mayhew  v.  Her- 
H.  404.  rick,  7  Com.  B.  229 ;  18  L.  J.  C.  P.  179, 

44  Nixon  V.  Nash,  12  Ohio  St.  647,  13  Jur.  1078;  Collyer  Partnership,  §§ 
80  Am.  Dec.  390.  See  also  Moore  v.  822  et  seq. ;  Story  Partnership,  §§ 
Sample,  3  Ala.  319;  Church  v.  261  et  seq.;  1  Parsons  Contracts,  §§ 
Knox,     2     Conn.     514 ;     Newhall     v.  176  et  seq. 

Buckingham,     14    111.    405 ;     Burgess         45  Morrison    v.    Blodgett,    8    N.    H. 
V.     Atkins.     5     Blackf.     (Ind.)     W ;     238,  29  Am.  Dec.  653. 
White  V.  Woodward,  8  B.  Mon.  (Ky.) 


1159  ACTIONS    GENERALLY  §    831 

"Mr.  Justice  Story,  in  his  Commentaries  on  Equity  Jurisprudence, 
says :  'It  is  well  known  that  at  law  an  execution  for  the  separate 
debt  of  one  of  the  partners  may  be  levied  upon  the  joint  property 
of  the  partnership.  In  such  a  case,  however,  the  judgment  cred- 
itor can  levy,  not  the  moiety,  or  undivided  share  of  the  debtor 
in  the  property,  as  if  there  were  no  debts  of  the  partnership,  or 
Hen  on  the  same  for  the  balance  due  to  the  other  partner;  but 
he  can  levy  the  interest  only  of  the  judgment  debtor,  if  any,  in 
the  property,  after  the  payment  of  all  debts  and  other  charges 
thereon.  In  short,  he  can  take  only  the  same  interest  in  the 
property  which  the  judgment  debtor  would  have  upon  the  final 
settlement  of  all  accounts  of  the  partnership.  When,  therefore, 
the  sheriff  seizes  such  property  upon  an  execution,  he  seizes  only 
such  undivided  and  unascertained  interest;  and  if  he  sells  under 
the  execution,  the  sale  conveys  nothing  more  to  the  vendee,  who 
thereby  becomes  a  tenant  in  common,  substituted  to  the  rights  and 
interest  of  the  judgment  debtor  in  the  property  seized.  In  truth, 
the  sale  does  not  transfer  any  part  of  the  joint  property  to  the 
vendee,  so  as  to  entitle  him  to  take  it  from  the  other  partners; 
for  that  would  be  to  place  him  in  a  better  situation  than  the  part- 
ner himself.  But  it  gives  him  properly  a  right  in  equity  to  call 
for  an  account;  and  thus  to  entitle  him  to  the  interest  of  the 
partner  in  the  property  which  shall  upon  such  settlement  be  ascer- 
tained to  exist'  "^'^  This  seems  to  be  a  necessary  result,  from  the 
adoption  of  the  principle  before  stated.  It  has  been  repeatedly 
said  that  the  creditor  can  have  no  greater  right  than  the  debtor 
had;  and  if  "he  can  take  only  the  same  interest  in  the  property 
which  the  judgment  debtor  would  have  upon  the  final  settle- 
ment of  all  the  accounts  of  the  partnership,"  such  interest  is  not 
an  undivided  interest  in  any  particular  portion  of  the  partner- 
ship property,  to  be  reduced  into  possession  to  the  exclusion  of 

^'^  1  Story  Commentaries  on  Equity  also   Church  v.   Knox,  2  Conn.   514; 

Jurisprudence,  626;  Gow  Partnership  Commercial     Bank     v.     Wilkins,     2 

(246),  271;    Button  v.   Morrison,    17  Greenl.    (Maine)    28;  Gibson  v.   Ste- 

Ves.   193,   1   Rose,  213,   11   Rev.  Rep.  vens,  7  N.  H.  352;  Scrugham  v.  Car- 

56;  Waters  v.  Taylor,  2  Ves.  &  Bea.  tcr,    12   Wend.    (N.   H.)    131;    Crane 

299,  15  Ves.  10,  13  Rev.  Rep.  91.     See  v.  French,  1  Wend.  (N.  Y.)  311. 

23 — Row.  CN  Partn. — Vol.  2 


§831  LAW    OF    PARTNERSHIP  1160 

the  other  partners,  or  sold  to  others/^  One  partner  has  no  right 
to  convert  the  partnership  goods  to  his  own  purposes*®  although 
there  may  be  objections  to  sustaining  an  action  at  law  if  he  does 
so.*^  The  officer  levying  such  execution  has  no  right  to  offer 
for  sale  more  than  the  partner's  interest  in  firm  property,  that  is, 
his  share  after  firm  debts  are  paid  and  partnership  accounts  set- 
tled. And  an  officer  may  be  liable  in  trespass  if  he  offers  to  sell 
the  whole  property  on  such  execution.^*'  As  said  in  one  case:^^ 
"It  can  not  be  doubted  that  the  interest  of  one  partner,  in  the 
goods  or  property  of  the  firm,  may  be  levied  upon  and  sold  on 
execution  for  his  individual  debt.  As  incidental  to  the  right  of 
sale,  the  officer  may,  without  interfering  with  the  rights  of  the 
other  partners,  take  possession  of  the  entire  interest  seized,  and, 
on  sale,  deliver  it  to  the  purchaser,  who  takes  subject  to  the 
rights  of  the  other  partners.  The  power  of  the  sheriff  to  take 
possession  of  the  entire  partnership  property  is  merely  incidental 
to  the  right  to  reach  the  interest  of  the  debtor.  The  sheriff,  un- 
der some  circumstances  at  least,  may,  for  his  own  security  and 
in  order  to  protect  his  levy  temporarily  pending  the  sale,  take 
possession  of  the  entire  property  of  the  partnership,  and  after 
the  sale  of  the  debtor's  interest  so  levied  upon,  redeliver  the 
whole  of  the  property,  in  which  he  has  sold  the  interest  of  the 
execution  defendant,  to  the  other  partners  and  the  purchaser.'^" 

47  Young  V.  Keighly,  15  Ves.  557.  Maine  162,  83  Am.  Dec.  500 ;  Walsh 

48Dobv.  Halsey,  16  Johns.  (N.  Y.)  v.    Adams,    3    Denio    (N.    Y.)     125; 

34,   8    Am.    Dec.   293 ;    Livingston    v.  Michalover   v.    Moses,    19   App.   Div. 

Roosevelt,  4  Johns.    (N.   Y.)    251,  4  343,  46  N.  Y.  S.  456;  Zoller  v.  Grant, 

Am.   Dec.  273;   Gram  v.   Cadwell,   5  3  N.  Y.  S.  539,  19  N.  Y.  St.  311,  24 

Cow.  (N.  Y.)  489;  Shirreff  v.  Wilks,  Jones  &   S.  279;   Deal  v.   Bogue,  20 

1  East  48,  5  Rev.  Rep.  509.  Pa.  St.  228,  57  Am.  Dec.  702 ;  Bogue 

49  Jones  V.  Yates,  9  Barn.  &  Cress,  v.  Steel,  7  Leg.  Int.  (Pa.)  162,  1 
532,  4  M.  &.  Ry.  613,  7  L.  J.  (O.  S.)  Phila.  90;  Randall  v.  Johnson,  13  R. 
K.  B.  217.  I.  338;  Fraser  v.  Kershaw,  2  Jur.  (N. 

50  Daniels  v.  Owen,  70  Ala.  297;  S.)  880,  4  W.  R.  431,  25  L.  J.  Ch. 
Jolley  v.  Hardeman,  111  Ga.  749,  36  445,  2  Kay  &  J.  496. 

S.    E.    952 ;    Williams    v.    Lewis,    115  ^i  Ferguson    v.    Day,    6    Ind.    App. 

Ind.  45,  17  N.  E.  262,  7  Am.  St.  403;  138,  33  N.  E.  213. 

Ferguson   v.    Day,   6   Ind.   App.    138,  ^2  Siting  Williams  v.  Lewis,  115  Ind. 

33  N.  E.  213  ;   Spalding  v.  Black,  22  45, 17  N.  E.  262,  7  Am.  St.  403  ;  Branch 

Kans.     55;     Moore     v.     Pennell,     52  v.    Wiseman,    51    Ind.    1;    Moore    v. 


1161  ACTIONS    GENERALLY  §    831 

The  sheriff  can  not,  in  such  case,  on  execution,  against  one  part- 
ner only,  seize  and  levy  upon  specific  articles  of  partnership  prop- 
erty. The  levy  and  sale  must  be  on  the  interest  of  the  debtor  in 
the  partnership  property.  This  follows  of  necessity  because  the 
partners  have  no  separate  title  in  any  part  of  the  partnership  prop- 
erty.^^  The  sheriff  must  act  in  obedience  to  the  law,  or  he  becomes 
a  trespasser  ab  initio.  It  is  not  enough  to  show  a  judgment  and 
execution  in  justification,  for  it  must  also  be  shown  that  he  pro- 
ceeded in  the  manner  provided  by  law.^*  *  >i:  *  'p|^g  f ^^cts  pre- 
sented in  this  case  not  only  show  that  the  whole  of  the  property 
specifically  described  in  the  complaint,  belonging  to  the  partner- 
ship, was  levied  upon  and  seized  by  the  sheriff  for  the  individual 
debt  of  one  of  the  partners,  but,  in  addition  thereto,  it  appears 
from  the  conclusion  and  judgment  of  the  court  below  that  the 
entire  value  of  the  whole  partnership  property  so  taken  by  the 
sheriff  was  adjudged  to  belong  to  appellee,  as  such  sheriff,  and 
he  was  given  judgment  therefor  in  the  sum  of  six  thousand 
dollars.  The  only  right  of  the  sheriff  in  such  case,  on  a  proper 
levy  on  the  interest  of  the  debtor,  is  merely  incidental  to  reaching 
the  interest  of  the  execution  defendant,  in  the  partnership  prop- 
erty seized  by  him  pursuant  to  such  levy.  The  interest  of  the 
partner  is  subject  to  the  rights  of  the  other  partners,  and  also  to 
the  contingency  that  an  accounting  may  show  that  such  execu- 
tion defendant  has  no  beneficial  or  valuable  interest.  If,  in  such 
cases,  no  steps  are  taken  by  any  of  the  parties  in  interest  to  in- 
voke the  equity  powers  of  the  court  to  adjust  the  partnership 
business  and  to  determine  the  beneficial  interest  of  the  debtor  in 
the  partnership  property,  the  sheriff  may  proceed  to  sell  the  ap- 
parent interest  of  the  execution  defendant  in  the  goods  and  chat- 
tels levied  on.    In  no  event,  however,  can  the  whole  property  of 

Pennell,  52  Maine  162,  83  Am.  Dec.  45, 17  N.  E.  262.  7  Am.  St.  403  ;  Donel- 

500,    and    authorities    cited    in    note;  Ian  v.   Hardy.   57  Ind.   393;   Gillham 

Atkins    V.    Saxton.    11    N.    Y.    195;  v.    Kerone.   45   Mo.   487;   Whigham's 

Nixon  V.  Nash.   12  Ohio  St.  647.  80  Appeal,  63  Pa.   St.   194. 
Am.   Dec.   390,   and   authorities   cited         •''*  Citing   Rutherford    v.    Davis,    95 

in  note.  Ind.    245 ;    Jarratt    v.    Gwathney,    5 

53  Citing  Williams  v.  Lewis,  115  Ind.  Blackf.  (Ind.)  237. 


§831  LAW    OF    PARTNERSHIP  1162 

the  partnership  be  sold  by  the  sheriff  on  execution  against  one 
member  and  the  entire  proceeds  thereof  apphed  to  the  payment  of 
his  individual  debt,  in  utter  disregard  of  the  interests  of  the  part- 
nership and  the  rights  of  the  other  members.  In  such  a  case — 
if  the  levy  is  duly  made  on  the  interest  of  the  execution  defend- 
ant, the  property  seized  'without  interfering  with  the  rights  of 
the  other  partners,'  except  the  annoyance  necessarily  incident  to 
such  procedure,  and  the  proceedings  are  rightfully  conducted  by 
the  sheriff,  in  all  respects,  in  the  manner  calculated  to  reach  the 
interest  of  the  debtor  only,  in  the  partnership  property — the 
sheriff  may  ordinarily  under  such  circumstances,  pending  the 
sale  or  pursuant  to  an  order  of  court,  temporarily  retain  the  pos- 
session of  the  entire  property ;  but  should  the  sale  by  him  of  the 
interest  of  the  debtor  in  the  property  be  prevented,  or  the  property 
be  taken  from  him,  all  that  the  sheriff  or  the  execution  plaintiff 
would,  in  any  event,  be  entitled  tO'  recover  or  receive  against  or 
from  the  parties  taking  the  same,  would  be  the  value  at  the  time 
of  the  levy,  of  the  beneficial  interest  of  the  execution  defendant 
in  such  property  on  accounting  and  settlement  of  the  partnership 
business. "^°  Some  cases  hold  that  the  officer  has  no  right  to 
levy  on  specific  firm  property  for  a  debt  of  a  member  of  the 
firm,  and  if  he  does  so  is  guilty  of  an  illegal  conversion.^'' 
Others  allow  a  levy  on  and  sale  of  a  portion  of  the  partnership 
property  for  an  individual  partner's  debt,^'^  while  others  hold  he 
must  levy  on  the  partner's  entire  Interest. ^^     Some  courts  hold 

55  Citing  Donellan  v.  Hardy,  57  Ind.  Wiles  v.  Maddox,  26  Mo.  11 ;  Walsh 

393.  V.    Adams,    3    Denio    (N.    Y.)    125; 

56Blumenfeld  v.   Seward,  71   Miss.  Phillips  v.  Cook,  24  Wend.    (N,  Y.) 

342,  14  So.  442;   Skavdale  v.  Moyer,  389;    Randall    v.    Johnson,    13    R.    I. 

21  Wash.   10,  56  Pac.  841,  46  L.  R.  338;    Haskins    v.    Everett,    4    Sneed 

A.   481.      See   also    Gerard   v.    Bates,  (Tenn.)    531. 

124  111.  150,  16  N.  E.  258,  7  Am.  St.  ^s  Tait  v.   Murphy,  80  Ala.  440,   2 

350;  Williams  v.  Lewis,  115  Ind.  45,  So.    317;    Daniel   v.    Owens,    70   Ala. 

17  N.   E.  262,  7  Am.   St.  403;  Levy  297;  Weber  v.  Hertz,  188  111.  68,  58 

V.  Cowan,  27  La.  Ann.  556;  Sanborn  N.   E.  676;    Swan  v.   Gilbert,  67   111. 

v.  Royce,   132  Mass.  594.  App.    236;    Levy    v.    Cowan,    27    La. 

s^Hershfield    v.    Claflin,    25    Kans.  Ann.  556;   Pittman  v.  Robicheau,   14 

166,  2,1  Am.  Rep.  237;  Fogg  v.  Law-  La.   Ann.    108;    Alexander   v.    Burns, 

ry,   68    Maine   78,   28   Am.    Rep.    19;  6    La.    Ann.    704;    Ernest    v.    Wood- 


1163  ACTIONS    GENERALLY  §    831 

he  may  levy  only  on  such  part  of  the  partner's  interest  as  is 
necessary  to  satisfy  the  execution,  or  is  within  his  reach/"  In 
levying  on  jEirm  property  on  execution  on  a  judgment  against 
one  partner,  ordinarily  the  officer  takes  possession  of  the  firm 
property. *"*  It  was  said  in  one  case  :''^  **The  share  of  one  of  sev- 
eral copartners  in  the  goods  of  the  firm  may  be  attached  and 
sold  on  execution  for  his  individual  debt;  and  as  incidental  to 
this  right,  the  officer  may  take  possession  of  the  goods  seized, 
and  deliver  the  whole  to  the  purchaser.  But  if  he  sells  the 
entire  property  in  the  goods,  it  is  such  an  abuse  of  his  legal  au- 
thority as  will  make  him  liable  as  a  trespasser  ab  initio;  and  an 
action  may  be  maintained  against  him  in  the  name  of  all  the 
members  of  the  firm.  With  respect  to  such  members  of  the  firm 
as  are  not  parties  to  the  execution,  he  is  a  trespasser,  because 
he  has  sold  their  share  of  the  property  to  pay  the  debt  of  others, 
without  any  precept  or  authority  in  law  authorizing  him  so  to 
do ;  and  with  respect  to  the  debtors  themselves,  because  he  has 
sold  their  shares  jointly  with  the  shares  of  others,  and  thereby 
rendered  it  impossible  to  determine  what  proportion  of  the  pur- 
chase-money belongs  to  them,  and  how  much  of  it  ought  to  be 
indorsed  on  the  execution,  and  because  it  is  their  right  to  have 
their  shares  sold  separately,  to  the  end  that  they  may  not  only 
know  the  precise  amount  for  Avhich  they  are  sold,  but  because 
the  sale  of  a  larger  amount  of  property  in  bulk  may  injuriously 
affect  the  price  by  limiting  the  number  of  bidders.     Many  per- 

worth,   124  Mich.   1,  82   N.  W.  661;  Cal.  617;   Davis  v.  White,   1   Houst 

Hutchinson  v.  Dubois,  45  Mich.   143,  (Del.)    228;    White  v.  Jones,   38   111. 

7   N.   W.   714;    Sirrine  v.   Briggs,   31  159;  Newhall  v.  Buckingham,   14  111. 

Mich.  443 ;  Blumenfeld  v.  Seward,  71  405 ;    Broadnax   v.   Thomason,    1    La. 

Miss.    342,    14    So.    442;    Atwood    v.  Ann.    382;    Wickham    v.    Davis,    24 

Meredith,  V  Miss.  635.  Minn.   167;   Barrett  v.   McKenzie,  24 

^9  Phillips  V.   Cook,  24  Wend.    (N.  Minn.  20;   Lester  v.  Givens,  74   Mo. 

Y.)   389;  Acher  v.  Burrall,  23  Wend.  App.  395;  Carillon  v.  Thomas,  6  Mo. 

(N.  Y.)   606,  35  Am.  Dec.  582.  App.    574;    Read    v.    McLanahan,    47 

60  United     States     v.     Williams,     4  N.    Y.    Super.    Ct.   275;    Cogswell    v. 

McLean    (U.  S.)   236,  Fed.  Cas.  No.  Wilson,   17  Ore.  31,  21  Pac.  388. 

16719 ;    Andrews    v.    Keith,    34    Ala.  ci  Moore  v.  Pennell,  52  Maine  162, 

722;   Harris   v.   Phillips,   49  Ark.   58,  83  Am.  Dec.  500. 
4   S.   W.    196;    Clark  v.    Cushing,   52 


§    832  LAW    OF    PARTNERSHIP  1164 

sons  might  have  the  abihty  and  be  wilhng  to  purchase  the  debtor's 
share,  when  they  could  not  purchase  a  larger  amount.  Ordi- 
narily, we  should  not  expect  the  price  of  the  debtor's  share  to 
be  injuriously  affected  by  selling  the  entire  property;  but  it  is 
sufficient  to  protect  him  against  such  a  sale,  to  know  that  such 
might  be  the  result ;  that  cases  might  occur  in  which  such  a  sale 
would  cause  his  share  to  sell  for  less  than  if  it  were  sold  sepa- 
rately. Many  other  reasons  suggest  themselves  why  the  law 
ought  not  to  sanction  such  a  proceeding,  but  those  already  named 
are  deemed  sufficient  to  condemn  it.  Such  a  sale  being  illegal, 
and  rendering  the  officer  a  trespasser  ab  initio,  the  action  may 
properly  be  brought  in  the  name  of  all  the  partners,  and  they 
will  be  entitled  to  recover  the  full  value  of  the  goods  sold,  leav- 
ing the  judgment,  to  satisfy  which  the  property  was  sold,  in  no 
part  satisfied."  In  some  states  the  manner  of  such  levy  is  gov- 
erned by  statute.*'^ 

§  832.  Interest  taken  by  purchaser  upon  sale  of  partner- 
ship property  for  individual  partner's  debt. — The  purchaser 
at  an  execution  sale  of  one  partner's  interest  in  the  firm  assets 
to  satisfy  his  individual  debt,  takes  nothing  if  the  firm  is  insolv- 
ent.*^^ "It  is,  no  doubt,  a  well-established  principle  of  law,  that 
partnership  stock  and  property  consisting  of  personal  estate,  must 
first  be  applied  to  the  payment  of  partnership  debts,  and  there- 

62  Nussbaum  v.  Connor,  94  Ga.  530,  McLean  (U.  S.)  236,  Fed.  Cas.  No. 
21  S.  E.  709;  Waxelbaum  v.  Connor,  16719;  Rainey  v.  Nance,  54  111.  29; 
94  Ga.  529,  19  S.  E.  805 ;  Aultman  Chandler  v.  Lincoln,  52  111.  74 ;  Peck 
V.  Fuller,  53  Iowa  60,  4  N.  W.  809;  v.  Fisher,  7  Cush.  (Mass.)  386; 
Richards  v.  Haines,  30  Iowa  574;  Lane  v.  Lanfest,  40  Minn.  375,  42 
Aldrich  v.  Wallace,  8  Dana  (Ky.)  N.  W.  84;  Williams  v.  Gage,  49 
287,  33  Am.  Dec.  495;  Crane  v.  Miss.  777;  Wiles  v.  Maddox,  26  Mo 
Cranitch,  3  Misc.  (N.  Y.)  557,  52  77;  Atwood  v.  Impson,  20  N.  J.  Eq 
N.  Y.  St.  515,  23  N.  Y.  S.  320;  150;  Staats  v.  Bristow,  73  N.  Y 
Dengler's  Appeal,  125  Pa.  St.  12,  17  264 ;  Martin  v.  Wagener,  1  Thomps 
Atl.  184;  Adoue  v.  Wettermark,  36  &  C.  (N.  Y.)  509 ;  Willett  v.  Stringer 
Tex.  Civ.  App.  585,  82  S.  W.  797;  17  Abb.  Pr.  (N.  Y.)  152;  Walsh  v 
Radford  Grocery  Co.  V.  Owens  (Tex.  Adams,  3  Den.  (N.  Y.)  125;  La- 
Civ.  App.),  161  S.  W.  911;  Brown  tham  v.  Simmons,  48  N.  Car.  27 
V.  Hutchinson,  2  Q.  B.  126.  Price  v.  Hunt,  33  N.  Car.  42 ;  Foster 

63  United    States    v.    Williams,    14  v.    Barnes,   81    Pa.    St.   377;   Rundall 


1165  ACTIONS    GENERALLY  §    832 

fore  that  an  attachment  of  such  partnership  property  for  a  part- 
nership debt,  though  subsequent  in  time,  will  take  precedence  of 
a  prior  attachment  of  the  same  property  for  the  debt  of  one  of 
the  partners ;  it  being  considered  that  the  real  and  actual  interest 
of  each  partner  in  such  partnership  stock  is  the  net  balance, 
which  will  be  coming  to  him  after  paymicnt  of  all  the  partnership 
debts  and  a  just  settlement  of  the  account  between  himself  and 
his  partner.'"^*  Such  purchaser  has  the  right  to  an  accounting,*'^ 
or  bill  in  equity,^^  in  order  to  ascertain  the  extent  of  his  pur- 
chase. In  a  case  where  there  was  a  levy  on  the  property  of  a 
joint  stock  company  for  the  debt  of  one  stockholder,  the  court 
said  i^''  "We  do  not  deny  but  that  the  execution  may  be  levied 
on  the  joint  property,  with  a  view  of  reaching  the  undivided 
interest  of  the  judgment  debtors,  but  in  such  case  the  levy  is  not 
upon  his  individual  share,  as  if  there  were  no  debts  of  the  part- 
nership, of  lien  upon  the  same  for  the  balance  due  to  the  other 
partners.  It  is  upon  the  interest  only  of  the  judgment  debtor, 
if  any  in  the  property  after  the  payment  of  all  the  partnership 
debts  and  other  charges  thereon.  The  purchaser  takes  the  same 
interest  in  the  property  which  the  judgment  debtor  would  have 
upon  a  final  adjustment  of  all  the  accounts  of  the  partnership. 
It  is  not  only  an  undivided,  but  an  unascertained  interest,  and 

V.  Stedge,  2  Pa.  Co.  Ct.  608;  Bogue  Y.    St.    818;    Phillips    v.    Cook,    24 

V.    Steel,    7    Leg.    Int.    (Pa.)    162,    1  Wend.     (N.    Y.)     389;    Cogswell    v. 

Phila.   90;    Boro   v.   Harris,    13    Lea  Wilson,    17    Ore.    31,    21    Pac.    288; 

(Tenn.)    36;    Haskins   v.    Everett,   4  Lothrop    v.    Wightman,    41    Pa.    St. 

Sneed    (Tenn.)    531;    Carter   v.    Ro-  297;    Gregory's    Appeal,    4    Pennyp. 

land,    53    Tex.    540;    McCutchon    v.  (Pa.)  221 ;  Knight  v.  Ogden,  2  Tenn. 

Davis    (Tex.),   8   S.   W.    123;    Lewis  Ch.      473;      Johnson      v.      Wingfield 

V.   Alexander    (Tex.   Civ.   App.),   31  (Tenn.  Ch.  App.),  42  S.  W.  203. 

S.    W.    414;    Perrens    v.    Johnson,    3  ^g  jJcQ^ic     Bank     v.     Harvej^     16 

Jur.   (N.  S.)  975,  3  Smale  &  G.  419,  Iowa   141;   Arnold  v.   Hagerman,   45 

65  Eng.  Reprint  720.  N.   J.   Eq.    186,    17   Atl.   93,    14   Am. 

64  Peck  V.  Fisher,  7  Cush.  (Mass.)  St.   712;    Hubble   v.    Perrin,    3    Ohio 
386.  287;  Cogswell  v.  Wilson,  17  Ore.  31, 

65  Claggett   V.    Kilbourne,    1    Black  21  Pac.  388 ;  Sterling  v.  Brightbill,  5 
(U.  S.)    346,   17  L.  ed.  213;  Barrett  Watts   (Pa.)  229,  30  Am.  Dec.  304. 
v.    McKenzie,   24   Minn.   20 ;    Day  v.  ^'^  Claggett    v.    Kilbourne,    1    Black 
McQuillan,    13    Minn.    205 ;    Sterrett  (U.  S.)  346,  17  L.  ed.  213. 

v.   Buffalo   Third   Nat.   Bank,   10   N. 


§    832  LAW    OF    PARTNERSHIP  1166 

the  purchaser  is  substituted  to  the  rights  and  interests  of  the  judg- 
ment debtor  in  the  property  sold.  Neither  does  the  sale  transfer 
any  part  of  the  joint  property  to  the  purchaser,  so  as  to  entitle 
him  to  take  it  from  the  other  partners ;  for  that  would  be  to  place 
him  in  a  better  situation  than  the  partner  (judgment  debtor) 
himself.  The  remedy  of  the  purchaser  is  to  go  into  equity  and 
call  for  an  account,  and  thus  entitle  himself  to  the  interest  of 
the  judgment  debtor,  if  any,  after  the  settlement  of  the  partner- 
ship liabilities.  The  fact  that  the  property  in  this  case  consists 
of  real  estate,  does  not  change  the  principles  of  law  governing 
the  ultimate  rights  and  interests  concerned.  The  real  property 
belonging  to  the  partnership  is  treated  in  equity  as  part  of  the 
partnership  fund,  and  is  disposed  of  and  distributed  the  same 
as  the  personal  assets.  In  this  case  the  legal  title  is  in  the  trus- 
tees, who  are  bound  to  account  to  the  stockholders,  the  cestuis 
que  trust,  according  to  their  respective  shares,  after  all  debts  of 
the  association  have  been  discharged.  The  equity  of  the  judg- 
ment creditor  is  the  interest  in  the  land,  after  a  sufficient  por- 
tion of  it  has  been  disposed  of  for  this  purpose."  As  one  court 
has  said  f^  *Tt  is  clear,  we  think,  upon  principle  and  upon 
authority,  that  the  levying  creditor,  in  the  case  at  bar,  having 
acquired  a  lien  by  the  seizure,  in  execution,  of  his  debtor's  inter- 
est in  the  tangible  property  of  the  firm,  might  properly  file  his 
petition  against  the  other  partner  for  an  account  of  the  partner- 
ship, and  the  ascertainment  of  his  debtor's  interest  in  the  prop- 
erty seized,  before  a  sale  upon  execution.  The  rule  in  Ohio,  at 
least,  seems  therefore  to  be,  that  upon  such  levy  being  made,  it 
is  the  right  of  the  creditor  and  of  the  other  copartners,  should 
either  desire,  to  invoke  the  equity  powers  of  the  court  to  adjust 
the  partnership  business  and  to  stay  proceedings  under  the  exe- 
cution, till  the  beneficial  interest  of  the  debtor  partner  in  the 
goods  seized  has  been  ascertained.  But  that  if  the  creditor  does 
not  so  elect,  and  no  such  steps  are  taken  by  the  other  partners, 
the  officer  executing  the  writ  must  sell  the  apparent  interest  of 

68  Nixon  V.  Nash,  12  Ohio  St.  647, 
80  Am.  Dec.  390. 


1167  ACTIONS    GENERALLY  §    832 

the  debtor  in  the  chattels  levied  on,  and  upon  such  sale,  redeliver 
the  same  to  the  other  partners  and  the  purchaser,  who  will  then 
be  owners  in  common,  subject  to  a  lien  in  favor  of  the  other 
partners  and  the  joint  creditors,  upon  the  interest  of  the  debtor 
partner  in  the  hands  of  the  purchaser  for  any  balance  due  upon 
final  adjustment  of  the  partnership  account."  At  an  execution 
sale  of  the  separate  property  of  a  partner  to  satisfy  a  judgment 
against  the  firm  the  purchaser  takes  full  title  to  the  property 
sold,^®  subject  to  prior  liens  of  executions  issued  on  individual 
debts  of  partners, ^°  unless  it  is  otherwise  provided  by  statute.''^ 
But  such  sale  of  an  individual  partner's  property  under  an  execu- 
tion against  the  firm  is  void  if  the  individual  partner  was  not 
served  with  summons  and  did  not  appear  in  the  action."^^  It  was 
said  by  the  Illinois  Supreme  Court :"  "From  these  authorities, 
and  on  principle,  it  appears  that  an  officer  having  executions 
against  an  insolvent  partnership,  and  also  against  individual 
members  of  the  firm,  is  required  to  make  application  of  the 
proceeds  of  firm  property  to  the  payment  of  the  executions 
against  the  firm,  even  though  such  executions  are  junior  to  those 

69Blackman       v.       Moore-Handley  47  Pac.  391;   Heins  v.  Tamblyn,   110 

Hardware  Co.,   106  Ala.  458,   17  So.  Iowa  478,   81    N.   W.   698;   Jones   v. 

629;   Haralson   v.   Campbell,  63   Ala.  Jones,    13    Iowa   276;    Davis    v.    Bu- 

278 ;  Conroy  v.  Woods,  13  Cal.  626,  12)  chanan,    12    Iowa    575 ;    Lewinson    v. 

Am.  Dec.  605;  Parler  v.  Johnson,  81  Albuquerque  First  Nat.  Bank,   11  N. 

Ga.254,7  S.  E.  317;  Cleghorn  v.  Co-  Mex.  510;  Souls  v.  Cornell,  15  App. 

lumbus  Ins.  Bank,  9  Ga.  319;  Gordon  Div.    (N.  Y.)    161;  Kneib  v.  Graves, 

V.  Kennedy,  36  Iowa   167;   Metropo-  12  Pa.  St.  104;  Tassey  v.  Church,  6 

lis   Nat.   Bank  v.   Sprague,   20   N.  J.  Watts  &  S.    (Pa.)   465,  40  Am.  Dec. 

Eq.  13 ;   Randolph  v.  Daly,   16  N.  J.  575 ;  Clark  v.  Cullen,  9  Q.  B.  D.  355, 

Eq.   313;    Commonwealth   v.    Rogers,  47   L.   T.   307;    Alabama   Rev.    Code, 

Brightly  N.  P.  450,  Clark  252 ;  May-  §    2538 ;    Colorado    Code    Civ.    Proc, 

hew  v.  Herrick,  7  C.  B.  229,  18  L.  J.,  §  235 ;  Iowa  Code  1873,  §  3102 ;  New 

C.    P.    179,    13    Jur.    1078.      Compare  Mexico    Comp.    Laws,    §    2943;    New 

Bowker   v.    Smith,   48    N.    H.    Ill,   2  York  Civ.  Proc,  §§  1934,  1935. 

Am.  Rep.  189.  "First    Nat.    Bank    v.    Greig,    43 

70  In  re  Sandusky,  Fed.  Cas.  No.  Fla.  412,  31  So.  239 ;  Clayton  v.  Rob- 
12308 ;  Cleghorn  v.  Columbus  Ins.  erts,  84  Ga.  149,  10  S.  E.  621 ;  Strong 
Bank,  9  Ga.  319;  Kuhne  v.  Law,  14  v.  Hines,  35  Miss.  201. 

Rich.   (S.  Car.)   18.  "Swan  v.  Gilbert,   175  111.  204,  51 

71  McCoy  V.  Watson,  51   Ala.  466;     N.  E.  604,  67  Am.  St.  208. 
Sawyer  v.  Armstrong,  23   Colo.  287, 


§    833  LAW    OF    PARTNERSHIP  1168 

against  the  individual  members  of  the  firm.  The  officer,  acting 
as  agent  of  a  mortgagee  having  a  chattel  mortgage  for  collection 
against  a  firm,  may,  when  an  execution  against  an  individual 
member  of  the  firm  comes  to  his  hands,  apply  the  same  prin- 
ciple without  being  liable  for  a  false  return.  It  is  apparent, 
therefore,  that  Cave,  the  defendant  in  the  execution,  had  no  prop- 
erty subject  to  the  lien  of  this  execution,  for  the  only  interest 
an  individual  has  in  firm  property  is  the  surplus  after  the  part- 
nership debts  are  paid  and  the  accounts  between  the  partners 
adjusted."  The  creditor  in  favor  of  whose  execution  the  sale 
is  made,  is  entitled  to  the  proceeds.^*  Generally,  executions  in 
favor  of  firm  creditors  must  be  satisfied  from  the  proceeds  of 
sale  under  several  executions,  some  of  which  were  levied  by  firm 
creditors  and  some  by  individual  creditors,  before  any  application 
can  be  made  to  the  executions  of  individual  creditors,  irrespective 
of  priority  in  time  of  judgment  or  levy/^  A  purchaser  under 
an  execution  issued  on  a  judgment  against  all  the  partners,  though 
not  on  a  firm  debt,  acquires,  it  is  held,  a  right  to  all  the  firm 
assets. "° 

§  833.  Levy  of  execution  on  firm  property  for  individual 
debt — Uniform  Partnership  Act. — The  Uniform  Partnership 
Act  by  providing  that  a  partner's  share  is  not  subject  to  execu- 
tion or  attachment  except  for  a  firm  debt,  and  providing  for  the 
issuance  of  a  charging  order  against  such  share,  on  application 

7-1  Thompson  v.   Frist,   15   Md.  24;  149;  Cooper's  Appeal,  26  Pa.  St.  262; 

Fenton  v.  Folger,  21  Wend.  676  (N.  Snodgrass'   Appeal,    13    Pa.    St.   471; 

Y.)  ;  Vandike's  Appeal,  57  Pa.  St.  9.  Ov^erholt's    Appeal,    12    Pa.    St.    222, 

Except   where   a   court   of    equity   is  51  Am.  Dec.  598;  Crawford  v.  Baum, 

authorized  to   interfere  and  marshal  12   Rich.    (S.   Car.)    75;    Blankenship 

assets;  Kelly's  Appeal,  16  Pa.  St.  59;  v.  Wartelsky   (Tex.),  6  S.  W.  140. 

Doner    v.     Stauffer,     1     Pen.    &    W.  ^e  Rouse  v.  Wallace,  10  Colo.  App. 

(Pa.)    198,  21  Am.  Dec.  370.  93,  50  Pac.  366;    Davis  v.   Delaware 

"  Inbusch  V.  Farwell,  1  Black   (U.  &c.   Canal  Co.,   109  N.  Y.  47,   15   N. 

S.)    566,   17  L.  ed.   188;   Commercial  E.  873,  4  Am.  St.  418;   Saunders  v. 

Bank  v.  Mitchell,  58  Cal.  42 ;  Louden  Reilly,   105   N.  Y.   12,   12  N.   E.   170, 

V.   Ball,   93   Ind.  232;    Ryder  v.   Gil-  59    Am.    Rep.    472.      See    Poswa    v. 

bert,  16  Hun  (N.  Y.)  163;  Coover's  Jones,  21  Cal.  App.  664,  132  Pac.  629. 
Appeal,   29   Pa.    St.  9,   70  Am.    Dec 


1169  ACTIONS    GENERALLY  §    834 

to  a  competent  court,  has  greatly  simplified  the  complex  and  per- 
plexing rules  now  in  force  as  to  the  rights  against  firm  property 
of  an  individual  creditor  of  a  partner/^  In  this  respect  it  clari- 
fies the  rules  of  partnership  law  perhaps  more  than  in  any  other, 
and  the  procedure  under  it  will  relieve  partners,  officers,  attor- 
neys and  courts  from  many  difficult  situations  which  now  arise. 

§  834.  Actions  after  a  change  in  membership. — The  gen- 
eral rule  is  that  dissolution  of  a  firm  does  not  change  the  rights 
and  liabilities  of  the  partners  as  to  third  persons,  and  therefore 
the  general  rules  as  to  partners  as  parties  to  actions  apply  after 
dissolution  as  well  as  before/^  As  said  in  one  case:'^''  "The 
defendant  made  a  special  contract  with  the  plaintiffs  as  copartners 
to  do  work  for  him.  In  any  suit  to  enforce  this  contract  or  any 
liability  growing  out  of  it,  both  partners  must  be  joined  as  plain- 
tiffs. The  defendant  contracted  with  them  jointly,  not  with 
either  of  them  separately.  The  dissolution  of  the  partnership 
before  the  work  was  completed  had  no  effect  on  the  rights  or 
liability  of  the  defendant.  It  did  not  authorize  the  plaintiffs  to 
sever  the  contract  and  sue  the  defendant  separately.  They  must 
still  sue  jointly."  The  admission  of  a  new  member  is  the  dissolu- 
tion of  the  firm,  and  at  common  law,  it  was  the  rule  that  an 
action  on  a  claim  of  the  old  firm  should  be  brought  in  the  names 
of  the  members  of  the  old  firm,  as  if  no  change  had  occurred.^*' 

"See  ante  §  821.  41  Mich.  529,  2  N,  W.  670;  Smith  v. 

78Regester  v.  Dodge,  6  Fed.  6,   19  Shelden,   35    Mich.   42,   24  Am.   Rep. 

Blatchf.  79,  61  How.  Pr.  107;  How-  529;    Holmes    v.    Shands,    26    Miss. 

ell  V.  Reynolds,  12  Ala.  128 ;  Gooden  639 ;  Sanders  v.  Clififord,  72  Mo.  App. 

V.    Morrow,    8    Ala.    486;    Matthews  548;   Wright  v.  Williamson,  3  N.  J. 

V.  Paine,  47  Ark.  54,  14  S.  W.  463;  L.  532;  Hill  v.  Packard,  5  Wend.  (N. 

Molen  V.  Orr,  44  Ark.  486;  Thomp-  Y.)  375. 

son  V.  McDonald,  84  Ga.  5,  10  S.  E.  79  pish  v.  Gates,  133  Mass.  441. 

448;  Helm  v.  O'Rourke,  46  La.  Ann.  so  Crews  v.  Yowell,  Id  S.  W.   127, 

178,  15  So.  400;  Gannett  v.  Cunning-  25  Ky.  L.  598;  McKniglit  v.  Lowitz, 

ham,   34  Maine  56;   Hyde  v.   Moxie  176     Mich.    452,     142     N.     W.     769; 

Nerve  Food   Co.,    160   Mass.   559,   Zd  Brown  v.  Haven,  Z1  Vt.  439;  Wood 

N.  E.  585 ;  Page  v.  Wolcott,  15  Gray  v.   Rutland  &c.   Mut.   F.   Ins.  Co.,   31 

(Mass.)     536;     Peters    v.     Davis,     7  Vt.    552;    Brougham    v.    Balfour,    3 

Mass.   257 ;    Busfield   v.   Wheeler,    14  U.  C.  C.  P.  72. 
Allen    (Mass.)    139;   Hayes  v.   Knox, 


§    834  LAW    OF    PARTNERSHIP  1170 

The  general  rule  now,  however,  under  statutes  permitting  an 
action  to  be  brought  in  the  name  of  the  real  party  in  interest, 
or  by  the  assignee  of  a  chose  in  action,  is  that  actions  to  enforce 
the  claims  of  a  partnership  arising  before  a  change  in  member- 
ship may  be  brought  in  the  names  of  the  new  firm,  which  has 
acquired  the  firm  assets,  or  of  the  continuing  partner  who  has 
purchased  the  interest  of  his  copartner,^^  although  this  rule  does 
not  apply  in  an  action  to  cancel  an  assignment  of  a  partner's 
interest.^^  The  general  rule  at  common  law  was  that  a  retiring 
partner  should  be  made  a  party  to  any  action  in  which  he  would 
have  been  a  necessary  party  if  he  had  not  retired/'*^  In  an  equi- 
table action  against  a  retiring  partner  and  the  members  of  the 
new  firm,  a  creditor  of  the  old  firm  may  enforce  the  payment 
of  his  debt.^'*  One,  any,  or  all  of  the  partners  may  be  sued  after 
the  dissolution  of  the  partnership  for  a  tort  which  was  com- 
mitted by  a  servant  of  the  firm  in  the  course  of  his  employment. ^^ 
Any  partner  may  sue  after  dissolution  to  collect  debts  due  the 
firm.®°  After  dissolution  it  is  necessary  to  join  all  partners  in 
suing  for  breach  of  a  firm  contract  and  one  partner  can  not  sue 
alone  unless  he  has  been  substituted  as  purchaser  of  the  goods 
sold  to  the  firm  under  the  contract.^'^  If  he  has  been  so  substi- 
tuted he  may  sue  in  his  own  name  making  the  copartners  defend- 
ants.^^ If  service  on  one  member  of  the  firm  would  have  been 
sufficient  in  an  action  against  it  before  dissolution,  it  is  sufficient 
afterward. ^°    An  assignee  of  a  partnership  who  has,  with  the 

81  Walker    v.    Steele,    9    Colo.    388,         S4  gheppard    v.    Bridges,     137    Ga. 
12  Pac.  423;  Rector  v.  Duntley  Mfg.    615,  74  S.  E.  245. 

Co.,  189  111.  App.  562 ;  West  v.  Citi-  ^s  Heidenreich  v.   Bremner,  260  111. 

zens'  Ins.  Co.,  27  Ohio  St.  1,  22  Am.  439,  103  N.  E.  275. 

Rep.    294;     Tolhurst    v.     Associated  86  Lord  v.  Downs,   112   Maine  396, 

Portland       Cement       Manufacturers  92  Atl.  327. 

[1903],  A.  C.  414,  72  L.  J.  K.  B.  834,  sr  Moore    v.    Leigh-Head     (Okla.), 

89  L.  T.  Rep.   (N.  S.)    196.  149   Pac.    1129;    Dew  v.   Pearson, '73 

82  Hausling     v.      Rheinfrank,      103  Wash.  602,  132  Pac.  412. 

App.  Div.  517,  93  N.  Y.  S.  121.  «»  Dew  v.   Pearson,   12>  Wash.  602, 

83Regester  v.  Dodge,  6  Fed.  6,  19  132  Pac.  412. 

Blatchf.    (U.    S.)    79,    61    How.    Pr.  s^Nathan  v.  Thomas,  65   Fla.  240, 

107;    Shorter  v.  Hightower,  48  Ala.  58  So.  247. 
526. 


1171  ACTIONS    GENERALLY  §    834 

assent  of  the  other  party  to  an  executory  contract  of  the  firm, 
carried  it  to  completion,  may  sue  on  the  contract  as  assignee.'*'' 
In  enforcing  a  liabiHty  of  the  old  firm,  an  action  may  be  brought 
against  all  the  members  of  such  firm,  notwithstanding  the  fact 
that  the  debts  of  the  firm  have  been  assumed  by  some  of  the  mem- 
bers, or  by  a  new  firm  which  has  succeeded  to  the  old.^^  A  part- 
ner who  has  retired  can  not  escape  liability  on  that  ground,  but 
must  plead  and  prove  that  he  has  been  released  from  liability 
to  the  plaintiff  on  the  obligation  in  suit.^"  It  is  the  general  pre- 
sumption that  those  who  were  partners  when  an  obligation  was 
incurred  by  a  firm  are  proper  parties  defendant  when  action  is 
brought  to  enforce  such  obligation."^  A  partner  who  alleges  that 
he  retired  from  a  firm  before  an  obligation  was  created,  has  the 
burden  of  showing"  notice  of  his  retirement  to  the  plaintiff  who 
was  a  customer  of  the  firm."'^  In  some  jurisdictions  a  firm  cred- 
itor who  is  not  a  party  to  a  contract  of  assumption  of  firm  debts 
by  one  partner  or  a  new  firm,  may  as  a  beneficiary  of  the  contract 
of  assumption  sue  such  partner  or  new  firm.°^     The  holder  of 

90  Milne  V.  Douglass,  17  Fed.  482,  v.  Furstenfeld,  146  Mo.  App.  279, 
5   McCrarj^  401;   Degnan  v.   Nowlin,     129  S.  W.   1028;  Vance  v.  Blair,   18 

5  Indian  Ter.  312,  82  S.  W.  758;  Le-  Ohio  532,  51  Am.  Dec.  467;  Furni- 
jeune  v.  Vanfrey  Planting  &c.  Co.,  ture  Co.  v.  Wynn  (Tex.  Civ.  App.), 
123  La.  871,  49  So.  603;  Dyas  v.  156  S.  W.  340;  Adams  v.  Powers,  82 
Dinkgrave,  IS  La.  Ann.  502,  11  Am.  Va.  612;  Cox  v.  Hubbard,  4  C.  B. 
Dec.  196;  Allston  v.  Contee,  4  Harr.  317,  56  E.  C.  L.  317. 

6  J.    (Md.)   351.  s^Uhl   V.    Bingaman,   78   Ind.    365; 

91  Shorter  v.  Hightower,  48  Ala.  Rodgers-Wade  Furniture  Co.  v. 
526;  Sheppard  v.  Bridges,  137  Ga.  Wynn  (Tex.  Civ.  App.),  156  S.  W. 
615,  74  S.  E.  245;  Dean  v.  McFaul,  340;  Thompson  v.  Harmon  (Tex. 
23   Mo.   1(i;   Gill  v.   Bickel,  10  Tex.  Civ.  App.),  152  S.  W.  1161. 

Civ.  App.  67,  30  S.  W.  919 ;  Ex  parte  ^5  Bessemer  Sav.  Bank  v.  Rosen- 
Gould,  4  Deac.  &  C.  547,  4  L.  J.  baum  Grocery  Co.,  137  Ala.  530,  34 
Bankr.  7,  2  Mont.  &  A.  48.  So.  609 ;  Ringo  v.  Wing,  49  Ark.  457, 

92  Hall  V.  Jones,  56  Ala.  493;  Os-  5  S.  W.  787;  Lehow  v.  Simonton,  3 
born  V.  Evans,  91  Iowa  13,  58  N.  Colo.  346;  Morris  v.  Marqueze,  74 
W.  920;  Akin  v.  VanWirt,  124  App.  Ga.  86;  Dunlap  v.  McNeil,  35  Ind. 
Div.  83,  108  N.  Y.  S.  327.  316;  Doxey  v.  Service,  30  Ind.  App. 

93  Nevens  v.  Bulger,  93  Maine  502,  174,  65  N.  E.  757 ;  Mueller  Lumber 
45  Atl.  503;  Washburn  v.  Walworth,  Co.  v.  McCafifrey,  141  Iowa  ll<^,  113 
133  Mass.  499;  Shaw  v.  McGregory,  N.  W.  903;  Poole  v.  Hintrager,  60 
105    Mass.   96;   Willis    Coal   &c.    Co.  Iowa   180,   14  N.  W.  223;   Gilleu   v. 


§    834  LAW    OF    PARTNERSHIP  1172 

a  note  given  by  a  member  of  a  new  firm  in  the  name  of  the  new 
firm  for  a  debt  of  an  old  firm,  who  knows  this  fact,  must  prove 
the  assumption  of  the  debt  by  the  new  firm  in  order  to  maintain 
an  action  on  the  obhgation  against  the  new  firm.®°  It  is  a  ques- 
tion of  fact  as  to  whether  proper  notice  of  retirement  was 
given  f^  or  whether  the  obhgation  arose  before  dissolution  f^  or 
whether  the  debts  of  the  old  firm  were  assumed  by  the  new 
one  f^  or  whether  one  partner  had  sold  to  the  other  his  interest  in 
the  firm/  An  incoming  partner  sued  on  a  debt  of  the  old  firm,  may 
defend  by  showing  that  he  was  induced  to  assume  the  firm  debts 
of  the  old  firm  by  fraud,  and  that  the  plaintiff  was  a  party  to  such 
fraud.^  Where  injunction  lies  to  restrain  breach  of  a  contract 
which  was  entered  into  by  a  partnership,  which  was  dissolved 
before  the  contract  was  completed,  and  the  firm  business  was 
continued  by  one  partner,  it  may  be  brought  against  all  the 
partners.^  In  an  action  against  the  original  members  of  a  part- 
nership and  the  assignees  of  their  interest,  who,  with  knowl- 
edge of  the  firm's  obligations,  had  assumed  those  of  their  as- 
signors, to  recover  purchase-money  because  of  the  firm's  breach 

Peters,    39   Kans.   489,    18    Pac.   613;  600;  Union   Nat.   Bank  of  Franklin- 
Floyd  V.  Ort,  20  Kans.   162 ;  Taylor  ville  v.  Dean,  154  App.  Div.  869,  139 
V.  Wrather,    155   Ky.  25,    159   S.   W.  N.  Y.  S.  835;  Rodgers-Wade  Furni- 
662;  Francis  v.  Smith,  1  Duv.   (Ky.)  ture  Co.  v.  Wynn   (Tex.  Civ.  App.), 
121;    Reynolds    v.    Lawton,    62    Hun  156   S.   W.   340;    Alaska    Banking   & 
596,    17  N.  Y.   S.  432,  43   N.   Y.   St.  Safe    Deposit    Co.    v.    Simmons,    67 
578;    Kinney    County    Land    Co.    v.  Wash.  673,  122  Pac.  319. 
Cubbage    (Tex.    Civ.    App.),    155    S.  ^^ Union    Nat.    Bank    of    Franklin- 
W.    591 ;    McGibbon    v.    Walsh,    109  ville  v.  Dean,  154  App.  Div.  869,  139 
Wis.   670,    85    N.    W.   409 ;    J.   &   H.  N.  Y.  S.  835 ;  Commercial  Nat.  Bank 
Clasgens  Co.  v.   Silber,  93  Wis.  579,  v.  Brinton    (Utah),   145   Pac.  42. 
67    N.    W.    20;    Thayer   v.    Goss,    91  ^^  American   Seeding  Mach.   Co.  v. 
Wis.  90,  64  N.  W.  312;  Hine  v.  Bed-  Holzbauer,  117  Minn.  278,  135  N.  W. 
dome,  8  U.  C.  C.  P.  381 ;  Stecker  v.  807. 
Ontario  Seed  Co.,  20  Ont.  L.  359.  i  Gaisell  v.  Johnston,  68  Wash.  470, 

96  Waters  v.   Maddox,   7  La.  Ann.  123  Pac.  783. 

644 ;    Scott    City   Bank  v.    Sandusky,  2  Morris  v.   Marqueze,  74  Ga.   86 ; 

51   Mo.  App.  398;   Schultze  v.  Hutt-  Taylor  v.  Wrather,   155   Ky.  25,    159 

linger,  159  App.  Div.  476,  144  N.  Y.  S.  W.  662. 

S.  449.  ^  People's    Brewing    Co.    of    Tren- 

"  Westinghouse    Elec.    &c.    Co.    v.  ton   v.    Levin,   78   N.  J.   Eq.   583,   81 

Hubert,   175   Mich.   568.   141   N.   W.  Atl.  1114. 


1173  ACTIONS    GENERALLY  §    835 

of  its  contracts  for  the  sale  of  land,  it  was  held  that  a  judgment 
that  the  original  partners  recover  over  against  their  assignees 
amounts  which  they  were  required  to  pay  on  the  judgment  was 
proper.*  Where  a  continuing  partner  in  a  law  firm  sued  for 
services  rendered  during  the  partnership,  the  presumption  is  that 
the  claim  belonged  to  the  partnership  and  in  order  to  recover, 
the  plaintiff  should  plead  and  prove  an  assignment  from  the  firm 
to  him.^  "When  upon  a  written  contract  executed  by  two  or 
more  vendors,  copartners,  for  the  future  sale  and  delivery  of 
merchandise  there  is  indorsed  the  undertaking  of  a  stranger  to 
become  surety  for  the  vendee  named  in  the  contract,  an  action 
can  not  be  maintained  upon  such  undertaking  by  a  part  of  the 
vendors  so  named  to  whom  one  or  more  of  them  had,  before 
acceptance  or  the  time  for  performance  assigned  their  interest 
in  the  contract  and  in  the  property  which  was  its  subject,  thereby 
causing  a  dissolution  of  the  copartnership."^  Where  it  does 
not  appear  that  a  new  firm  assumed  the  debts  of  an  old  one,  it 
is  not  a  defense  that  one  of  the  partners  in  both  firms  had  used 
the  funds  of  the  new  firm  to  settle  an  individual  debt  due  the 
plaintiff  by  one  of  the  original  partners.'^ 

§  835.  Action  by  or  against  surviving  partner. — The  gen- 
eral rule  is  that  any  action  at  law  to  enforce  the  rights  of  the 
partnership  after  the  death  of  a  partner  should  be  brought  by 
the  surviving  partner  or  partners  as  plaintiffs,  without  joining 
the  deceased  partner's  representatives  or  heirs,^  unless  it  is  pro- 

4  Kinney  County  Land  Co.  v.  Cub-  Silvey,  144  Ala.  398,  42  So.  62 ;  Cost- 
bage  (Tex.  Civ.  App.),  155  S.  W.  ley  v.  Wilkerson,  49  Ala.  210;  Miller 
591.  V.  Kern  County,  137  Cal.  516,  70  Pac. 

5  McKnight  V.  Lowitz,  176  Mich.  549 ;  Berson  v.  Ewing,  84  Cal.  89,  23 
452,  142  N.  W.  769.  Pac.  1112;  Louisville  &  N.  R.  Co.  v. 

6  Black  V.  Albery,  89  Ohio  240,  106  Morse,  143  Ga.  110.  84  S.  E.  428;  Linn 
N.  E.  38.  V.  Downing,  216  111.  64,  74  N.  E.  729; 

'''Douglas     Naval     Stores     Co.     v.  Moore  v.  Terhune,  161  111.  App.  155; 

Georgia  Fertilizer  &  Oil  Co.,  11  Ga.  Mcintosh    v.    Zaring,    150    Ind.    301, 

App.  130,  74  S.  E.  844.  49    N.    E.    164 ;    Hayes    v.    Johnson, 

8  Pagan  v.  Sparks,  2  Wash.  (C.  C.)  56  Ind.  App.  238,  105  N.  E.  164;  Mc- 

325,  Fed.  Cas.  No.   10659;   Robinson  Candless  v.  Hadden,  9  B.  Mon.  (Ky.) 

V.  Hintrager,  36  Fed.  752;  Evans  v.  186;    Matherson    v.    Wilkinson,    79 


§  835 


LAW    OF    PARTNERSHIP 


1174 


vided  otherwise  by  statute.^  It  was  said  in  one  case  :^°  "If, 
therefore,  the  partnership  actually  existed  between  John  and 
Albert,  the  title  to  the  property  belonging  to  it  still  remained  in 
the  firm,  and  upon  the  death  of  John  the  title  thereto  became 
vested  in  Albert  as  the  surviving  partner.  In  all  matters  con- 
nected with  the  partnership  he  was  the  proper  party  to  sue  and 
to  be  sued.  If  a  partner,  it  became  his  duty  to  close  up  the  part- 
nership matters,  collect  the  assets,  pay  the  debts,  and  then  dis- 
tribute the  fund.  Until  the  partnership  fund  is  ready  for  dis- 
tribution, the  representatives  of  the  deceased  partner  have  no 
right  to  interfere,  so  long  as  the  surviving  partner  is  proceeding 
in  good  faith  to  wind  up  its  affairs.""  It  is  said  that  the  sur- 
vivor should  sue  as  such,  and  not  in  his  own  right.^^   Misjoinder 


Maine  159,  8  Atl.  684;  Clark  v. 
Howe,  23  Maine  560;  Stafford  v. 
Gold,  9  Pick.  (Mass.)  533;  Peters 
V.  Davis,  7  Mass.  257;  Austin  v. 
Walsh,  2  Mass.  401 ;  Walker  v.  Max- 
well, 1  Mass.  104;  Whitman  v.  Bos- 
ton &c.  R.  Co.,  3  Allen  (Mass.) 
.•133 ;  O'Connell  v.  Schwanaback,  76 
Mich.  517,  43  N.  W.  599;  Cragin  v. 
Gardner,  64  Mich.  399,  31  N.  W. 
206;  Teller  v.  Wetherell,  9  Mich. 
464;  Hargadine  v.  Gibbons,  114  Mo. 
561,  21  S.  W.  726;  Boyd  v.  Webster, 
58  N.  H.  336;  Clift  v.  Moses,  112  N. 
Y.  426,  20  N.  E.  392 ;  Daby  v.  Erics- 
son, 45  N.  Y.  786;  Place  v.  Bleyl,  45 
App.  Div.  17,  60  N.  Y.  S.  800;  Car- 
rere  v.  Spofford,  46  How.  Pr.  (N. 
Y.)  294;  Holmes  v.  DeCamp,  1 
Johns.  (N.  Y.)  34,  3  Am.  Dec.  293; 
Felton  V.  Reid,  52  N.  Car.  269 ;  Beach 
V.  Hayward,  10  Ohio  455 ;  Hawkins 
V.  Capron,  17  R.  I.  679,  24  Atl.  466; 
Dial  V.  Agnew,  28  S.  Car.  454,  6  S. 
E.  295 ;  Davis  v.  Ross  (Tenn.  Ch. 
App.),  50  S.  W.  650;  Watson  v. 
Miller,  55  Tex.  289;  Shivel  v.  Greer 
(Tex.  Civ.  App.),  123  S.  W.  207; 
Philadelphia    Fire   Assoc,    v.    Laning 


(Tex.  Civ.  App.),  31  S.  W.  681; 
Campbell  v.  Wallace,  3  Tex.  App.  Civ. 
Cas.,  §  433 ;  Hines  v.  Dean,  1  Tex. 
App.  Civ.  Cas.,  §  690;  Richards  v. 
Heather,  1  B.  &  Aid.  29;  Bolckow 
v.  Foster,  25  Grant  Ch.  (U.  C.)  476. 

^Notrebe  v.  McKinney,  6  Rob. 
(La.)  13;  McCord  v.  West  Felici- 
ana R.  Co.,  1  Rob.  (La.)  519;  Dick 
V.  Dunlap,  1  Rob.  (La.)  54;  Bab- 
cock  v.  Brashear,  19  La.  404;  Con- 
nelly V.  Cheevers,  16  La.  30 ;  Cutler 
V.  Cochran,  13  La.  482 ;  Hoey  v.  Two- 
good,  11  La.  195;  Flower  v.  O'Con- 
nor, 7  La.  194 ;  Crozier  v.  Hodge,  3 
La.  357;  Norris  v.  Ogden,  11  Mart. 
(La.)  455;  Lockhart  v.  Harrell,  6 
La.  Ann.  530;  Latimer  v.  Newman, 
69  Aio.  App.  16;  Phoenix  Ins.  Co.  v. 
Carnahan,  63  Ohio  258,  58  N.  E. 
805. 

"Van  Kleeck  v.  Hammell,  87 
Mich.  599,  24  Am.  St.  182. 

iiBassett  v.  Miller,  39  Mich.  133; 
Merritt  v.  Dickey,  38  Mich.  41 ;  Pfef- 
fer  V.  Steiner,  27  Mich.  537;  Barry 
v.  Briggs,  22  Mich.  201. 

12  Brown  v.  Allen,  Zt)  Iowa  306. 


1175 


ACTIONS    GENERALLY 


835 


of  a  deceased  partner's  administrator  as  a  plaintiff  has  been 
held  to  be  waived  by  failure  to  object.^^  If  the  partnership  arti- 
cles provide  for  the  deceased  partner's  executor  to  take  his  place 
in  the  firm,  it  has  been  held  that  it  is  proper  to  bring  suit  in  the 
name  of  the  surviving  partner  and  the  executor  on  a  contract  of 
the  old  firm/*  It  has  also  been  held  that  in  one  action  a  surviv- 
ing partner  may  recover  demands  due  him  individually  and  de- 
mands due  him  as  surviving  partner.^^  By  the  weight  of 
authority  actions  to  enforce  obligations  of  a  firm,  after  the 
death  of  a  partner,  must  be  brought  against  the  surviving  part- 
ners   alone/°     In   some   jurisdictions    it   is    allowable   to    join 


13  Nicklaus  v.  Dalin,  63  Ind.  87. 

"Woarms  v.  Bauer,  26  N.  Y.  St. 
936,  16  Daly  333,  11  N.  Y.  S.  59. 

i^Blackstone  v.  Ragan,  125  111. 
App.  546;  Murphy  v.  Cochran,  146 
Iowa  443,  123  N.  W.  349. 

i'3  Brigham-Hopkins  Co.  v.  Gross, 
107  Fed,  769 ;  Corson  v.  Berson,  86 
Cal.  433,  25  Pac.  7 ;  West  Coast  Lum- 
ber Co.  V.  Apfield,  86  Cal.  335,  24 
Pac.  993 ;  Doty  v.  Irwin  Phillips  Co., 
15  Colo.  App.  96,  61  Pac.  188;  Ross 
V.  Everett,  12  Ga.  30 ;  Roosvelt  v. 
McDowell,  1  Ga.  489;  Bauer  Grocer 
Co.  V.  McKee  Shoe  Co.,  87  111.  App. 
434;  Horton  v.  Brown,  45  111.  App. 
171 ;  Black  v.  Struthers,  11  Iowa 
459;  Childs  v.  Hyde,  10  Iowa  294, 
77  Am.  Dec.  113;  Postlewait  v. 
Howes,  3  Iowa  365;  Southard  v. 
Lewis,  4  Dana  (Ky.)  148;  Fennell 
V.  Myers,  76  S.  W.  136,  25  Ky.  L. 
589;  McNally  v.  Kerswell,  37  Maine 
550;  Harwood  v.  Jones,  10  Gill  & 
J.  (Md.)  404,  32  Am.  Dec.  180;  Van 
Kleeck  v.  McCabe,  87  Mich.  599,  49 
N.  W.  872,  24  Am.  St.  182;  Man- 
ning V.  Williams,  2  Mich.  105;  Rob- 
ertshaw  v.  Hanway,  52  Miss.  713 ; 
Freeman  v.  Stewart,  41  Miss.  138; 
Robinson  v.  Thompson,  Sm.  &  M.  Ch. 


(Miss.)  454;  Rusling  v.  Brodhead,  55 
N.  J.  Eq.  200,  35  Atl.  841;  Merrill 
V.  Blanchard,  158  N.  Y.  682,  52  N. 
E.  1125;  Richter  v.  Poppenhausen, 
42  N.  Y.  373;  Voorhis  v.  Childs,  17 
N.  Y.  354 ;  Tiffany  v.  Hess,  67  Misc. 
258,  122  N.  Y.  S.  482;  Callanan  v. 
Keeseville,  48  Misc.  476,  95  N.  Y. 
S.  513;  Smith  v.  Ferguson,  33  App. 
Div.  561,  53  N.  Y.  S.  1097;  Goelet  v. 
McKinstry,  1  Johns.  Cas.  (N.  Y.) 
405;  McCaskill  v.  Lancashire,  83  N. 
Car.  393;  White  v.  Dilhnger  (Okla.), 
151  Pac.  194;  Poppleton  v.  Jones, 
42  Ore.  24,  69  Pac.  919;  Johnson  v. 
Weller,  54  Pa.  Super.  Ct.  481;  Mc- 
Claren  v.  Citizens'  Oil  &c.  Co.,  14 
Pa.  Super.  Ct.  167;  Brooks  v. 
Brooks,  12  Heisk.  (Tenn.)  12; 
Saunders  v.  Stallings,  5  Heisk. 
(Tenn.)  65;  Gant  v.  Reed,  24  Tex. 
46,  76  Am.  Dec.  94 ;  Lovelady  v.  Ben- 
nett (Tex.  Civ.  App.),  30  S.  W. 
1124;  Dulaney  v.  Walshe,  3  Tex.  Civ. 
App.  174,  22  S.  W.  131;  Brigham- 
Hopkins  Co.  v.  Gross,  30  Wash.  277, 
70  Pac.  480;  Brigham-Hopkins  Co. 
v.  Gross,  20  Wash.  218,  54  Pac.  1127; 
Barlow  v.  Coggan,  1  Wash.  Terr. 
257 ;  Wilkinson  v.  Henderson,  2  L. 
J.  Ch.  190,  1  Myl.  &  K.  582. 


24 — Row.  CN  P.A.RTN.— Vol.  2 


§    835  LAW    OF    PARTNERSHIP  1176 

as  defendants  the  representatives  of  the  deceased  partner."    A 
partner  who  is  sued  jointly  with  a  personal  representative  of  his 
deceased  partner,  can  not,  it  has  been  held,  after  judgment  object  . 
to  the  misjoinder;  his  remedy  was  by  plea  in  abatement,  or 
amendment  of  the  record  prior  to  judgment.     All  parties  to  a 
partnership  agreement  between  a  surviving  partner  and  repre- 
sentatives of  a  deceased  partner  are  necessary  parties  to  a  suit 
to  set  aside  the  agreement/^    If  an  action  is  pending  against 
a  partnership  at  the  time  of  the  death  of  a  partner,  it  should,  it 
has  been  held,  be  continued  against  the  surviving  members  of 
the  firm."     In  a  Georgia  case,  where  the  articles  of  partnership 
provided  that  the  surviving  partner  could  wind  up  partnership 
affairs,  it  was  held  he  could  sue  for  tort  without  joining  the  per- 
sonal representative  of  a  deceased  partner.^"  '  Where  there  were 
two  surviving  partners,  and  the  administratrix  of  a  deceased 
partner  sued  one  of  them  alleging  that  he  as  executor  of  the 
deceased  partner  had  been  removed  as  executor  because  he  failed 
to  inventory  the  deceased  partner's  interest  as  a  part  of  the  assets 
of  the  estate,  and  that  she  had  been  refused  information  as  to 
the  decedent's  interest  in  the  firm,  and  asked  an  accounting,  both 
surviving  partners  were  necessary  parties,  since  the  action  was 
for  accounting.^^   Advantage  of  the  fact  that  a  surviving  partner 
has  failed  to  file  a  bond  required  by  statute  can  be  taken  only  by 
plea  in  abatement  in  a  suit  brought  by  him.     The  general  issue 
admits  the  capacity  in  which  he  sues.-^    One  sued  as  a  surviving 
partner,  who  established  his  defense  that  he  was  a  stranger  to 
the  firm  and  not  liable  on  firm  notes  is  not  liable  for  the  conver- 

17  Anderson  v.  Pollard,  62  Ga.  46;  is  Smith   v.    Irvin,    108    App.    Div. 

Garrard  v.  Dawson,  49  Ga.  434 ;  In-  218,  95  N.  Y.  S.  731. 

diana   Pottery  Co.   v.   Bates,   14  Ind.  i^  Dineen  v.  Lanning,  92  Nebr.  545, 

8;  Marble  v.  Marble,  4  Ky.  L.  360;  138  N.  W.  759;  White  &  Smith  v.  Dil- 

Johnson  v.  Weller,  54  Pa.  Super.  Ct.  linger    (Okla.),   151   Pac.   194. 

481 ;    Trundle   v.    Edwards.   4    Sneed  20  Louisville  &  N.  R.  Co.  v.  Morse, 

(Tenn.)    572;    Simpson   v.   Young,   2  143  Ga.  110,  84  S.  E.  428. 

Humph.  (Tenn.)  514;  Carter  v.  Cur-  21  O'Brien  v.  O'Brien,  16  Cal.  App. 

rie,  5  Call  (Va.)   158;  Eng.  Partner-  193,  116  Pac.  696. 

ship  Act   (1890),  §  9.  22  Seruta  v.  Surace,  111  Maine  508, 

90  Atl.  328. 


1177  ACTIONS    GENERALLY  §    835 

sion  of  firm  assets  after  the  death  of  the  alleged  partner."  Per- 
sons claiming  under  a  deceased  partner  are  not  limited  to  a  recov- 
ery of  the  selling  price  in  an  action  against  a  surety  of  a  partner- 
ship administrator  to  recover  for  a  sale  of  property  by  the  admin- 
istrator to  himself  as  purchaser.-^  The  action  of  a  probate  court 
in  ordering  that  the  legatees  of  a  deceased  partner  could  use  the 
name  of  a  copartner,  who  was  appointed  the  deceased  partner's 
executor,  in  suing  for  the  decedent's  interest  in  the  firm,  was  held 
improper,  since  unnecessary.-^  Judgment  against  a  surviving 
partner  binds  the  firm  assets  under  his  control  and  may  be  en- 
'forced  by  execution.^^  A  judgment  against  a  surviving  partner 
will  ultimately  affect  the  individual  assets  of  the  deceased  partner, 
and  it  is  irregular  when  based  on  a  submission  to  arbitration 
which  was  not  binding  on  the  deceased  partner.^^  Under  the 
statutes  of  some  jurisdictions,  attachment  will,  under  some  cir- 
cumstances, issue  against  a  surviving  partner  in  an  action  upon 
a  claim  against  the  partnership,  and  the  procedure  in  such 
cases  follows  the  particular  statute.^®  After  the  death  of  a 
partner  the  rule  at  common  law  is  that  a  judgment  in  favor  of  the 
partnership  does  not  become  dormant,  but  execution  may  be  issued 
on  it  by  the  surviving  partner,  who  has  title  to  all  firm  property 
for  the  purpose  of  settling  its  affairs. ^^  The  contrary,  however, 
is  held  in  Kansas. ^°    The  representatives  of  the  deceased  partner 

23Letson  v.  Hall,  1  Ala.  App.  619,  199;    Roach    v.    Brannon,    57    Miss. 

55  So.  944.  490;   State  v.  Mason,  96  Mo.   127,  9 

2*  State  V.  American  Surety  Co.  of  S.  W.  19;  Krueger  v.  Speith,  8  Mont. 

New  York   (Mo.),   177  S.  W.   1074;  482,   20   Pac.   664,    3   L.    R.   A.   291; 

25  In  re   Sloman's   Estate    (Mich.),  Swezey   v.    Brown,    10   Wkly.    Notes 
152  N.  W.  959.  Cas.  (Pa.)  207. 

26  Stampfle  v.  Bush,  71  W.  Va.  659,  29  Linn  v.  Downing,  216  111.  64,  74 
11  S.  E.  283.  N.  E.  729;   Corder  v.  Steiner    (Tex. 

2- Hoffman  v.  Westlecraft,  85  N.  J.  Civ.  App.),  54  S.  W.  277.     See  also 

L.  484,  89  Atl.  1006.  Hargadine  v.   Gibbons,   114  Mo.  561, 

2sFilley  v.    Phelps,    18   Conn.  294;  21  S.  W.  726;  Judy  v.  St.  Louis  Ice 

Sheffield  v.  Key,  14  Ga.  537;  Powell  Mfg.  Co.,  60  Mo.  App.   114;   Ellison 

V.  Hopson,  13  La.  Ann.  626;  Turner  v.   Andrews,    12   Ired.    L.    (N.    Car.) 

V.    CoUins,    1    Mart.    (N.    S.)     (La.)  188;    Dikinson    v.    Bowers,    7    Baxt. 

369;   Berry  v.  Harris,  22  Md.  30,  85  307. 

Am.  Dec.  639 ;  Allis  v.  Day,  13  Minn.  20  Xewhouse  v.  Heilbrun,  74  Kans. 


§    836  LAW    OF    rARTNERSHIP  1178 

have  the  right  in  equity  to  compel  the  appHcation  of  partnership 
property  to  partnership  debts. ^^  "Dissohition  takes  place  by  the 
death  of  a  member,  and  by  bankruptcy  or  insolvency.  In  cases 
falling  within  either  of  these  classes,  the  affairs  of  the  partner- 
ship are  frequently  wound  up,  and  the  effects  and  estates  ad- 
ministered in  courts  of  justice.  Courts  always  have  respect  to 
the  fiduciary  rights  and  duties  which  subsist  between  partners, 
and  in  the  absence  of  special  circumstances  to  vary  the  rule,  will 
apply  partnership  effects  primarily  to  partnership  debts.  This 
because  of  the  trust  which  subsisted  between  the  parties.  Hence 
if  the  death  of  a  member  cause  the  dissolution,  the  representative 
or  succession  to  his  estate  has  the  clear  right  to  have  the  partner- 
ship effects  applied  to  the  payment  of  partnership  debts,  in  pref- 
erence to  the  debts  of  the  survivor,  and  in  like  preference  of  any 
right  he  may  assert  to  re-embark  them  in  trade ;  and  the  insolv- 
ency of  the  deceased  member  does  not  vary  the  question.  In  the 
administration  and  settlement  of  a  firm  thus  dissolved,  the  court 
will  enforce  the  trust  in  favor  of  the  deceased  of  bankrupt  mem- 
ber's estate,  and  apply  the  assets  first  to  the  payment  of  the  part- 
nership debts,  but  not  because  of  any  lien  or  right  the  creditor 
or  creditors  can  assert.  They  have  no  such  lien  or  right.  It  is 
their  debtor's  right  to  have  the  assets  thus  applied ;  and  enforcing 
that  clear  right,  the  benefit  and  preference  accrue  to  the  partner- 
ship creditor.  It  is  thus  that  the  court  of  equity,  by  a  process 
of  its  own,  works  out  the  partnership  debtor's  quasi  lien  in  the 
prior  payment  of  the  partnership  creditor's  demand,  while  he 
himself  has  no  lien,  and  can  assert  no  claim  to  be  a  beneficiary 
under  the  trust."^- 

§  836.     Proceedings  against  estate  of  deceased  partner. — 

The  deceased  partner's  estate  is  universally  held  liable  for  firm 
obligations,  notwithstanding  the  general  rule  that  in  an  action 
at  law  the  representatives  of  the  deceased  partner  can  not  be 

282,  86  Pac.  145,   10  Ann.  Cas.  955;        si  See  ch.  20. 

Ballinger  v.  Redhead,   1   Kans.  App.         s^  Goldsmith    v.    Eichold,    94    Ala. 

434,  40  Pac.  828.  116,  33  Am.  St.  97. 


1179 


ACTIONS    GENERALLY 


836 


joined  with  the  surviving  partner. ^^  The  rule  in  some  states  is 
that  a  creditor  of  the  firm,  before  he  can  proceed  against  the 
estate  of  a  deceased  partner,  must  show  that  he  has  proceeded 
against  the  surviving  partners  to  execution,  or  that  they  are 
insolvent,  the  reason  given  for  the  rule  being  that  the  partner- 
ship assets,  of  which  the  surviving  partner  has  control,  are  the 
primary  fund  from  which  firm  debts  should  be  paid.^*  The  rule 
in  New  York  is :  "Where  the  plaintiff  can  prove  the  insolvency 
of  the  survivor,  and  thus  show  that  he  has  no  legal  remedy  for 
the  collection  of  his  debt  against  him,  he  may  proceed  to  enforce 
payment  from  the  estate  of  a  deceased  partner,  or  other  joining 
debtor,  without  bringing  an  action  against  the  survivor,  or  he 
may  exhaust  his  legal  remedy  against  the  survivor,  and  then  pro- 
ceed against  the  estate  of  the  deceased  debtor.  The  representa- 
tives of  the  estate  of  the  deceased  debtor  have  an  adequate  rem- 
edy against  the  sheriff,  in  case  of  a  wrongful  return  of  the  execu- 
tion."^^. As  the  court  said  in  one  case  :^°    "We  do  not  find,  either 


33  Goldsmith  v.  Eichold,  94  Ala. 
116,  10  So.  80,  33  Am.  St.  97;  Sav- 
ings &c.  See.  V.  Gibb,  21  Cal.  595 ; 
Storer  v.  Hinklej',  Kirby  (Conn.) 
147;  Evans  v.  Superior  Steel  Co.,  114 
111.  App.  505 ;  Sampson  v.  Shaw,  101 
Alass.  145,  3  Am.  Rep.  327;  Hoff- 
man V.  Westlecraft,  85  N.  J.  L.  484; 
Alorgan  v.  Skidmore,  3  Abb.  N.  Cas. 
(N.  Y.)  92;  Lang  v.  Keppele,  1  Binn. 
(Pa.)  123;  Gant  v.  Reed,  24  Tex. 
46,  76  Am.  Dec.  94;  Sale  v.  Dish- 
man,  3  Leigh   (Va.)   548. 

31  Nelson  v.  Hill,  5  How.  (U.  S.) 
127,  12  L.  ed.  81;  Troy  Iron  &c. 
Factory  v.  Winslow,  1  Ban.  &  A.  98, 
11  Blatchf.  513,  Fed.  Cas.  No. 
14199;  Winfrey  v.  Clarke,  107  Ala. 
355,  18  So.  141 ;  Beaton  v.  Wade,  14 
Colo.  4,  22  Pac.  1093 ;  Leggat  v.  Leg- 
gat,  176  N.  Y.  590,  68  N.  E.  1119; 
Hoyt  V.  Bonnett,  50  N.  Y.  538 ;  Rich- 
ter  V.  Poppenhausen,  42  N.  Y.  373 ; 
Tracy  v.  Suydam,  30  Barb.  (N.  Y.) 
110;  Voorhies  v.  Baxter,  1  Abb.  Fr. 


43,  18  Barb.  (N.  Y.)  592;  Dubois' 
Case,  3  Abb.  Pr.  (N.  Y.)  177;  Law- 
rence V.  Leake  &c.  Orphan  House, 
2  Denio  (N.  Y.)  577;  Hamersley 
V.  Lambert,  2  Johns.  Ch.  (N.  Y.) 
508;  Slatter  v.  Carroll,  2  Sandf.  Ch. 
(N.  Y.)  573;  In  re  Burdick,  79  Misc. 
167,  140  N.  Y.  S.  582,  4  N.  Y.  Civ. 
Proc.  R.  21 ;  Norment  v.  Wittmann, 
157  App.  Div.  708,  142  N.  Y.  S.  717; 
Seligman  v.  Friedlander,  199  N.  Y. 
373,  92  N.  E.  1047 ;  Burgwin  v.  Host- 
ler, 1  N.  Car.  167,  Tayl.  124,  1  Am. 
Dec.  582;  Horsey  v.  Heath,  5  Ohio 
353 ;  Island  Sav.  Bank  v.  Galvin,  19 
R.  L  569.  36  Atl.  1125;  Taylor  v. 
Slater,  17  R.  L  801.  24  Atl.  835; 
Pearce  v.  Cooke,  13  R.  I.  184 ;  Shaw 
V.  Knowles,  3  R.  I.  112;  Philson  v. 
Bampfield,  1  Brev.   (S.  Car.)  202. 

35  Pope  V.  Cole,  55  N.  Y.  124,  14 
Am.  Rep.  19S. 

3*5  Pearson  v.  Keedy.  6  B.  Mon. 
(Ky.)   128,  43  Am.  Dec.  160. 


§    836  LAW    OF    PARTNERSHIP  1180 

in  principle  or  precedents,  any  authority  for  the  position  that 
the  creditor  of  a  firm  may,  upon  the  death  of  one  of  the  partners, 
go  into  chancery  as  a  matter  of  course,  to  coerce  satisfaction  of 
a  legal  demand,  out  of  the  effects  of  the  firm  in  the  hands  of  the 
survivor.  If  the  survivor  is  solvent,  the  legal  remedy  against 
him  is  plain,  and  as  efficient  to  reach  the  effects  of  the  firm  in 
his  hands,  of  whatever  description  they  may  be,  as  the  like  rem- 
edy against  any  other  individual  is,  to  reach  his  effects  of  the 
same  species.  The  survivor  is,  at  law,  the  only  debtor  of  the  firm 
creditor,  and  through  him  the  visible  effects  of  the  firm  in  pos- 
session of  which  for  the  purpose  of  paying  debts,  he  is  entitled 
to  the  custody  and  control,  are  accessible  by  legal  execution.  The 
debt  being  his  own,  his  individual  property,  which  had  never  be- 
longed to  the  firm,  is  also  accessible  in  the  same  manner.  There 
is,  therefore,  no  failure  of  the  legal  remedy  while  either  the 
effects  of  the  firm  or  those  of  the  survivor,  of  a  species  liable 
to  execution,  remain  in  his  hands ;  and  as  it  is  immaterial  to  the 
creditor  whether  his  debt  is  satisfied  out  of  the  individual  effects 
or  out  of  those  which  had  belonged  to  the  firm,  even  the  conver- 
sion of  the  latter  into  choses  in  action,  gives  him  no  cause  for 
going  into  chancery  to  reach  them,  while  the  former  remain  ac- 
cessible to  his  legal  remedy.  Each  partner  has  unquestionably 
a  right  to  have  the  effects  of  the  firm  appropriated  to  the  firm 
debts,  and  has,  in  equity  at  least,  a  lien  upon  those  effects  to 
secure  not  only  this  appropriation,  but  also  any  final  balance  in 
his  own  favor.  The  creditor  of  the  firm  has  no  such  lien  in  him- 
self, but  only  a  derivative  equity  based  upon  the  rights  of  the 
partners  themselves.  In  virtue  of  which  he  may,  in  case  of  the 
death  of  one  and  the  insolvency  of  the  survivor,  be  substituted 
to  the  right  of  the  deceased  or  his  representatives,  to  have  the 
partnership  effects  appropriated  to  the  partnership  debt.  But 
this  right  of  substitution  is  based  on  necessity  arising  from  the 
insolvency  of  the  survivor  and  the  consequent  inefficiency  of  the 
legal  remedy."  But  in  other  states  there  are  concurrent  reme- 
dies against  the  estate  of  the  deceased  partner  and  the  surviving 


1181  ACTIONS    GENERALLY  §    836 

partner,  and  both  may  be  followed  at  the  same  time.""  The 
United  States  Supreme  Court  has  said:^®  *'The  creditor  of  a 
partnership  may,  at  his  option,  proceed  at  law  against  the  surviv-. 
ing  partner,  or  go  in  the  first  instance,  into  equity  against  the 
representatives  of  the  deceased  partner.  It  is  not  necessary  for 
him  to  exhaust  his  remedy  at  law  against  the  surviving  partner 
before  proceeding  in  equity  against  the  estate  of  the  deceased. 
Where  there  were  two  mercantile  firms  and  some  of  the  members 
common  to  both,  a  creditor's  bill  was  not  multifarious  when  filed 
against  the  personal  representatives  of  two  of  the  deceased  part- 
ners of  the  two  firms,  and  also  against  the  surviving  partner  of 
one  of  the  firms."  It  was  said  in  one  case  :^^  "It  is  contended 
that  equity  is  without  jurisdiction  of  the  bill,  because  it  is  in  the 
nature  of  a  creditor's  bill  or  a  bill  of  discovery,  which  will  not 
lie  until  the  remedy  at  law  has  been  exhausted  by  the  procuring 
of  a  judgment  and  execution.  The  bill  is  not,  however,  of  that 
character,  but  is  an  original  proceeding  against  the  estate  of  a 
deceased  partner  to  enforce  his  liability  upon  a  partnership  con- 
tract, in  which  case  the  estate  is  primarily  liable  in  equity,  which 
may  be  resorted  to  in  the  first  instance."*"  It  is  not  uncommon  in 
equitable  proceedings  for  the  court  to  permit  proceedings  against 
the  deceased  partner's  estate,  or  the  joinder  of  surviving  partners 

37  Smith  V.   Mallory,  24  Ala.   628;  re  Hodgson,  31   Ch.  Div.  177,  55  L. 

McCulIoch  V.  Judd,  20  Ala.  703  ;  Smith  J.  Ch.  241 ;  Hills  v.  McRae,  9  Hare 

V.   Van   Gilder,   26  Ark.   527;    Filley  297,   15  Jur.   Ite,  20  L.  J.   Ch.  533; 

V.   Phelps,   18  Conn.  294;  Doggett  v.  Cheetham  v.  Crook,  1  McClell.  &  Y. 

Dill,   108  111.  560,  48  Am.  Rep.  565;  307;   Stephenson  v.  Chiswell,  3  Ves. 

Newman  v.   Gates,   165   Ind.   171,   72  566,   30   Eng.   Reprint   1158;   Thorpe 

N.  E.  638 ;  Vance  v.  Cowing,  13  Ind.  v.    Jackson,    2    Y.    &    C.    553 ;    Eng. 

460;    Small   v.    Davis,    12    Ind.    App.  Partnership  Act    (1890),  §  9. 
635,  40   N.   E.  934;   Bass  v.   Em.ery,        ss  Nelson  v.  Hill,  5  How.   (U.  S.) 

74   Maine   338;   Van   Kleeck  v.   Mc-  127,  12  L.  ed.  80. 
Cahe,   87   Mich.   599,  49  N.   W.   872,        so  Union  Trust  Co.  v.   Shoemaker, 

24  Am.  St.  182 ;  Freeman  v.  Stewart,  258  111.  564,  101  N.  E.  1050. 
41    Miss.    138;    Grosvenor  v.    Austin,        40  Nelson  v.  Hill,  5  How.    (U.  S.) 

6  Ohio  103,  25  Am.  Dec.  743;  Will-  127,    12   L.   ed.   80;   Doggett  v.    Dill, 

iams  V.  Bradley,  5  Ohio  Cir.  Ct.  114,  108  111.  560,  48  Am.  Rep.  565;  Mason 

3    Ohio    Cir.    Dec.    58;    Saunders    v.  v.  Tiffany.  45  111.  392;  Ladd  v.  Gris- 

Wilder,   2   Head    (Tenn.)    577;    Sale  wold,  4  Gilm.   (III.)  25,  46  Am.  Dec. 

V.   Dishman,  3  Leigh    (Va.)   548;   In  443. 


836 


LAW    OF    PARTNERSHIP 


1182 


and  the  deceased  partner's  representatives,  when  no  such  procedure 
would  be  allowed  at  law.*^  As  a  rule  the  jurisdiction  of  actions  by 
the  surviving"  partner  or  partnership  creditors  against  the  estate  of 
a  deceased  partner  is  in  equity.*"  In  some  jurisdictions  the  exclu- 
sive cognizance  of  such  actions  is  placed  by  statute  in  the  pro- 
bate courts/^  A  voluntary  assignment  for  benefit  of  creditors 
by  a  surviving  partner  has  been  held  insufficient  to  transfer  juris- 
diction of  a  partnership  estate  from  the  probate  court  to  the  cir- 
cuit court/*  In  proceedings  to  subject  the  estate  of  a  deceased 
partner  to  claims  against  the  firm,  suit  should  be  brought  against 
his  personal  representatives,*^  and  the  surviving  partners  should 


41  Nelson  v.  Hill,  5  How.  (U.  S.) 

127,  12  L.  ed.  81 ;  Vose  v.  Philbrook, 
3  Story  (U.  S.)  335,  Fed.  Cas.  No. 
17010;  Waldron  v.  Simmons,  28  Ala. 
629;  Raisch  v.  Warren,  18  Cal.  App. 
655,  124  Pac.  95 ;  Fillyan  v.  Laverty,  3 
Fla.  72;  Scott  v.  Scott,  33  Ga.  102; 
Garvin  v.  Stewart,  59  111.  229;  Weyer 
V.  Thornburgh,  IS  Ind.  124;  Indiana 
Pottery  Co.  V.  Bates,  14  Ind.  8; 
Pearson  v.  Keedy,  6  B.  Mon.    (Ky.) 

128,  43  Am.  Dec.  160;  Bennett  v. 
Bennett,  93  Maine  241,  44  Atl.  894; 
Citizens'  Mut.  Ins.  Co.  v.  Ligon,  59 
Miss.  305 ;  Hanway  v.  Robertshaw, 
49  Miss.  758;  Boisgerard  v.  Wall, 
Sm.  &  M.  Ch.  (Miss.)  404;  Haines 
V.  Hollister,  64  N.  Y.  1 ;  Zimmer- 
man V.  Kunkel,  43  Hun  638,  6  N.  Y. 
St.  768;  Butts  v.  Gening,  5  Paige  (N. 
Y.)  254;  Copcutt  v.  Merchant,  4 
Bradf.  Surr.  (N.  Y.)  18;  Drake  v. 
Blount,  17  N.  Car.  353 ;  Jackson  v. 
King,  8  Leigh  (Va.)  689;  Gait  v. 
Calland,  7  Leigh  (Va.)  594;  Brett 
V.  Beckwith,  3  Jur.  (N.  S.)  31,  26 
L.  J.  Ch.  130,  5  W.  R.  112;  Baxter 
V.  Turnbull,  2  Grant  Ch.  (U.  C.)  521. 

42  Raisch  v.  Warren.  18  Cal.  App. 
655.  124  Pac.  95 ;  Union  Trust  Co.  v. 
Shoemaker.  258  111.  564,  101  N.  E. 
1050;  Aloore  Furniture  Co.  v.  Prus- 


sing,  71  III,  App.  666 ;  Hills  v.  McRae, 
9  Hare  297,  20  L.  J.  Ch.  533,  15  Jur. 
66. 

43  Lewis  V.  Moore,  9  Rob.  (La.) 
196;  Anderson  v.  Birdsall,  19  La. 
441;  Caldwell  v.  Hawkins,  73  Mo. 
450.  Compare  Knox  v.  Bates,  79  Ga. 
425,  5  S.  E.  61. 

44  Troll  V.  St.  Louis,  257  Mo.  626, 
168  S.  W.  167. 

45  Nelson  v.  Hill,  5  How.  (U.  S.) 
127,  12  L.  ed.  81;  McLain  v.  Car- 
son, 4  Ark.  164,  37  Am.  Dec.  777; 
Savings  &c.  Soc.  v.  Gibb,  21  Cal. 
595;  Camp  v.  Grant,  21  Conn.  41,  54 
Am.  Dec.  321 ;  Fillyan  v.  Laverty,  3 
Fla.  72;  Mason  v.  Tiffany,  45  111. 
392;  Ralston  v.  Moore,  105  Ind.  243, 
4  N.  E.  673;  Braxton  v.  State,  25 
Ind.  82 ;  Ransom  v.  Pomeroy,  5 
Blackf.  (Ind.)  383;  Postlewait  v. 
Howes,  3  Iowa  365 ;  Maxey  v.  Aver- 
ill,  2  B.  Mon.  (Ky.)  107;  Manning 
V.  Williams.  2  Mich.  105;  Irby  v. 
Graham,  46  Miss.  425 ;  Buckingham 
V.  Ludlum,  37  N.  J.  Eq.  137;  Blair 
V.  Wood,  108  Pa.  St.  278;  Lang  v. 
Keppele,  1  Binn.  (Pa.)  123;  Cres- 
well  V.  Blank,  3  Grant  Cas.  (Pa.) 
320:  Sherman  v.  Kreul,  42  Wis.  33; 
Wilkinson  v.  Henderson,  1  Myl.  & 
K.  582,  2  L.  J.  Ch.   190;   Devaynes 


1183 


ACTIONS    GENERALLY 


§  836 


be  joined  to  answer  to  their  interest. ■*"  The  liabiHty  for  services 
rendered  under  a  contract  with  the  personal  representative  of  a 
deceased  partner,  is  not  a  Hability  of  the  firm,  which  was  dis- 
solved by  his  death.  It  has  been  held  that  a  suit  against  the 
personal  representative  for  the  settlement  of  a  partnership  will 
not  be  considered  prematurely  brought  unless  special  reason  for 
so  holding  is  shown.*^  A  surviving  partner  has  been  held  entitled 
to  bring  an  action  against  the  deceased  partner's  administrator 
for  an  accounting  and  tO'  restrain  the  disposal  of  assets,  even 
though  no  judgment  had  been  had  at  law.^®  The  widow  of  a 
deceased  partner  suing  to  recover  her  share  should  make  the  chil- 
dren parties  plaintiff  or  defendant,  under  the  Kentucky  code.'*'' 
The  statutes  vary  in  the  different  jurisdictions  as  to  the  time 
when  the  statute  of  limitations  bars  actions  by  or  against  surviv- 
ing partners  or  representatives  of  deceased  partners. ^'^  In  some 
jurisdictions  a  partnership  creditor  has  no  right  to  sue  while  the 
partnership  estate  is  being  administered  in  the  courts,  and  the  stat- 
ute of  limitations  does  not  run  during  this  time.^^     Some  courts 


V.  Noble,  1  Mer.  580,  15  Rev.  Rep. 
151. 

46Vose  V.  Philbrook,  3  Story  (U. 
S.)  335,  Fed.  Cas.  No.  17010;  Wat- 
kins  V.  Adams,  53  Colo.  290,  125  Pac. 
122 ;  Fillyan  v.  Laverty,  3  Fla.  72 ; 
Anderson  v.  Pollard.  62  Ga.  46;  Gar- 
rard V.  Dawson,  49  Ga.  435 ;  Ross 
V.  Everett,  12  Ga.  30 ;  Braxton  v. 
State,  25  Ind.  82 ;  Freeman  v.  Stew- 
art, 41  Miss.  138 ;  Parish  v.  Lewis, 
Freem.  (Miss.)  299;  Lawrence  v. 
Leake,  2  Denio  (N.  Y.)  577;  Pope 
v.  Cole,  55  N.  Y.  124,  14  Am.  Rep. 
198;  Van  Riper  v.  Poppenhausen,  43 
N.  Y.  68;  Stahl  v.  Stahl,  2  Lans.  (N. 
Y.)  60;  Parker  v.  Jackson,  16  Barb. 
(N.  Y.)  33;  Wiesenfeld  v.  Byrd,  17 
S.  Car.  106;  Saunders  v.  Wilder,  2 
Head  (Tenn.)  577;  In  re  Hodgson,  31 
Ch.  Div.  177. 

*''  Williamson  v.  Succession  of 
Scott,  133  La.  307,  62  So.  935. 


48Raisch  v.  Warren,  18  Cal.  App. 
655,  124  Pac.  95. 

49Hackett  v.  State  Bank  &  Trust 
Co.,  155  Ky.  392,  159  S.  W.  952. 

^0  Brigham-Hopkins  Co.  v.  Gross, 
107  Fed.  769;  Goldsmith  v.  Eichold, 
94  Ala.  116,  10  So.  80,  33  Am.  St. 
97;  Willis  V.  Sutton,  116  Ga.  283, 
42  S.  E.  526;  Bennett  v.  Bennett,  92 
Maine  80,  42  Atl.  237 ;  Denny  v.  Tur- 
ner, 2  Mo.  App.  52;  Gibbons  v.  Bush 
Co.,  115  App.  Div.  619,  101  N.  Y.  S. 
721 ;  Cohen  v.  Hymes,  64  Hun  54,  18 
N.  Y.  S.  571,  45  N.  Y.  St.  821 ;  Ham- 
bough  V.  Carney  (Tenn.  Ch.),  62  S. 
W.  503 ;  Lovett  v.  Perry,  98  Va.  604, 
37  S.  E.  33;  Brown  v.  Gordon,  16 
Beav.  302,  22  L.  J.  Ch.  65,  1  W.  R.  2 ; 
Braithwaite  v.  Britain,  1  Keen.  206, 
15  Eng.  Ch.  206;  McFadgen  v.  Stew- 
art, 11  Grant  Ch.  (U.  C.)  272.  See 
ante  §  644. 

^1  Brigham-Hopkins    Co.    v.    Gross, 


§    837  LAW    OF    PARTNERSHIP  1184 

hold  that  the  representatives  of  a  deceased  partner  can  not  set 
up  the  statute  of  limitations  against  a  firm  creditor  so  long  as 
the  surviving  partner  is  liable  and  may  call  on  them  for  contri- 
bution/^ but  the  contrary  has  also  been  held.^^  Under  circum- 
stances such  that  it  is  necessary  to  preserve  partnership  assets, 
or  to  secure  their  honest  administration,  the  court  may  appoint 
a  receiver  in  an  action  by  creditors  against  the  surviving  part- 
ner.^* Laches,  such  as  delay  for  fifteen,^^  or  thirty-two  years, ^° 
may  bar  the  right  of  a  deceased  partner's  representatives,  or  of 
partnership  creditors  to  have  an  accounting  of  the  partnership 
matters,  or  set  aside  a  sale  of  land  sold  in  partition  on  dissolu- 
tion of  the  firm,  and  where  the  rights  of  creditors  which  are 
superior  to  rights  of  heirs  of  the  deceased  partner  are  barred 
by  laches,  it  has  been  held  that  the  rights  of  the  heirs  are  also 
barred. '^^ 

§  837.  Surety  on  partnership  bond. — On  appeal  by  a 
partnership  an  appeal  bond  signed  by  one  partner  has  been  held 
sufficient.^**  A  surety  upon  a  partnership  bond  is  liable  only  for 
a  breach  of  the  obligation  occurring  before  the  dissolution  of  the 
firm,  but  if  the  surety  has  become  liable  for  the  performance  of 
a  particular  contract  by  a  partnership,  its  subsequent  dissolution 
before  the  completion  of  the  contract  will  not  release  him  from 
liability  for  each  of  the  former  partners  so  far  as  that  particular 
contract  is  concerned.^''  A  surety  for  a  partnership  is  not  liable 
for  the  acts  of  a  surviving  member  of  the  firm  after  the  death 

30  Wash.  277,  70  Pac.  480 ;  Brigham-  ^^  Clock's    Admr.    v.    Weikel,    149 

Hopkins  Co.  V.  Gross,  20  Wash.  218,  Ky.  170,  147  S.  W.  897. 

54  Pac.  1127.  !^6  Troll  v.  St.  Louis,  257  Mo.  626, 

52  Buckingham    v.    Ludlum,    2>7    N.  168  S.  W.  167. 

J.  Eq.   137;   Winter  v.   Innes,  2  Jur.  ^7  Troll  v.  St.  Louis,  257  Mo.  626, 

981,   4   Myl.   &   C.   101,    18   Eng.   Ch.  168  S.  W.  167. 

101.  58  Tate  V.  Holly,  21  Colo.  App.  451, 

53  Way  V.    Bassett,   5   Hare   55,    10  122  Pac.  58. 

Jur.  89,  15  L.  J.  Ch.  1.  59  Freeman    v.    Berkey,    45    Minn. 

54  Dick  V.  Laird,  4  Cranch   (C.  C.)  438.    48    N.    W.    194;    Kauffmann    v. 
667,    Fed.    Cas.    No.    3891 ;    Word    v.  Cooper,  46  Nebr.  644,  65  N.  W.  796. 
Word,  90  Ala.  81,  7  So.  412;  Moyers 

V.  Cummings,  17  App.  (D.  C.)  269. 


1185  ACTIONS    GENERALLY  §    837 

of  one,  unless  a  contrary  intention  appears  on  the  face  of  the 
contract.*'"  Where  a  bond  is  given  by  one  partner  to  the  others, 
and  one  of  the  others  dies,  the  surety  on  the  bond  is  not  liable 
for  any  acts  of  the  principal  thereafter.®^  But  where  the  inten- 
tion, appearing  from  the  instrument,  is  to  be  bound  to  obligees 
as  a  class  or  changing  body,  a  change  in  the  personnel  of  the 
body  or  in  the  number  thereof  will  not  operate  as  a  discharge 
of  the  surety."^  A  surety  for  one  person  as  principal  is  not  liable 
for  the  acts  of  a  partnership  subsequently  formed  by  that  per- 
son with  another.®^  Where  one  member  of  a  partnership  retires 
from  the  firm  and  the  remaining  members  agree  with  him  to 
pay  the  firm  debt,  and  these  facts  are  known  to  the  creditor,  the 
member  so  retiring  will  be  considered  in  law  a  surety.°* 

^°  Simson   v.    Cooke,    1    Bing.   452,  fying  bond   given   to  them   are   dis- 

8  E.  C.  L,  590;  Connecticut  Mut.  L.  charged. 

Ins.  Co.  V.  Bowler,  Holmes    (U.  S.)  ^2  Metcalf  v.  Bruin,  2  Campb.  422, 

263,  Fed.  Cas.  No.  3106.  12  East  400;  Gargan  v.  School  Dist. 

Gi  Chapman  v.  Beckington,  3  Q.  B  No.  IS,  4  Colo.  53. 

703,  3  G.  &  D.  33,  12  L.  J.  Q.  B.  61,  <^-^  Connecticut  Mut.  L.  Ins.   Co.  v. 

7  Jur.  62 ;   Bodenham  v.   Purchas,   2  Scott,  81  Ky.  540,  5  Ky.  L.  639 ;  Par- 

B.  &  Aid.  32,  20  Rev.  Rep.  342.    Bow-  ham  Sewing  Mach.  Co.  v.  Brock,  113 

ers  V.   Cobb,   31    Fed.  678,   held  that  Mass.  194. 

where,    by    an    arrangement   between  '^^  Williams  v.   Boyd,   75    Ind.  286 ; 

two  sureties  on  a  bond,  one  of  them  Wendlandt  v.    Sohre,   37   Minn.    162, 

is  released  from  liability  as  between  33  N.  W.  700.   See  ante  §§  556,  558. 
themselves,   sureties   on  an   indemni- 


CHAPTER  XXVI 

PLEADING 

SECTION  SECTION 

845.  Generally — Parties.  856.  Cross-complaint. 

846.  Caption.  857.  Extent  of  defense. 

847.  Petition,    complaint,    or    declara-    858.  Defenses  in  suits  between  part- 

tion — Statement  of  partnership  ners. 

relation.  859.  Reply. 

848.  Complaint  against  partnership.  860.  Departure. 

849.  Complaint  by  or  against  surviv-  861.  Proof  and  variance. 

ing  partner.  862.  Separate  pleading  by   one   part- 

850.  Complaints  —  In     suits     between  ner. 

partners.  863.  Demurrer. 

851.  Some  particular  examples.  864.  Motion     for    judgment    on    the 

852.  Alleging  legal  conclusions.  pleadings. 

853.  Material  matters.  865.  Summons. 

854.  Answer.  866.  Verification. 

855.  Answer  in  actions  between  part- 

ners. 

§  845.  Generally — Parties. — The  aim  of  this  chapter  is  to 
give  a  brief  review  of  the  general  rules  of  pleading  in  actions  by 
and  against  partnerships,  and  between  partners.  One  branch  of 
the  subject,  that  is,  who  are  necessary  and  proper  parties  in  such 
actions,  has  been  covered  in  the  chapter  on  actions.^ 

§  846.  Caption. — A  caption  is  not  a  pleading,  but  it  is 
held  to  be  a  part  thereof,  in  all  pleadings,  at  least  as  to  certain 
matters.  In  general,  the  caption  is  the  same  in  all  pleadings  in  the 
same  case;  in  fact,  it  is  provided  in  some  states  by  statute  that 
the  title  of  the  case  shall  not  be  changed  in  the  various  pleadings, 
even  though  parties  may  be  added  or  dismissed,  and  essentially 
the  caption  is  the  title  to  the  case.  In  actions  governed  by  stat- 
utes providing  for  suit  by  or  against  partnerships  in  the  firm  name 

1  Chapters  24,  25. 

1186 


1187  PLEADING  §    846 

alone,  it  is  sufficient  to  name  the  party  plaintiff  or  defendant  in 
such  terms,  as,  for  example,  if  A,  B  and  C  are  partners  doing 
business  under  the  firm  name  of  A,  B  &  Company  it  is  sufficient 
to  name  as  plaintiff  or  defendant.  A,  B  &  Company.  Where  the 
statutes  of  a  particular  state  do  not  thus  provide,  or  the  firm 
does  not  come  within  the  provisions  of  the  statute,  by  reason 
of  nonresidence,  nonregistration,  or  any  other  cause,  then  the 
partners  should  be  named,  together  with  the  firm  name;  as,  for 
example.  A,  B  and  C,  partners  doing  business  as  A,  B  &  Com- 
pany. As  a  rule,  all  parties  interested  should  be  made  parties  to 
the  suit,  and  so  included  in  the  caption,  except  that  in  states 
where  statutory  enactment  precludes  a  change  in  the  caption, 
only  the  original  parties  to  the  suit  will  appear  in  the  caption 
of  the  various  pleadings,  however  many  others  may  be  added.  An 
exception  to  the  rule  that  all  parties  interested  should  be  made 
parties  to  the  suit,  and  included  in  the  caption,  is  that  where  the 
number  of  partners  is  very  large,  and  too  numerous  to  bring  upon 
the  record,  or-  in  the  case  of  an  unincorporated  joint  stock  com- 
pany, in  which  frequent  changes  by  death  or  transfer  of  shares 
may  occur,  one  may  sue  for  all,  and  in  such  case  only  the  name 
of  the  party  commencing  the  suit,  need  be  in  the  caption  as 
plaintiff.^  Under  the  codes,  in  several  states,  the  caption  is  made 
a  part  of  the  petition,  and  in  such  states,  and  possibly  in  some 
others  a  repetition  of  the  names  of  the  partners  in  the  petition 
is  not  necessary  where  they  are  all  named  in  the  caption.'*  It  is 
undoubtedly  the  better  and  safer  rule,  however,  to  allege  the 
fact  of  partnership  in  the  body  of  the  petition,  without  relying 
on  the  fact  of  its  being  included  in  the  caption,  inasmuch  as  this 
is  an  allegation  which  may  be  controverted,  and  the  caption,  as 
stated  above,  is  the  title  of  the  case,  and  not  the  place  to  state 
issuable  facts. ^  The  contrary  has  been  held,  however,  in  several 
states.'^ 

-  See  ante  §  801.  ^  Foerster  v.   Kirkpatrick,  2   Minn. 

3  Piatt  V.   Colvin,  50  Ohio  St.  703,  210 ;  Norton  v.  Thatcher,  8  Nebr.  186. 

36  N.  E.  735.  -  McCloskey  v.   Strickland,  7  Iowa 

4Pierson    v.     Fuhrmann,     1     Colo.  259;   King  v.   Bell,    13   Nebr.  409,    14 

App.    187,    27    Pac.    1015;    Walter    v.  N.  W.  141. 
Godshall,  2,2  S.  Car.  187,  10  S.  E.  951. 


§  847 


LAW    OF    PARTNERSHIP 


118:; 


§  847.  Petition,  complaint,  or  declaration — Statement  of 
partnership  relation. — Inasmuch  as  the  object  of  pleadings 
is  to  place,  before  the  court,  in  plain,  logical  and  consecutive 
order,  the  material  and  relevant  facts  governing  the  issues  of  the 
case,  it  would  seem  that  one  of  the  first  allegations  should  be 
the  averment  of  the  partnership  relation  between  either  the  plain- 
tiffs or  defendants,  as  the  case  may  be.  If  partners  are  suing  or 
being  sued  jointly,  their  respective  rights  or  liabilities  to  sue  or 
be  sued  jointly  must  appear,  and  if  the  joint  right  or  liability  is 
not  otherwise  shown,  there  must  be  an  averment  of  the  partner- 
ship. So  wherever  the  right  of  partners  to  sue  or  to  join  as 
plaintiffs  depends  on  the  fact  of  partnership,  there  should  be  an 
averment  of  the  fact  of  partnership,  in  clear  words,^  and  a  mere 
suggestion  of  partnership  as  an  inference  from  other  facts,  is 
not  sufficient.'^     ''The  averment  that  plaintiffs  were  merchants. 


s  Lapeyre  V.  Gales,  2  Cranch  (C.  C.) 
291,  14  Fed.  Cas.  No.  8081;  Braun 
V.  Woollacott,  129  Cal.  107,  61  Pac. 
801 ;  Alpers  v.  Schammel,  75  Cal.  590, 
17  Pac.  708;  Wise  v.  Williams,  72 
Cal.  544,  14  Pac.  204;  Pfister  v.  Wade, 
69  Cal.  133,  10  Pac.  369 ;  Lucas  v. 
Gobbi,  10  Cal.  App.  648,  103  Pac.  157; 
Fryer  v.  Breeze,  16  Colo.  323,  26  Pac. 
817;  Ray  v.  Pollock,  56  Fla.  530,  47 
So.  940;  De  Graum  v.  Jones,  23  Fla. 
83,  6  So.  925;  Whitlock  v.  Mozley, 
142  Ga.  305,  82  S.  E.  886;  Duckwall 
V.  Jones,  156  Ind.  682,  58  N.  E.  1055, 
60  N.  E.  797;  McDonald  v.  Fran- 
chere,  102  Iowa  496,  71  N.  W.  427; 
Wendall  v.  Osborne,  63  Iowa  99,  18 
N.  W.  709;  Sweet  v.  Ervin,  54  Iowa 
101,  6  N.  W.  156;  Thorne  v.  Fox,  67 
Md.  67,  8  Atl.  667 ;  Danaher  v.  Hitch- 
cock, 34  Alich  516;  Pegg  v.  Bidleman, 
5  Mich.  26;  Boosalis  v.  Stevenson,  62 
Minn.  193,  64  N.  W.  380;  Hayward 
V.  Grant,  13  Minn.  165  (Gil.  154),  97 
Am.  Dec.  228 ;  Jaeger  v.  Hartman,  13 
Minn.  55 ;  Fetz  v.  Clark,  7  Minn.  217 ; 
Stickney  v.   Smith,  5   Minn.  486;   Ir- 


vine V.  Myers,  4  Minn.  229 ;  Foerster 
V.  Kirkpatrick,  2  Minn.  210 ;  National 
Ins.  Co.  V.  Bowman,  60  Mo.  252 ; 
Mcjunkin  v.  Placek,  80  Nebr.  2,7Z, 
114  N.  W.  411;  Church  v.  Callihan, 
49  Nebr.  542,  68  N.  W.  932;  Mor- 
rissey  v.  Schindler,  18  Nebr.  672,  26 
N.  W.  476;  Chamberlain  Banking 
House  V.  Noyes,  3  Nebr.  (Unof.) 
550,  92  N.  W.  175;  Loper  v.  Welch, 
3  Duer  (N.  Y.)  644;  Anable  v.  For- 
est &c.  Steam  Engine  Co.,  16  Abb. 
Pr.  (N.  Y.)  286;  Millhiser  v.  Holley- 
man,  27  S.  Car.  572,  16  S.  E.  688; 
Harle  v.  Morgan,  29  S.  Car.  258,  7 
S.  E.  487;  Bischoff  v.  Blease,  20  S. 
Car.  460 ;  Van  Brunt  &c.  Co.  v.  Har- 
rigan,  8  S.  Dak.  96,  65  N.  W.  421; 
Coody  V.  Shawver  (Tex.  Civ.  App.), 
161  S.  W.  935. 

^  Hawley  Bros.  Hardware  Co.  v. 
Brownstone,  123  Cal.  643,  56  Pac. 
468 ;  Gilman  v.  Cosgrove,  22  Cal.  356 ; 
Anderson  v.  Brewing  Assn.,  49  Ind. 
App.  403,  97  N.  E.  445;  St.  John  v. 
Coates,  63  Hun  460,  18  N.  Y.  S. 
419,   45    N.    Y.    St.   431;    Kessler    v. 


1189  PLEADING  §    847 

engaged  in  the  sale  of  general  merchandise,  is  wholly  insufficient 
to  show  any  joint  or  partnership  interest.  If  the  complaint  seeks 
a  recovery  for  damage  to  a  partnership  business,  the  averments 
should  show  such  relation  between  the  plaintiffs  as  to  warrant 
it."^°  So  it  is  insufficient  to  plead  merely  the  signing  of  a  con- 
tract in  a  firm  name,  as  showing  partnership.  As  said  in  one 
case  :^^  "The  manner  in  which  the  contract  was  signed  by  Friedly 
and  Giles  would  be  competent  evidence  as  tending  to  prove  the 
existence  of  a  partnership  between  them.  *  *  *  Competent 
evidence  tending  to  prove  a  material  fact,  is  not  the  fact,  or  the 
equivalent  thereof.  The  fact  must  be  alleged  affirmatively  before 
the  dem.urrer  admits  it  to  be  true.  A  demurrer  admits  as  true 
only  such  allegations  as  are  properly  and  sufficiently  pleaded." 
A  mere  allegation  in  the  pleading  of  joint  ownership  of  mules 
sought  to  be  recovered  is  not  equivalent  to  an  allegation  of  part- 
nership as  to  the  mules. ^"  This  rule  as  to  the  clear  averment  of 
the  fact  of  partnership  applies,  for  instance,  where  suit  is  brought 
upon  a  note  payable  to  or  endorsed  to,  a  firm  in  the  firm  name, 
for  in  such  case  it  is  necessary  to  aver  a  partnership  between  the 
plaintiffs  under  such  firm  name,  in  order  to  show  the  identity 
between  the  plaintiffs  and  the  owners  of  the  claim  sued  on.^^ 
If  the  pleading  avers  that  the  partners  acquired  the  cause  of 
action  as  such,  it  is  not  bad  for  failure  to  allege  that  they  were 

First  Nat.  Bank,  21  Tex.  Civ.  App,  mond    v.    Stansbury,    24    Mich.    445; 

98,  51  S.  W.  62.  Dessaint  v.  Elling,  31   Minn.  287,   17 

10  Anderson  v.  Evansville  Brewing  N.  W.  480;  McGregor  v.  Cleveland, 
Assn.,  49  Ind.  App.  403,  97  N.  E.  5  Wend.  (N.  Y.)  475;  Bentley  v. 
445.  Smith,  3  Caines   (N.  Y.)   170;  Clark 

11  Mcintosh  V.  Zaring,  150  Ind.  301,  v.  Kensell,  Wright  (Ohio)  480;  Ege 
49  N.  E.  164.  v.  Kyle,  2  Watts.  (Pa.)  222;  Bischofif 

i2Coody    V.    Shawver    (Tex.    Civ.  v.   Blease,  20  S.  Car.  460;   Neely  v. 

App.),  161  S.  W.  935.  Morris,  2  Head  (Tenn.)  595,  75  Am. 

13  Lapeyre  v.   Gales,  2  Cranch    (C.  Dec.    753;    Howard    v.    Boorman,    17 

C.)    291,   Fed.   Cas.   No.   8081;   Keith  Wis.    459;    Barnes    v.    Elmbinger,    1 

V.  Pratt,  5  Ark.  661 ;  Boswell  v.  Dun-  Wis.   56 ;    Attwood   v.   Rattenbury,    6 

ning,  5  Har.    (Del.)   231;  Wilcox  v.  Moore  579,  23  Rev.  Rep.  633,   17  E. 

Woods,  4  111.  51 ;  Irving  v.  M'Lean,  C.   L.  61 ;   Ord  v.  Portal,  3  Campb. 

4     Blackf.     (Ind.)     52;     Hughes     v.  240. 
Walker,   4   Blackf.    (Ind.)    50;    Red- 


§    847  LAW    OF    PARTNERSHIP  1190 

partners  at  the  time  of  suit."  But  where  the  partners  could 
recover  on  the  cause  sued  on  as  joint  owners  or  joint  contractors, 
it  is  not  necessary  that  the  complaint  aver  the  fact  of  a  partner- 
ship/^ As  said  in  one  case:^°  "The  defendant  demurred,  and 
specified  in  the  demurrer  several  grounds  of  objection,  but  the 
only  one  insisted  on  was  that  the  complaint  did  not  aver  that  the 
plaintiffs  were  partners,  and  as  such  had  made  the  sale  in  ques- 
tion. *  *  *  Such  an  averment  is  only  necessary  when  the 
rights  of  the  plaintiffs  to  maintain  the  action  depends  upon  their 
partnership,  but  as,  without  being  partners,  they  might  prove  a 
joint  ownership  and  joint  contract,  and  upon  such  proof  would 
be  entitled  to  recover,  the  objection  was  untenable."  This  rule 
may  apply  in  an  action  for  goods  sold.^'^  Thus,  it  is  held,^^  that 
the  absence  of  an  allegation  of  partnership  in  the  pleadings,  where 
its  existence  is  not  necessary  to  the  validity  of  the  claim,  is  not 
ground  of  objection,  where  the  individual  names,  with  the  firm 
names,  are  given  in  the  title,  but  that  the  firm  name  in  the  title 
will  be  considered  descriptio  personss  merely,  and  surplusage. 
Even  where  it  is  proper,  and  where  plaintiffs  may  be  compelled, 
to  show  the  fact  of  the  partnership  relation,  the  omission  is  not 
a  fatal  defect,  and  if  the  other  parties  submit  to  the  litigation 
without  proper  objection,  they  have  been  held  to  have  waived 
the  defect.^''     The  complaint,  where  partners  sue  as  plaintiffs. 

14  Klemik    v.    Henricksen    Jewelry  25  Ore.  446,  36  Pac.  165 ;   Munroe  v. 

Co.,  122  Minn.  380,  142  N.  W.  871.  Williams,  35  S.  Car.  572,  15  S.  E.  279; 

isBeller  v.  Block,  19  Ark.  566;  Mc-  First  Nat.  Bank  v.  Hattenback,  13  S. 

Tntosh  V.  Zaring,  150  Ind.  301,  49  N.  Dak.  365,  83  N.  W.  421. 

E.  164;  Hayward  v.  Grant,  13  Minn.  i6  Loper  v.  Welch,  3  Duer  (N.  Y.) 

165    (Gil.    154),    97    Am.    Dec.    228;  644. 

Jaeger  v.  Hartman,  13  Minn.  55  (Gil  i''  Boosalis  v.   Stevenson,  62   Minn. 

50)  ;   Wood  V.   Fithian,  24   N.  J.   L.  193,  64  N.  W.  380 ;  Leper  v.  Welch, 

33,  838;  Loper  v.  Welch,  3  Duer  (N.  3  Duer  (N.  Y.)  644;  Clark  v.  Wick, 

Y.)  644;  Cowan  v.  Baird,  77  N.  Car.  25  Ore.  446,  36  Pac.  165. 

201;  Martin  v.  Kelly,  Cheves  L.    (S.  is  Campbell  v.  Blanke,  13  Kans.  62; 

Car.)  215.     See  also  Klemik  v.  Hen-  Jaeger  v.  Hartman,  13  Minn.  55  (Gil. 

ricksen   Jewelry  Co.,    122   Minn.   380,  50). 

142  N.  W.  871 ;  Wilson  v.  Yegen,  38  i^  Howard  v.  Woodward,  52  Kans. 

Mont.   504,    100    Pac.   613;    Maynard  106,  34  Pac.  348;   Keene  v.   Master- 

V.  Fellows.  43  N.  H.  255;  Cowan  v.  man,  66  Alinn.  72,  68  N.  W.  771. 
Baird,  77  N.  Car.  201 ;  Clark  v.  Wick, 


1191 


PLEADING 


§  8-I-; 


should  not  only  aver  the  existence  of  a  partnership  but  should 
also  show  the  names  of  the  individual  partners.-"  However,  a 
defect  in  a  pleading  in  this  respect  may  usually  be  cured  by 
amendment,-^  and  if  there  is  a  joint  cause  of  action  the  allega- 
tion of  partnership  may  be  disregarded  as  surplusage.'"  So  if 
by  statute  suit  in  the  firm  name  is  permitted,  an  allegation  setting 
forth  the  partners'  names  may  be  surplusage."^  In  some  states 
certain  statutory  requirements  must  be  followed  before  a  suit 
can  be  maintained  in  the  firm  name.  '  It  is  sometimes  held  that 
compliance  with  these  formalities  should  be  alleged  in  the  com- 
plaint,-* but  in  most  jurisdictions  noncompliance  is  a  matter 
of  defense,  and  need  not  be  alleged  in  a  complaint,  but  must  be 
affirmatively  alleged  and  proved  by  the  defendants.^^  In  an 
action  by  partners  for  a  broker's  commission  in  effecting  a  sale. 


20  Haarmann  v.  Lueders,  109  Fed. 
325;  Day  v.  Cushman,  2  111.  475; 
Hellyer  v.  Bowser,  Id  Ind.  35 ;  Clark 
V.  Dunlap,  2  Ind.  551;  Marsh  v.  Chi- 
cago &c.  R.  Co.,  79  Iowa  332,  44  N. 
W.  562 ;  Gordon  v.  Janney,  Morris 
(Iowa)  182;  Wolf  v.  New  Orleans 
Tailor-Made  Pants  Co.,  52  La.  Ann. 
1357,  27  So.  893;  Voigt  Brewery  Co. 
V.  Pacifico,  139  Mich.  284,  102  N.  W. 
739;  Stubendorf  v.  Sonnenschein,  11 
Nebr.  235,  9  N.  W.  91;  Walter  v. 
Godshall,  32  S.  Car.  187,  10  S.  E. 
951 ;  Graves  v.  Drane,  66  Tex.  658, 
1  S.  W.  905 ;  Putnam  v.  Wheeler,  65 
Tex.  522 ;  Scott  v.  Llano  County  Bank 
(Tex.  Civ.  App.),  85  S.  W.  301; 
Howard  v.  Boorman,  17  Wis.  459. 

-1  Vinegar  Bend  Lumber  Co.  v. 
Hamilton-Brown  Shoe  Co.,  129  Ala. 
271,  29  So.  857;  Loewenberg  v.  Gil- 
liam, 72  Ark.  314,  79  S.  W.  1064 ;  Hey- 
man  v.  Decatur  Street  Bank  (Ga. 
App.),  84  S.  E.  483;  Carlton  v.  Gris- 
som,  98  Ga.  118,  26  S.  E.  11;  Smith  v. 
Columbia  Jewelry  Co.,  114  Ga.  698,  40 


S.  E.  735 ;  Gwinn  v.  O'Daniel,  5  Tex. 
Civ.  App.  112,  23  S.  W.  850;  Lewis 
V.  Locke,  41  Vt.  11. 

22  Wilson  V.  Carter  Oil  Co.,  46  W. 
Va.  469,  ZZ  S.  E.  249. 

23  Phoenix  Ins.  Co.  v.  Carnahan,  63 
Ohio  St.  258,  58  N.  E.  805. 

2*  New  Carlisle  Bank  v.  Brown,  11 
Ohio  Cir.  Ct.  11.  See  ante  §§  262, 
263,  264. 

25  Cook  V.  Fowler,  101  Cal.  89.  35 
Pac.  431 ;  Phillips  v.  Goldtree,  74  Cal. 
151,  13  Pac.  313,  15  Pac.  451;  Lee  v. 
Orr,  70  Cal.  398,  11  Pac.  745 ;  Sweeney 
V.  Stanford,  67  Cal.  635,  8  Pac.  444; 
Smith  V.  Stubbs,  16  Colo.  App.  130,  63 
Pac.  955;  Croft  v.  Bain,  49  Mont. 
484,  143  Pac.  960 ;  Reilly  v.  Llatheway, 
46  Mont.  1,  125  Pac.  417;  Swope  v. 
Burnham,  6  Okla.  736,  52  Pac.  924; 
Drake  v.  Great  Northern  R.  Co.,  24 
S.  Dak.  19,  123  N.  W.  82;  Heegaard 
V.  Dakota  L.  &  T.  Co.,  3  S.  Dak.  569. 
54  N.  W.  656.  See  ante  §§  262,  263. 
264. 


25 — Row.  ON  Partn. — Vol.  2 


848 


LAW    OF    PARTNERSHIP 


1192 


judgment  for  the  plaintiffs  can  not  be  sustained  by  proof  of  a 
contract  made  with  one  of  them  as  an  individual.^" 

§  848.  Complaint  against  partnership. — The  general  prin- 
ciples as  to  pleading  the  fact  of  partnership  and  the  names  of  the 
partners  are  substantially  the  same  in  cases  where  partnerships 
are  defendants  as  where  they  are  plaintiffs.  Generally  the  fact 
of  partnership  need  not  be  alleged  in  an  action  against  partners 
as  such,  it  being  sufficient  to  declare  against  them  as  against  any 
other  joint  debtors  or  joint  obligors,  since  they  are  bound  in  the 
same  manner.^^  Thus,  in  an  action  on  an  instrument  which  shows 
joint  liability  of  several  persons  it  need  not  be  alleged  that  they 
were  partners.^*  And  where  the  action  is  on  a  promissory  note 
executed  by  members  of  a  partnership,  the  makers  may  be  sued 
as  individuals,  without  declaring  against  them  as  partners.-'^  If 
it  is  not  necessary  to  allege  the  fact  of  partnership  in  an  action 
against  partners    there  is  no  variance  where  such   fact  is  not 


26  Michael  v.  Kennedy,  166  AIo. 
App.  462,  148  S.  W.  983. 

2"  Davis  V.  Abbott,  2  McLean  (U. 
S.)  29,  Fed.  Cas.  No.  3622;  Austin 
V.  Beall,  167  Ala.  426,  52  So.  657, 
Ann.  Cas.  1912  A,  510;  Jemison  v. 
Bearing,  41  Ala.  283 ;  Swinney  v. 
Burnside,  17  Ark.  38 ;  Hunter  v.  Mar- 
tin, 57  Cal.  365 ;  Faust  v.  Smith,  3 
Colo.  App.  505,  34  Pac.  261;  Pollock 
V.  Glazier,  20  Ind.  262.  See  also  Do- 
benspec  v.  Armel,  11  Ind.  31;  Ens- 
minger  v.  Marvin,  5  Blackf.  (Ind.) 
210;  Patten  v.  Gurney,  17  Mass.  182, 
9  Am.  Dec.  141 ;  Danaher  v.  Hitch- 
cock, 34  Mich.  516;  Pegg  v.  Bidle- 
man,  5  Mich.  26;  Fellows  v.  Jerni- 
gan,  68  Mo.  434;  Stix  v.  Mathews,  63 
Mo.  371 ;  Gates  v.  Watson,  54  Mo.  585  ; 
Lessing  v.  Sulzbacher,  35  Mo.  445 ; 
Smith  V.  Cain,  180  Mo.  App.  457,  166 
S.  \V.  653 ;  Maynard  v.  Fellows,  43 
N.  H.  255;  Wolf  v.  Strahl,  54  Hun 
(N.  Y.)  636;  Ageloff  v.  Lakin,  115 
N.    Y.    S.    1082;    Oechs    v.    Cook,    3 


Duer  (N.  Y.)  161;  Mack  v.  Spencer, 
4  Wend.  (N.  Y.)  411;  Allen  v.  Da- 
vids, 70  S.  Car.  260,  49  S.  E.  846; 
First  Nat.  Bank  v.  Hattenback,  13 
S.  Dak.  365,  83  N.  W.  421 ;  Hawley 
V.  Hurd,  56  Vt.  617;  Meacham  v. 
Batchelder,  3  Pin.  (Wis.)  281,  3 
Chand.  316. 

2s  Davis  V.  Abbott,  2  McLean  (U. 
S.)  29,  Fed.  Cas.  No.  3622;  Comp- 
ton  V.  Smith,  120  Ala.  233,  25  So. 
300;  Hicks  v.  Branton,  21  Ark.  186. 

23  Jemison  v.  Dearing,  41  Ala.  283 ; 
Swinney  v.  Burnside,  17  Ark.  38 ; 
Lucas  V.  Baldwin,  97  Ind.  471 ;  Pol- 
lock V.  Glazier,  20  Ind.  262 ;  Danaher 
V.  Hitchcock,  34  Alich.  516;  Majmard 
V.  Fellows,  43  N.  H.  255 ;  Singleton 
V.  Thornton,  45  Hun  589,  9  N.  Y. 
St.  600;  Vallett  v.  Parker,  6  Wend. 
(N.  Y.)  615;  Mack  v.  Spencer,  4 
Wend.  (N.  Y.)  411 ;  Hawley  v.  Hurd, 
56  Vt.  617.  See  also  Pegg  v.  Bidle- 
man,  5  Mich.  26. 


1193 


PLEADING 


§    848 


pleaded,  but  is  proved  at  the  trial.""  Especially  is  this  held  where 
the  contract  sued  on  was  made  with  one  person  and  the  fact  of 
partnership  is  relied  on  to  show  joint  liability.^^  If  objection 
is  not  made  on  trial  to  the  failure  to  allege  a  partnership,  it 
will  not  be  considered  on  appeal.""  If  suit  is  brought  on  an 
obligation  executed  in  the  firm  name,  the  complaint  should  con- 
tain the  names  of  the  members,^^  although  it  is  usually  held  suffi- 
cient if  the  names  appear  in  the  caption.^*  "Where  *  *  *  the 
names  of  the  plaintiffs  are  given  in  full  in  the  title  of  the  cause, 
it  is  unnecessary  to  repeat  them  in  alleging  that  the  plaintiffs 
were  partners.  It  is  sufficient  to  allege  that  the  plaintiffs  were  part- 
ners without  again  giving  their  names."^^  If  an  allegation  of  part- 
nership appears  in  the  caption,  it  need  not  be  alleged  in  the  body 
of  the  complaint.^*^  In  a  tort  action  against  a  partner  or  partners, 
partnership  liability  is  joint  and  several,  it  is  unnecessary  to 
allege  the  fact  of  partnership  or  the  names  of  the  members,  and 
action  may  be  brought  against  one  or  less  than  all  the  partners, 
and  the  whole  of  the  damages  asked  may  be  recovered  from  any 


30  Austin  V.  Beall,  167  Ala.  426,  52 
So.  657,  Ann.  Cas.  1912  A,  510;  Jem- 
ison  V.  Bearing,  41  Ala.  283 ;  Howard 
V.  Woodward,  52  Kans.  106,  34  Pac. 
348;  Kimball  v.  Longstreet,  174  Mass. 
487,  55  N.  E.  177;  Stix  v.  Mathews, 
63  Mo.  371 ;  Ward  v.  Dow,  44  N.  H. 
45;  Mack  v.  Spencer,  4  Wend.  (N, 
Y.)   411. 

31  Fetz  V.  Clark,  7  Minn.  217;  Stone 
V.  Neeley,  42  Nebr.  567,  60  N.  W. 
965. 

32  Keene  v.  Masterman,  66  Minn.  72, 
68  N.  W.  771. 

33  Wise  V.  Williams,  72  Cal.  544, 
14  Pac.  204;  Lucas  v.  Baldwin,  97 
Ind.  471 ;  Rains  v.  Bolin,  6  Ind.  App. 
181,  33  N.  E.  218;  Laing  v.  Craig, 
14  Tex.  Civ.  App.  134,  36  S.  W.  142; 
Osborne  v.  Holland,  1  Tex.  App.  Civ. 
Cas.,  §  1087 ;  Rogers  v.  Verlander, 
30  W.  Va.  619,  5  S.  E.  847.    But  see 


Dimond  v.  Minnesota  Sav.  Bank,  70 
Minn.  298,  73  N.  W.  182.  Compare 
United  States  v.  Hughes,  161  Fed. 
1021. 

3*  Pierson  v.  Fuhrmann,  1  Colo. 
App.  187,  27  Pac.  1015;  McGregor 
v.  Hubbs,  125  Ind.  487,  25  N.  E.  591 ; 
Adams  Express  Co.  v.  Harris,  120 
Ind.  73,  21  N.  E.  340,  7  L.  R.  A. 
214,  16  Am.  St.  315 ;  Percival  v.  Grofif, 

5  Blackf.  (Ind.)  233;  Rains  v.  Bolin, 

6  Ind.  App.  181,  33  N.  E.  218;  Mc- 
Closkey  v.  Strickland,  7  Iowa  259 ; 
Kimball  v.  Longstreet,  174  Mass.  487, 
55  N.  E.  177.  Compare  Wendall  v. 
Osborne,  63  Iowa  99,  18  N.  W.  709. 

3'''  Adams  Express  Co.  v.  Harris, 
120  Ind.  73,  21  N.  E.  340,  7  L.  R.  A. 
214,  16  Am.  St.  315. 

3"  Pierson  v.  Fuhrman,  1  Colo. 
App.  187,  27  Pac.  1015;  McCloskey 
V.  Strickland,  7  Iowa  259. 


§    849  LAW    OF    PARTNERSHIP  1194 

one  of  them.^^  This  rule  also  applies  to  actions  on  contract 
against  partners,  where  by  statute  they  are  jointly  and  severally 
liable  on  such  obligations.^*  An  allegation  that  a  defendant  was 
a  partner  with  his  copartners  when  he  signed  an  acceptance  of 
an  offer  which  plaintiff  made,  is  not  sufficient  to  show  that  he 
was  a  partner  with  them  in  that  transaction.^^  It  is  held  in  a  few 
jurisdictions  that  the  fact  of  partnership  should  be  alleged  in  the 
complaint  in  an  action  against  the  members  of  the  firm.*°  A  bill 
brought  by  a  general  creditor  of  a  firm,  which  charged  insolv- 
ency of  the  partnership,  and  a  conspiracy  of  its  members  to 
hinder  and  defraud  its  creditors,  which  had  been  partially  exe- 
cuted by  one  partner's  absconding  and  the  levy  of  an  attachment 
by  another,  was  held  good  on  demurrer."*^  It  seems  that  a  part- 
nership liability  by  estoppel  by  holding  out  as  a  partner  must 
be  specially  pleaded.'*-  A  petition  which  alleges  a  cause  of  action 
against  the  '*E  &  C  Grain  Company,  a  partnership  composed  of 
E  &  C,"  has  been  held  sufficient  to  justify  a  judgment  against  the 
firm  and  the  individual  members.*" 

§  849.     Complaint  by   or  against    surviving   partner. — A 
surviving  partner  should  aver  in  his  complaint  all  the  facts  needed 

^'^  Alexandria     Min.     &c.     Co.     v.  255 ;  Hartness  v.  Thompson,  5  Johns. 

Painter,    1    Ind.    App.   587,   28   N.   E.  (N.  Y.)   160;  Gratz  v.  Stump,  Cooke 

113;  Head  v.  Goodwin,  37  Maine  181;  (Tenn.)    494. 

Baker  v.  Hornick,  51  S.  Car.  313,  28  s^  Reid  v.  Lyttle,  150  Ky.  304,  150 

S.  E.  941 ;  Ft.  Worth  &  D.  C.  Ry.  Co.  S.  W.  357. 

V.  Shank  (Tex.  Civ.  App.),  167  S.  W.  ^o  Petrie  v.  Newell,  13  111.  647;  Ir- 

1093;    Frank    v.    Tatum    (Tex.    Civ.  vine  v.  Myers,  4  Minn.  229;   Foers- 

App.),  26  S.  W.  900.  ter  v.  Kirkpatrick,  2  Minn.  210;  Kess- 

38  Clark  v.  Jones,  87  Ala.  474,  6  So.  ler  v.   First  Nat.   Bank   of   Yoakum, 

362 ;  Jemison  v.  Dearing,  41  Ala.  283 ;  21  Tex.  Civ.  App.  98,  51   S.  W.  62 ; 

McCulloch  V.  Judd,  20  Ala.  703 ;  Kent  Laing   v.    Craig,    14   Tex.    Civ.    App. 

v.  Wells,  21  Ark.  411;  Hicks  v.  Bran-  134,  51   S.  W.  62. 

ton,  21  Ark.  186 ;  Burgen  v.  Dwinal,  ^^  Murphy   v.    Fairweather,    72    W. 

11   Ark.   314;   Head  v.   Goodwin,   37  Va.  14,  77  S.  E.  321. 

Maine     181;     Cutts     v.     Gordon,     13  *2  jjamner    v.    Barker     (Tex.    Civ. 

Maine  474,  29  Am.   Dec.   520;   Red-  App.),  144  S.  W.  1180. 

ington  v.  Farrar,  5  Maine  379 ;  Tut-  ^^  Early   &    Clement    Grain    Co.    v. 

tie  V.  Cooper,  10  Pick.   (Mass.)  281;  Fite    (Tex.    Civ.    App.),    147    S.    W. 

Nutt  V.  Hunt,  4  Smed.  &  M.  (Miss.)  673. 
702;   Maynard  v.  Fellows,  43  N.  H. 


1195  PLEADING  §  849 

to  show  that  he  can  maintain  the  action  without  joining  those 
who  were  his  partners  when  the  claim  arose,  but  it  is  not  abso- 
lutely necessary  that  he  should  describe  himself  in  terms  as  sur-' 
viving  partner/*  The  same  rule  applies  as  to  the  averments  nec- 
essary in  an  action  against  a  surviving  partner.^^  If  there  is 
some  special  ground  of  liability,  such  as  fraud,  it  should  be  clearly 
pleaded/*^  The  joinder  as  plaintiff  of  the  administrator  of  a 
deceased  partner  with  surviving  partners,  where  the  surviving 
partners  alone  could  sue,  was  held  to  make  the  complaint  bad  as 
to  the  administrator  and  therefore  as  to  all  plaintiffs/^  So  a 
complaint  by  the  administratrix  of  a  deceased  partner  to  recover 
a  share  of  the  profits  accruing  after  his  death  was  held  bad,  which 
did  not  state  whether  there  were  firm  debts  outstanding,  whether 
losses  were  incurred  prior  to  such  death,  or  whether  any  settle- 
ment or  adjustment  of  the  partnership  business  had  ever  been 
had/^  A  new  firm  which  has  continued  the  business  of  the  old 
one  and  succeeded  to  its  obligations,  must  plead  an  assignment 
to  itself  in  suing  on  a  claim  of  the  old  firm/^  In  a  suit  against 
surviving  partners  for  an  accounting,  the  averment  of  facts 
showing  that  the  nonresident  defendant  was  the  party  chiefly 
delinquent,  but  also  showing  that  the  resident  defendant  had  been 

"Keith    V.     Pratt,     5    Ark.    661;  64;  Bradley  v.  Ward,  6  Blackf.  (Ind.) 

Bonne  v.   Kay,   5   Ark.    19;    Hubbell  190;    Raborg    v.    Columbia    Bank,    1 

V.   Skiles,   16  Ind.   138;   Patterson  v.  Harr.  &  G.  (Md.)  231 ;  Fried  v.  Burk, 

Chalmers,    7    B.    Mon.     (Ky.)     595;  125  Md.  500,  94  Atl.  86;   Berkey  v. 

Johnson   v.    Levy,    109   La.    1036,    34  Judd,  12  Minn.  52 ;  Tom  v.  Goodrich, 

So.  68;  Stevens  v.  Rollins,  34  Maine  2  Johns.    (N.  Y.)   213;  Hoeflinger  v. 

226;  Reese  v.  Kinkead,  17  Nev.  447,  Wells,   47   Wis.   628,    3    N.   W.   589. 

30   Pac.    1087 ;   Joyslin   v.    Taylor,  24  See   Burgess   v.  American    Bond   &c. 

N.  H.  268;   Ledden  v.  Colby,  14  N.  Co.,   103   Maine  378,  69  Atl.   573. 

H.    33,   40   Am.    Dec.    173;    Daby   v.  46  McCartney  v.  Boyd    (Wis.),  152 

Ericsson,   45    N.    Y.   786;    Wright   v.  N.  W.  820. 

McCampbell,  75  Tex.  644,   13   S.  W.  47  Hayes  v.  Johnson,  56  Ind.  App. 

293 ;    Howard   v.    Boorman,    17   Wis.  238,  105  N.  E.  164. 

459 ;    French    v.    Andrade,    6    Term.  ^s  Boehme  v.   Fitzgerald,  43   Monv. 

Rep.    582;     Slipper    v.    Stidstone,    5  226,  115  Pac.  413. 

Term.  Rep.  493,  1  Esp.  47.  *9  Needham    v.    Wright,     140    Ind. 

45  Hess  v.   Adler,  67  Ark.   444,   55  190,  39  N.  E.  510 ;  Spalding  v.  Mure, 

S.  W.  843 ;  Pattison  v.  Norris,  29  Ind.  6  Term.  Rep.  363. 
165 ;  Culbertson  v.  Townsend,  6  Ind. 


§  850 


LAW    OF    PARTNERSHIP 


1196 


connected  with  his  codefendant  in  the  management  and  control 
of  the  business  since  the  death  of  plaintiff's  decedent,  and  was 
withholding  from  plaintiff"  the  information  sought,  and  was  in 
some  degree  responsible  for  the  surviving  partner's  failure  to 
account  to  her  or  to  her  testator  in  his  lifetime  for  his  interest 
in  the  concern,  made  the  resident  defendant  an  actual  and  not  a 
mere  nominal  defendant. "'^° 

§  850.  Complaints — In  suits  between  partners. — In  suits 
between  partners  upon  partnership  matters,  the  partnership  rela- 
tion should  be  alleged,  as  should  also  the  contents  of  the  partner- 
ship agreement,  and,  incidentally,  the  respective  partner's  rights 
and  liabilities  thereunder.  If  there  has  been  a  dissolution  of  the 
firm,  this  should  be  alleged.  If  not,  and  a  dissolution  and  ac- 
counting are  desired,  the  grounds  for  such  relief  should  be  set 
forth. ^^  And  in  an  action  by  a  partner  for  a  dissolution  it  is 
essential  to  aver  facts  which  show  hirn  entitled  to  the  relief 
sought.^"     In  an  action  by  a  partner  for  an  accounting  after 


50  O'Brien  v.  O'Brien,  16  Cal.  App, 
193,  116  Pac.  696. 

51  Glover  V.  Hembree,  82  Ala.  324, 
8  So.  251 ;  Fischer  v.  Superior  Ct, 
98  Cal.  67,  32  Pac.  875;  Cuyamaca 
Granite  Co.  v.  Pacific  Paving  Co., 
95  Cal.  252,  30  Pac.  525;  Chalmers 
V.  Chalmers,  81  Cal.  81,  22  Pac.  395 ; 
Young  V.  Pearson,  1  Cal.  448;  Tara- 
bino  V.  Nicoli,  5  Colo.  App.  545,  39 
Pac.  362 ;  Moran  v.  Bentley,  69  Conn. 
392,  Z1  Atl.  1092;  Canfield  v.  Hard, 
6  Conn.  180;  Nims  v.  Nims,  23  Fla. 
69,  1  So.  527;  Floyd  v.  Kicklighter, 
139  Ga.  133,  Id  S.  E.  1011;  Bracken 
V.  Kennedy,  4  111.  558;  Acme  Copy- 
ing Co.  V.  McLure,  41  111.  App.  397; 
Adams  v.  Shew^alter,  139  Ind.  178, 
38  N.  E.  607;  Dehority  v.  Nelson, 
56  Ind.  414;  Carlin  v.  Donegan,  15 
Kans.  495 ;  Glenn  v.  Hebb,  12  Gill  & 
J.  (Md.)  271;  Houghton  v.  State 
Mut.  L.  Assur.  Co.,  110  Mich.  308, 
68  N.  W.   142;    Stern  v.   Harris,  40 


Minn.  209,  41  N.  W.  1036;  Whitney 
V.  Gotten,  53  Miss.  689 ;  Pope  v.  Sals- 
man,  35  Mo.  362 ;  McMahon  v.  Thorn- 
ton, 4  Mont.  46,  1  Pac.  724;  Dickey 
V.  Allen,  2  N.  J.  Eq.  40;  Bell  v. 
Merrifield,  109  N.  Y.  202,  16  N.  E. 
55,  4  Am.  St.  436;  Salter  v.  Ham, 
31  N.  Y.  321;  Scott  v.  Pinkerton,  3 
Edw.  Ch.  (N.  Y.)  70;  Ludington  v. 
Taft,  10  Barb.  (N.  Y.)  447;  Eisner 
V.  Eisner,  5  App.  Div.  117,  38  N.  Y. 
S.  671 ;  Haberkorn  v.  Hill,  2  N.  Y.  S. 
243 ;  Weber  v.  Kemper,  7  Cine.  Wkly. 
L.  Bui.  301,  8  Ohio  Dec.  403;  Gray 
V.  Kerr,  46  Ohio  652,  23  N.  E.  136; 
Holladay  v.  Elliott,  3  Ore.  340 ;  Cong- 
don  V.  Aylsworth,  16  R.  I.  281,  18 
Atl.  247;  Jones  v.  Smith,  31  S.  Car. 
527,  10  S.  E.  340 ;  Blakely  v.  Smock, 
96  Wis.  611,  71  N.  W.  1052. 

52  Bradley  v.  Harkness,  26  Cal.  69 ; 
Duffield  V.  Brainerd,  45  Conn.  424; 
Adams  v.  Shewalter,  139  Ind.  178, 
38  N.  E.  607 ;  Kimble  v.  Seal,  92  Ind. 


1197 


PLEADING 


850 


dissolution,  the  existence  and  dissolution  of  the  partnership  should 
be  averred,  and  that  there  has  been  no  settlement  and  facts  show- 
ing plaintiff's  right  to  an  accounting  or  that  a  balance  will  be 
due  him.^^  A  petition  which  alleges  a  partnership,  and  that  the 
plaintiff  was  wrongfully  excluded  from  the  business,  and  prays 
an  accounting,  but  which  does  not  show  the  terms  of  the  agree- 
ment, or  the  plaintiff's  interest  in  the  profits,  is  subject  to  de- 


276 ;  Dehority  v.  Nelson,  56  Ind.  414 ; 
Havener  v.  Stephens,  58  S.  W.  372, 
22  Ky.  L.  498;  Fooks  v.  Williams, 
120  Md.  436,  87  Atl.  692;  Arnold 
V.  Sinclair,  11  Mont.  556,  29  Pac. 
340,  28  Am.  St.  489 ;  Waite  v.  Aborn, 
60  App.  Div.  520,  69  N.  Y.  S.  967; 
Smith  V.  Lamon  (Tex.  Civ.  App.), 
143  S.  W.  304;  Keith  v.  Aubrey  (Tex. 
Civ.  App.),  127  S.  W.  278;  Holder 
v.  Shelby  (Tex.  Civ.  App.),  118  S. 
W.  590 ;  Roberts  v.  Dunham,  1  C.  PI. 
136;  Master  v.  Kirton,  3  Ves.  Jr.  74, 
30  Eng.  Reprint  901.  See  also  Ras- 
saert  v.  Mensch,  17  Cal.  App.  637, 
120  Pac.  1072;  Brandt  v.  Salomon- 
son,  17  Cal.  App.  395,  119  Pac.  946; 
Pritchett  v.  Kennedy,  140  Ga.  248, 
78  S.  E.  902;  Wehmeier  v.  Banking 
Co.,  49  Ind.  App.  454,  97  N.  E.  558; 
Davis  V.  Niswonger,  145  Ind.  426,  44 
N.  E.  542;  Candee  v.  Baker,  131  App. 
Div.  641,  116  N.  Y.  S.  55. 

53  Einstein  v.  Schnebly,  89  Fed.  540 ; 
Dugger  V.  Tutwiler,  129  Ala.  258,  30 
So.  91 ;  Haynes  v.  Short,  88  Ala.  562, 
7  So.  157;  Bremner  v.  Leavitt,  109 
Cal.  130,  41  Pac.  859 ;  Young  v.  Pear- 
son, 1  Cal.  448 ;  Buckley  v.  Kelly,  70 
Conn.  411,  39  Atl.  601;  Oliver  v. 
House,  125  Ga.  637,  54  S.  E.  732; 
Houston  V.  Polk,  124  Ga.  103,  52  S. 
E.  83;  Wells  v.  Strange,  5  Ga.  22; 
Bracken  v.  Kennedy,  4  111.  558 ; 
Gutsch  Brewing  Co.  v.  Fischbeck,  41 
111.  App.  400 ;  Frederick  v.  Cooper,  3 
Iowa  171  ;  Carlin  v.  Donegan,  15  Kans. 


495;  Borah  v.  O'Niell,  116  La.  672, 
41  So.  29;  Hunt  v.  Gorden,  52  Miss. 
194;  Pope  v.  Salsman,  35  Mo.  362; 
Shriver  v.  McCloud,  20  Nebr.  474,  30 
N.  W.  534;  Patterson  v.  Sadler  (N. 
J.  Ch.),  63  Atl.  1115;  Emrick  v.  Gold- 
stein, 103  App.  Div.  17,  92  N.  Y.  S. 
680;  Schulsinger  v.  Blau,  84  App. 
Div.  390,  82  N.  Y.  S.  686;  Tesch- 
macher  v.  Lenz,  82  Hun  594,  31  N. 
Y.  S.  543;  Ludington  v.  Taft,  10 
Barb.  (N.  Y.)  447;  Reeves  v.  Bushby, 
25  Misc.  226,  55  N.  Y.  S.  70 ;  Ketchum 
V.  Lewis,  64  Hun  638,  19  N.  Y.  S. 
452,  46  N.  Y.  St.  875;  Redfield  v. 
Middleton,  1  Abb.  Pr.  (N.  Y.)  (N. 
S.)  15;  McMurray  v.  Rawson,  3  Hill 
(N.  Y.)  59;  Champion  v.  Williams, 
2  Ohio  S.  &  C.  P.  Dec.  388,  2  Ohio 
N.  P.  329;  Everhart  v.  Everhart,  3 
Luz.  Leg.  Reg.  (Pa.)  217;  Bachman 
V.  Einhorn,  12  Phila.  (Pa.)  391;  Har- 
ris V.  Donavan,  33  Pitts.  Leg.  J. 
(N.  S.)  286;  Harkins  v.  Buxton,  11 
Pa.  Dist.  159;  Congdon  v.  Ayles- 
worth,  16  R.  I.  281,  18  Atl.  247; 
Wright  V.  Ross,  30  Tex.  Civ.  App. 
207,  70  S.  W.  234 ;  Owen  v.  Oviatt,  4 
Utah  95,  6  Pac.  527;  Park  v.  Mc- 
Gowen,  64  Vt.  173,  23  Atl.  855 ;  W^ood 
V.  Wood,  50  W.  Va.  570,  40  S.  E. 
416;  Coville  v.  Oilman,  13  W.  Va. 
314;  Good  v.  Blewitt,  13  Ves.  397, 
33  Eng.  Reprint  343.  See  Dondell 
V.  Shoo.  20  Cal.  App.  424,  129  Pac. 
478;  Valentin  v.  Sarrett,  25  Idaho 
517,    138    Pac.   834;    Fried   v.    Burk, 


§    850  LAW    OF    PARTNERSHIP  1198 

miirrer.'^*  Any  claims  to  special  relief  such  as  fraudulent  con- 
duct of  a  partner,  an  award  by  arbitrators,  an  account  stated,  or 
a  lien  on  property,  must  be  supported  by  allegations  of  fact  show- 
ing the  ground  of  the  claim.^^  The  partner  suing  in  such  action 
should  definitely  state  the  relief  desired.^"  But  pleadings  will 
be  liberally  construed  in  this  respect.  It  was  said  in  one  case  :^^ 
"If  the  case  upon  the  evidence,  did  not  entitle  complainants  to 
a  return  of  their  capital,  and  to  be  placed  in  the  same  situation, 
as  far  as  practicable,  as  if  they  had  never  entered  into  the  part- 
nership, but  did  authorize  the  ordinary  decree  for  a  dissolution 
and  accounting,  we  are  of  opinion  that  relief  could  be  awarded 
in  the  latter  aspect,  even  though  the  bill  were  not  framed  with 
precision,  in  the  alternative,  for  a  cancelation  or  for  a  dissolu- 
tion and  accounting.  If  the  specific  prayer  were  insufficient,  such 
a  decree  could  be  maintained  under  the  prayer  for  general  relief, 
since  it  would  be  conformable  to  the  case  made  by  the  bill."  An 
assignee  of  a  partner  who  brings  an  action  for  an  accounting 
must  state  in  his  complaint  facts  entitling  him  to  such  relief.^^ 
Statements  of  opinion  should  not  be  inserted,  and,  if  they  are 

125  Md.  500,  94  Atl.  86;  Chappell  v.  641,  116  N.  Y.  S.  55;  Simpson  v.  Simp- 

Chappell,  125  App.  Div.  127,   109  N.  son,  44  App.  Div.  492,  60  N.  Y.   S. 

Y.  S.  648;  Valentine  v.  Gilborne,  27  879;  Straus  v.  Heyenga,  41  Hun  646, 

S.  Dak.  309,  130  N.  W.  1018;  Knop-  5  N.  Y.  St.  TH ;  Gernt  v.  Cusack,  106 

snyder  v.  Quinn,  68  W.  Va.  577,  70  Tenn.  141,  59  S.  W.  335 ;   Hunter  v. 

S.  E.  363.  Tolbard,  47  W.  Va.  258,  34  S.  E.  12>1. 

54  Rose  V.  Moate  (Ga.),  87  S.  E.  20.        ^e  Qteri  v.  Scalzo,  145  U.  S.  578,  Zd 

55  Campbell  v.  Clark,  101  Fed.  972,  L.  ed.  824,  12  Sup.  Ct.  895 ;  Bennett 
42  C.  C.  A.  123;  Reese  v.  McCurdy,  v.  Woolfolk,  15  Ga.  213;  Adams  v. 
121  Ala.  425,  25  So.  918;  Foster  v.  Shewalter,  139  Ind.  178,  38  N.  E. 
Carr,  135  Cal.  83,  67  Pac.  43 ;  Ras-  607 ;  Dehority  v.  Nelson,  56  Ind.  414 ; 
saert  v.  Mensch,  17  Cal.  App.  (iZl ,  120  Richard  v.  Mouton,  106  La.  435,  30 
Pac.  1072 ;  Tarabino  v.  Nicoli,  5  Colo.  So.  894 ;  Thompson  v.  Walker,  39  La. 
App.  545,  39  Pac.  362;  Levi  v.  Kar-  Ann.  892,  2  So.  789;  Von  Tagen  v. 
rick,  13  Iowa  344;  Jaynes  v.  Goepper,  Roberts,  4  Leg.  Op.  (Pa.)  610. 

147  Mass.  309,  17  N.  E.  831 ;  Shackle-  "  Qteri  v.   Scalzo,    145   U.    S.   578, 

ton  V.  Kneisley,  48  Minn.  451,  51  N.  36  L.  ed.  824,  12  Sup.  Ct.  895. 

W.  470;   Nicholas  v.   Hadlock    (Mo.  ^s  ^uyamaca  Granite  Co.  v.  Pacific 

App.),  180  S.  W.  31 ;  Harrison  v.  Far-  Paving  Co.,  95  Cal.  252,  30  Pac.  525 ; 

rington,  36  N.  J.  Eq.  107;  Somers  v.  Sheldon  v.  Stevens,  32  Misc.  314,  66 

Harris,  161  App.  Div.  230,  146  N.  Y.  N.  Y.  S.  796. 

S.  572 ;  Candee  v.  Baker,  131  App.  Div. 


1199  PLEADING  §    850 

inserted,  are  demurrable,  or  add  nothing  to  the  force  and  effect 
of  the  pleading. ■'''''  It  is  often  difficult  to  distinguish  as  to 
whether  an  allegation  is  one  of  fact  or  of  opinion,  but  an  appli- 
cation of  the  usual  and  ordinary  rules  of  construction  will  usually 
determine  the  question.  By  the  laws  of  most  states,  there  are 
certain  preliminary  requisites  before  a  sun-iving  partner  can 
close  a  partnership.  These  should  be  shown  to  have  been  com- 
plied with.  The  same  rule  applies  to  the  administrator  of  a  de- 
ceased partner  before  he  can  commence  suit  for  an  accounting 
against  the  surviving  partner.*^"  Under  the  codes,  it  is  often 
made  necessary  that  copies  of  instruments  sued  upon  be  attached 
to  the  petition  or  complaint  as  exhibits.  It  would  seem,  however, 
that  articles  of  partnership  are  not  such  instruments  which  must 
be  attached.  There  is  a  general  rule  of  law  that  one  partner 
can  not  sue  his  copartner  in  regard  to  firm  matters.  There 
are  exceptions  to  this  rule,  and  where  one  partner  does  so 
sue  his  copartner,  he  must  offset  this  general  rule  by  affirm- 
atively alleging  the  exception,  and  its  application  to  his  case. 
For  instance,  one  may  sue  the  other  upon  an  ascertained  bal- 
ance,^^  and  in  an  action  for  a  balance  due,  the  complaint  must 
show  a  settlement  of  firm  affairs  and  a  determination  of  the 
amount  due  the  plaintiff  partner.*^^  And  where  there  is  an 
action  between  partners  on  a  contract  outside  of  partnership 
matters,  and  as  to  which  a  partnership  accounting  is  not  neces- 
sary, such  facts  must  appear  in  the  complaint.*^*  "A  complaint 
upon  a  written  contract  of  copartnership  between  the  plaintiff 

59  Einstein    v.     Schnebly,    89    Fed  Auer,  8  Hun   (N.  Y.)   180;  Covert  v. 

540.  Kenneberger,    53   How.   Pr.    (N.   Y.) 

*'°  Krutz  V.  Craig,  53  Ind.  561.  1 ;  Torrey  v.  Twombly,  57  How.  Pr. 

62  Neil   V.    Greenleaf,   26    Ohio    St.  (N.  Y.)   149;  Glass  v.  Wiles   (Tex.), 

567;   McDonald  v.  Holmes,  22   Ore.  14  S.  W.  225;  Edwards  v.  Reming- 

212,  29  Pac.  735.  ton,  51  Wis.  336,  8  N.  W.  193. 

G3Bean    v.    Gregg,    7    Colo.    499,    4  64  Benton   v.   Hunter,    119   Ga.   381, 

Pac.    903 ;    Wood    v.    Deutchman,    80  46  S.  E.  414 ;  Child  v.  Swain,  69  Ind. 

Ind.  524;  Williamson  v.  Haycock,  11  230;    McCament   v.    Gray,    6    Blackf. 

Iowa  40 ;  Wycoflf  V.  Purnell,  10  Iowa  (Ind.)    233;    Lewis    v.    Woolfolk,    2 

332 ;  Schulsinger  V.  Blau,  84  App.  Div.  Pin.     (Wis.)     209,     1     Chandl.     171: 

390,    82    N.    Y.    S.    686;    Mackey   v.  Walker  v.  Harris,  1  Anst.  245. 


§    851  LAW    OF    PARTXERSIIIP  1200 

and  the  defendant,  alleging  full  performance  on  the  plaintiff's 
part,  and  facts  showing  that  the  defendant  has  grossly  violated 
his  duties  under  said  contract  and  wholly  failed  to  perform  his 
part  thereof,  and  further  alleging  that,  by  reason  of  such  failure 
of  the  defendant  to  perform  his  part  of  said  contract,  the  plain- 
tiff has  sustained  damages  in  a  certain  sum,  for  the  recovery  of 
which  judgment  is  demanded,  is  sufficient  to  show  a  breach  by 
the  defendant  of  his  part  of  said  contract,  and  that  by  reason  of 
such  breach  the  plaintiff  has  sustained  damages  at  least  to  the 
extent  of  the  sum  paid  by  him  to  the  defendant  as  an  inducement 
to  the  formation  of  said  copartnership."*^^  Whatever  the  condi- 
tion may  be,  taking  the  particular  case  out  of  the  general  rule, 
it  must  be  alleged,  or  the  pleading  is  subject  to  demurrer,  as  it 
shows  no  cause  of  action  otherwise. 

§  851.  Some  particular  examples. — Omission  in  a  com- 
plaint in  action  to  recover  a  partner's  share  of  unadjusted  items 
to  plead  a  partnership  settlement,  is  cured  by  an  answer  which 
pleads  dissolution  and  settlement.^*'  A  pleading  in  an  action  on 
a  note  alleging  a  partnership  of  plaintiff  and  defendant,  and  that 
there  had  been  no  accounting  between  them  but  which  did  not 
allege  the  facts  showing  a  partnership,  was  held  insufficient.*'^  A 
petition  by  a  partner  against  his  copartner  on  a  dissolution  agree- 
ment alleging  that  the  copartner  in  consideration  of  the  division 
of  firm  property  agreed  to  pay  all  bills  contracted  by  either  part- 
ner or  in  the  firm  name,  that  the  copartner  had  executed  notes 
for  the  price  of  property  delivered  to  the  partner  on  the  division 
of  the  firm  property,  that  the  copartner  refused  to  pay  the  note, 
and  that  the  partner  was  compelled  to  pay  it,  was  held  to  author- 
ize a  recovery  without  regard  to  a  provision  in  the  agreement 
binding  the  copartner  to  pay  notes  executed  by  him  alone/^ 
Where  a  pleading  for  dissolution  of  a  partnership  alleged  that  it 
was  agreed  that  each  partner  should  devote  his  entire  time  to  the 

C5  Child  V.  Swaim,  69  Ind.  230.  ^7  Nixon  v.  Woodward,  6  Ala.  App, 

66  Jackson  v.  Powell,  110  Mo.  App.  151,  60  So.  480. 

249,  84  S.  W.  1132.     Compare  Black  es  Psinakas  v.  Magas,  161  Mo.  App. 

V.  Berg,  101  Minn.  9,  111  N.  W.  386.  19,  142  S.  W.  1086. 


1201  PLEADING  §    851 

business,  the  defendant  may  be  charged  with  plaintiff's  services, 
or  the  amount  paid  to  a  servant  to  do  work  the  defendant  should 
have  done.^"  A  bill  in  equity  can  not  be  maintained  against  two 
defendants  for  an  accounting  of  partnership  profits  from  the 
sale  of  lands  where  it  appears  that  plaintiff  and  one  of  the  de- 
fendants and  a  third  partner  had  purchased  the  lands  for  resale, 
and,  after  the  third  partner  had  removed  to  another  state,  the 
two  defendants  had  sold  the  lands,  without  showing  that  the 
third  partner  had  withdrawn  from  the  firm  and  that  the  second 
defendant  had  been  substituted  as  partner  in  his  place,  since  the 
withdrawal  of  the  original  third  partner  was  an  essential  element 
of  plaintiff's  right  to  recover,  as  such  third  partner  if  he  had  not 
withdrawn,  would  be  entitled  to  share  in  the  profits  and  to  an 
accounting  therefor.'*'  A  complaint  for  a  breach  of  contract 
binding  a  partner  selling  his  interest  not  to  engage  in  a  similar 
business  within  the  city  which  merely  alleged  that  defendant  en- 
gaged in  business  within  the  county  was  insufficient/^  A  peti- 
tion, in  an  action  for  a  partnership  dissolution  and  an  account- 
ing, and  for  a  receiver,  required  to  be  verified,  which  was  sworn 
to  positively  as  to  matters  within  plaintiff's  knowledge,  and  veri- 
fied on  belief  insofar  as  the  knowledge  was  derived  from 
others,  most  of  the  allegations  wiiich  related  to  matters  within 
plaintiff's  personal  knowledge,  and  almost  all  which  did  not  do 
so  were  admitted  in  the  answer,  was  held  sufficient.'^"  An  allega- 
tion that  the  property  used  in  the  partnership  business  was  to  be 
paid  for  out  of  the  profits  of  the  business  and  rents  from  the 
real  property,  and  that  payments  on  the  purchase-price  of  land 
had  been  made  from  such  rents  and  profits,  was  sufficient  to  show 
that  a  plaintiff  partner  was  to  have  an  interest  in  the  property.^^ 
A  petition  alleging  a  partnership  and  that  the  plaintiff  was  wrong- 
fully excluded  from  the  business,  praying  an  accounting,  but  not 

69  Valentin  v.  Sarrett,  25  Idaho  517,  72  Pritchett  v.  Kennedy,  140  Ga.  248, 
138  Pac.  834.  78  S.  E.  902. 

70  Heck  V.  Collins,  231  Pa.  357,  80  73  Doudell  v.  Shoo,  20  Cal.  App.  424, 
Atl.  535.  129  Pac.  478. 

71  Du    Bois    V.    Padgham,    18    Cal. 
App.  298,  123  Pac.  207. 


§    852  LAW    OF    PARTNERSHIP  1202 

showing  the  terms  or  the  plaintiff's  interest  in  profits  is  demur- 
rable/^* In  an  action  for  a  partnership  accounting  it  was  held  that 
an  averment  that  under  the  partnership  agreement  real  estate  pur- 
chased "should  be  and  become  partnership  assets"  meant  that  it 
should  become  such  when  acquired,  and  not  that  it  should  become 
such  only  when  fully  paid  for.'^*  In  a  suit  for  an  accounting  of 
a  partnership  which  had  extended  for  over  twenty  years,  the 
court  could  require  the  plaintiff  to  furnish  a  bill  of  particulars.'^ 

§  852.  Alleging  legal  conclusions. — The  usual  rule  that 
legal  conclusions  need  not  be  averred,  but  that  the  facts  upon 
which  the  legal  conclusions  are  based  must  be  set  forth,  governs 
in  partnership  as  in  other  actions.  There  is  a  legal  presumption, 
when  a  partnership  is  shown,  that  each  partner  is  the  agent  of  the 
firm  in  conducting  the  usual  business  of  the  firm,  in  the  usual 
manner,  and  that  if  such  is  not  the  case,  by  reason  of  special  con- 
tract, it  is  a  matter  of  affirmative  defense.  Hence,  if  the  firm  is 
sued  upon  the  act  of  one  of  the  partners,  done  in  the  scope,  or 
apparent  scope  of  his  authority,  an  allegation  that  the  partner 
was  authorized  to  perform  the  act  is  unnecessary  unless  the  ques- 
tion is  raised  by  answer  of  defendant.'*'  Likewise,  an  allegation 
that  certain  persons  were  partners  and  that  one  of  them  acted 
for  and  on  behalf  of  the  firm,  sufficiently  alleges  that  the  act  was 

73a Rose    V.    Moate     (Ga.),    87    S.  Etheridge  v.  Binney,  9  Pick.  (Mass.) 

E.  20.  272;     Manufacturers'     &c.     Bank     v. 

7*Doudell   V.    Shoo,    20    Cal.    App.  Winship,  5  Pick.  (Mass.)   11,  16  Am. 

424,  129  Pac.  478.  Dec.    369;    Carrier    v.    Cameron,    31 

'5  Richards  v.  Miller,  153  N.  Y.  S.  Mich.  Z7?,,   18  Am.   Rep.   192 ;   Hick- 

388.  man  v.  Kunkle,  27  Mo.  401;  Tutt  v. 

70  U.  S.  Bank  v.  Binney,  5  Mason  Addams,  24  Alo.  186 ;  Feust  v.  Brown, 

(U.    S.)    176,    Fed.   Cas.   No.   16791;  23  Mo.  App.  332;   Standard  Oil  Co. 

Knapp  V.  McBride,  7  Ala.  19;  Find-  v.   Hoese,   57   Nebr.  665,   78   N.   W. 

lay  V.  Stevenson,  3  Stew.   (Ala.)  48;  292;    Norton    v.    Thatcher,    8    Nebr. 

Miller  V.  Hines,  15  Ga.  197;  Moffitt  v.  186;  Vallett  v.  Parker,  6  Wend.   (N. 

Roche,  92  Ind.  96;  Vienne  v.  Harris,  Y.)    615;    Haldeman    v.    Aliddletown 

14  La.  Ann.  382 ;  Mercantile  Bank  v.  Bank,   28   Pa.    St.   440,   70   Am.   Dec. 

Cox,  38  Maine  500 ;  Barrett  v.  Swann,  142 ;    Ihmsen    v.    Negley,   25    Pa.    St. 

17  Maine  180 ;  Waldo  Bank  v.  Greely,  297 ;    Cunningham    v.    Smithson,     12 

16  Maine  419;    Manning  v.   Hays,  6  Leigh  (Va.)  32. 
Md.  5 ;  Thurston  v.  Lloyd,  4  Md.  283 ; 


1203  PLEADING  §    854 

the  act  of  the  firm."  If,  however,  it  appears  in  the  petition  that 
the  act  done  was  not  one  within  the  usual  scope  of  the  firm  busi- 
ness, it  must  be  shown  by  affirmative  averment  that  the  act  was 
done  by  express  authority,  or  some  other  showing  must  be  made 
which  w^ould  bring  it  within  the  actual  scope  of  the  firm  busi- 
ness.'^® 

§  853.  Material  matters. — Careful  consideration  should 
be  given  each  allegation  of  the  petition  (and  other  pleadings  as 
well)  upon  the  question  of  its  materiality.  If  material  and  at 
the  same  time  complying  with  other  rules  of  pleading,  it  should 
be  inserted.  If  immaterial,  this  in  itself  should  be  a  bar  to  its 
insertion.  The  same  general  rules  apply  in  partnership  cases  as 
in  those  governed  by  other  branches  of  the  law.  Irrelevant 
matter  has  been  held  to  render  a  petition  for  a  breach  of  contract 
to  form  a  partnership  subject  to  special  demurrers.''^ 

§  854.  Answer. — Every  allegation  of  the  petition,  which 
is  not  denied,  either  generally  or  specially,  must  be  taken  as 
true.  Hence,  every  allegation  of  the  petition,  which  the  defend- 
ant wishes  to  put  at  issue,  should  be  met  by  a  denial  in  the  an- 
swer. Often  the  nonexistence  of  the  alleged  partnership  is  a 
proper  defense,  as,  for  example,  w^here  the  liability  upon  which 
suit  is  brought  was  incurred  solely  by  one  person,  and  another 
person  is  joined,  on  the  grounds  that  there  is  a  partnership 
relation  between  him  and  the  person  incurring  the  liability,  such 
as  w^ould  make  both  liable.  In  such  a  case  a  general  denial  puts 
in  issue  the  fact  of  partnership,  inasmuch  as  its  existence  would 
be  necessary  to  liability  to  the  one  not  acting.^**    The  above  is  a 

'^Duckwell  V.  Jones,  156  Ind.  682,  474;    Graham  v.  Henderson,  35   Ind. 

58  N.  E.  1055.  195 ;    Fletcher    v.    Dana,    4    Blackf . 

78AIsop    V.    Central    Tr.    Co.,    100  (Ind.)  Zll  \  Hayner  v.  Eberhardt,  2,1 

Ky.  375,  38  S.  W.  510.  Kans.  308,   15   Pac.   168;   McKasy  v. 

79  Lane  v.  Lodge,  139  Ga.  93,  76  Huber,  65  Minn.  9,  67  N.  W.  650; 
S.  E.  874.  Fetz  v.   Clark,   7   Minn.   217;    Irvine 

80  Fetz  V.  Clark,  7  Minn.  217.  See  v.  Myers,  4  Minn.  229 ;  Wales  v. 
also  McKissack  v.  Witz,  120  Ala.  412,  Chamblin,  19  Mo.  500 ;  Harvey  v. 
25  So.  21 ;  Rogers  v.  Nuckolls,  2  Colo.  Walker,  59  Hun  114,  35  N.  Y.  St. 
281 ;  Martin  v.  Trainer,  125  111.  App.  765,   13-  N.  Y.   S.   170 ;   Richmond  v. 


854 


LAW    OF    PARTNERSHIP 


1204 


defense  only  when  the  suit  is  commenced  against  the  one  solely 
by  reason  of  his  alleged  partnership  relation.  In  case  the  petition 
alleges  that  the  act  sued  upon  was  a  joint  act  of  both  defendants, 
the  answer  that  there  was  no  partnership  is  bad,  as  the  question 
of  partnership  is  immaterial.  No  question  of  partnership  agency 
arises,  but  only  a  question  of  the  joint  act  of  the  defendants 
personally.*^  In  some  states  the  rule  is  that  existence  of  a  part- 
nership must  be  denied  specially  by  verified  plea  or  affidavit.*" 
Thus,  some  statutes  provide  that  when  defendants  are  sued  as 
partners,  the  fact  of  partnership  can  only  be  denied  by  verified 


Boyd,  130  Tenn.  187,  169  S.  W.  755 ; 
Burton  v.  Bostwick,  Brayt.  (Vt.) 
195;  Palmo  v.  Slayden  &  Co.,  100 
Tex.  13,  92  S.  W.  796. 

81  Hunter  v.  Martin,  57  Cal.  365. 

S2  Byrd  v.  Gasquet,  Hempst.  (U.  S.) 
261,  Fed.  Cas.  No.  2268a;  Bank  v. 
Mercantile  Co.,  163  Ala.  495,  50  So. 
882;  Goetter  v.  Head,  70  Ala.  532; 
New  York  &c.  Contracting  Co.  v. 
Meyer,  51  Ala.  325;  Bell  v.  Crosby, 
4  Ala.  575 ;  McCollum  v.  Gushing,  22 
Ark.  540;  Trowbridge  v.  Pitcher,  4 
Ark.  157;  Waterman  v.  Glisson,  115 
Ga.  773,  42  S.  E.  95 ;  Crockett  v.  Gar- 
rard, 4  Ga.  App.  360,  61  S.  E.  552; 
Eaves  v.  Field,  8  Ga.  App.  69,  68 
S.  E.  556;  Heidenreich  v.  Bremner, 
260  III.  439,  103  N.  E.  275;  Mulhall 
V.  Gillespie,  89  111.  346;  Zuel  v. 
Bowen,  78  111.  234;  Degan  v.  Singer, 
41  111.  28 ;  Heintz  v.  Cahn,  29  111.  308 ; 
Robinson  v.  Magarity,  28  III.  423; 
McKinney  v.  Peck,  28  111.  174;  Shu- 
feldt  V.  Seymour,  21  111.  524;  Hay- 
wood V.  Harmon,  17  111.  477;  War- 
ren V.  Chambers,  12  111.  124;  Steven- 
son V.  Farnsworth,  7  111.  715;  Bred- 
hofif  V.  Lepman,  181  III.  App.  247. 
Compare  Chicago  Stamping  Co.  v. 
Bignall,  54  111.  App.  312;  Langdell 
v.  Harney,  36  111.  App.  406;  Bensley 
V.  Brockway,  27  111.  App.  410;  Ault- 


man  &c.  Co.  v.  Webber,  4  111.  App. 
427;  Fergus  v.  Cleveland  Paper  Co., 
3  111.  App.  629 ;  Chicago  University 
v.  Emmert,  108  Iowa  500,  79  N.  W. 
285 ;  Hirsch  v.  Shafer,  66  Miss.  439, 
6  So.  229;  Cook  v.  Martin,  13  Miss. 
379 ;  Meeks  v.  Min.  Co.,  141  Mo.  App. 
648,  124  S.  W.  1084 ;  Tyrrel  v.  Milli- 
ken,  135  Mo.  App.  293,  115  S.  W. 
512;  Donk  Bros.  Coal  &c.  Co.  v. 
Aronson,  102  Mo.  App.  590,  77  S.  W. 
132 ;  Drumm  Flato  Comm.  Co.  v. 
Summers,  89  Mo.  App.  300;  Rich- 
ards V.  McNemee,  87  Mo.  App.  396; 
Mitchell  V.  Railton,  45  Mo.  App.  273 ; 
Haysler  v.  Dav/son,  28  Mo.  App.  531 ; 
Reiter  v.  Fruh,  150  Pa.  St.  623,  24 
Atl.  347;  Vanzandt  v.  Alassey,  12 
Phila.  (Pa.)  340;  Sinkler  v.  Lambert, 
5  Phila.  (Pa.)  36;  Wallace  v.  Taylor, 
1  Phila.  (Pa.)  74,  7  Leg.  Int.  (Pa.) 
114;  Richmond  v.  Boyd,  130  Tenn. 
187,  169  S.  W.  755;  Gulf  &c.  R.  Co. 
V.  Edloff,  89  Tex.  454,  34  S.  W.  414, 
35  S.  W.  144;  Smith  v.  Western 
Union  Tel.  Co.,  84  Tex.  359,  19  S. 
W,  441,  31  Am.  St.  59;  International 
&c.  R.  Co.  V.  Tisdale,  74  Tex.  8,  11 
S.  W.  900,  4  L.  R.  A.  545 ;  Lindsay 
v.  Jaffray,  55  Tex.  626;  Congdon  v. 
Monroe,  51  Tex.  109;  Lewis  v.  Low- 
er3%  31  Tex.  663 ;  Lee  v.  Hamilton, 
12  Tex.  413;  Woolsey  v.  Henke,  125 


1205 


PLEADING 


854 


plea,  or  affidavit,  or  it  is  taken  as  admitted,^^  while  other 
statutes  apply  only  to  actions  by  partnerships,  and  in  actions 
against  partnerships  the  fact  of  partnership  may  be  put  in  issue 
by  an  unsworn  denial.^*  It  has  been  held  that  where  there  is  no 
plea  denying  partnership,  the  burden  of  proving  that  there  is  no 
partnership  and  no  liability  rests  on  the  alleged  partner.^^  If 
the  existence  of  a  partnership  is  alleged  and  it  is  not  denied  in 
the  proper  manner,  if  denial  is  necessary,  then  it  is  unnecessary 
to  prove  its  existence.^*'     In  any  case  where  a  general  denial 


Wis.  134,  103  N.  W.  267;  Lago  v. 
Walsh,  98  Wis.  348,  74  N,  W.  212; 
Martin  v.  American  Express  Co.,  19 
Wis.  336;  Fisk  v.  Tank,  12  Wis.  276, 
78  Am.  Dec.  Til;  Barnes  v.  Elm- 
binger,  1  Wis.  56;  Underwriters  v. 
Wiley  (Tex.  Civ.  App.),  147  S.  W. 
629;  Good  v.  Galveston  &c.  R.  Co. 
(Tex.),  11  S.  W.  854,  4  L.  R.  A.  801; 
Wisconsin  Rev.  Stats.,  ch.  137,  §  98. 
Compare  National  Bldg.  &c.  Co.  v. 
Gosnell,  116  Md.  640,  82  Atl.  557; 
Rice  V.  Patterson,  92  Miss.  666,  46 
So.  255. 

83  Curtis  V.  Sexton,  252  Mo.  221, 
159  S.  W.  512;  Elm  City  Lumber  Co. 
V.  Haupt,  50  Pa.  Super.  Ct.  489;  O. 
H.  Broun,  Jr.,  Timber  Co.  v.  Cole- 
man (Ala.),  67  So.  243;  Johnson  v. 
Dyess  (Tex.  Civ.  App.),  149  S.  W. 
203 ;  Ginners'  Mut.  Underwriters  v. 
Wiley  (Tex.  Civ.  App.),  147  S.  W. 
629. 

84  Richmond  v.  Boyd,  130  Tenn.  187, 
169  S.  W.  755. 

85  Bredhoff  v.  Lepman,  181  111.  App. 
247. 

8«  Porter  v.  Graves,  104  U.  S.  171, 
26  L.  ed.  691 ;  Shuttleworth  v.  Marx, 
159  Ala.  418,  49  So.  83;  Teller  v. 
Hartman,  16  Colo.  447,  27  Pac.  947; 
Smith  v.  Cisson,  1  Colo.  29:  Smith 
v.  Westcott,  34  Fla.  430,  16  So.  332; 
Henderson  Warehouse  Co.  v.  Brand, 
105  Ga.  217,  31  S.  E.  551 ;  Crockett  v. 


Garrard,  4  Ga.  App.  360,  61  S.  E. 
552 ;  Bredhoff  v.  Lepman,  181  111.  App. 
247;  Wabash  Portland  Cement  Co.  v. 
Bracey,  160  111.  App.  18;  Rees  v. 
Simons,  10  Ind.  82;  Richards  v.  Hel- 
len,  153  Iowa  t(i,  133  N.  W.  393; 
Fennell  v.  Myers,  16  S.  W.  136,  25 
Ky.  L.  589;  Craig  v.  Chipman,  57  S. 
W.  244,  22  Ky.  L.  322;  Irvine  v. 
Myers,  4  Minn.  229;  Curtis  v.  Sex- 
ton, 252  Mo.  221,  159  S.  W.  512; 
Nephler  v.  Woodward,  200  Mo.  179, 
98  S.  W.  488;  Vanhoosier  v.  Dun- 
lap,  117  Mo.  App.  529,  93  S.  W.  350; 
Jameson  v.  Franklin,  6  How.  (Miss.) 
376 ;  Anable  v.  Conklin,  25  N.  Y.  470 ; 
Fairchild  v.  Rushmore,  8  Bosw.  (N. 
Y.)  698;  Hand  v.  Rogers,  8  Misc.  79, 
58  N.  Y.  St.  821,  28  N.  Y.  S.  521 ;  Hab- 
erkorn  v.  Hill,  2  N.  Y.  S.  243 ;  State 
V.  McMaster,  13  N.  Dak.  58.  99  N. 
W.  58;  Laferty  v.  Sheriff,  2  Mon- 
aghan  (Pa.)  202,  16  Atl.  90;  O'Brien 
V.  Levin,  11  Pa.  Dist.  729;  Lang  v. 
Jenkins,  12  Pa.  Co.  Ct.  634;  Texas 
Cent.  R.  Co.  v.  Pool,  52  Tex.  Civ.  App. 
307,  114  S.  W.  685;  Phaup  v.  Strat- 
ton,  9  Grat.  (Va.)  615;  Ruffner  v. 
Montgomery,  61  W.  Va.  62,  56  S.  E. 
388;  Elliott  v.  Espenhain,  54  Wis. 
231,  11  N.  W.  513;  Johnson  v.  Dyess 
(Tex.  Civ.  App.),  149  S.  W.  203; 
Neal  v.  Adkins  (Tex.  Civ.  App.),  145 
S.  W.  265. 


§    855  LAW    OF    PARTNERSHIP  1206 

which  reaches  the  fact  of  partnership,  or  a  special  denial  of  the 
fact  of  partnership,  would  be  available,  it  must  be  in  a  case  where 
the  liability  is  based  upon  the  fact  of  partnership.  A  plea  that 
defendants  in  a  personal  injury  case,  alleged  in  the  declaration  to 
be  partners,  were  not  the  owners  of  the  horse  and  wagon  which 
caused  the  injury,  does  not  put  the  fact  of  partnership  in  issue.^^ 
The  fact  of  partnership,  though  not  denied  by  a  defendant's  affi- 
davit, may  be  put  in  issue  by  a  plea  to  which  a  replication  is 
filed,  and  then  it  is  held  the  burden  is  on  plaintiff  to  prove  such 
fact.®*  If  the  partnership  is  denied  under  oath,  the  burden  rests 
on  the  plaintiff  to  prove  the  partnership,®^  Where  an  instru- 
ment sued  on  was  signed  in  a  firm  name,  a  defendant  who  did 
not  appear  on  the  face  of  the  instrument  as  a  member  of  the 
firm,  might  prove  nonmembership  without  a  verified  denial.^" 
An  answer  by  an  alleged  surviving  partner,  denying  plaintiff's 
ownership  of  notes  in  the  firm  name  sued  on  and  also  denying 
that  defendant  executed  them,  but  which  failed  to  deny  that  they 
were  executed  by  the  firm  and  that  defendant  was  a  member 
thereof,  or  so  conducted  himself  as  to  be  estopped  from  denying 
his  liability  on  them  was  insufficient.^^ 

§  855.  Answer  in  actions  between  partners. — In  actions 
at  law  between  partners  the  defendant  partner  may  plead  in  gen- 
eral denial,  which  controverts  all  matters  in  the  complaint  which 
the  plaintiff  is  required  to  prove. ^"  Thus,  in  an  action  for  ac- 
counting between  partners,  defendant  may  show  under  a  general 
denial  that  the  plaintiff  retained  certain  profits. ^^    The  defendant 

s"  Heidenreich  v.  Bremner,  260  III.  °- Johnston   v.    Freer,    51    Ga.   313; 

439,  103  N.  E.  275.  Hackney   v.    Williams,    46    Ind.    413 ; 

88  National   Bldg.   &c.   Co.  v.   Gos-  Noble   v.    Martin,    7   Mart.    (N.    S.) 

nell,  116  Md.  640,  82  Atl.  557;  Com-  (La.)     282;     Wheelock    v.     Rice,     1 

mercial  Jewelry  Co.  v.  Hite,  161  Mo.  Dougl.  (Mich.)  267;  Short  v.  Taylor, 

App.  465,   144  S.  W.   153.  137  Mo.  517,  38  S.  W.  952,  59  Am. 

89Staten  Auto  Co.  v.  Hogg    (Tex.  St.    508;    Buffkin    v.    Eason,    110    N.' 

Civ.  App.),  160  S.  W.  982.  Car.  264,  14  S.  E.  749;  Reiter  v.  Mor- 

"0  Richmond    v.    Boyd,    130    Tenn.  ton.  96  Pa.  St.  229. 

187,  169  S.  W.  755.  93  Lesh  v.  Davidson,   181   Ind.  429, 

"  Letson  v.  Hall,  1  Ala.  App.  619,  104  N.  E.  642. 
55  So.  944. 


1207 


PLEADING 


856 


may  plead  specially  that  the  complaint  is  brought  on  a  matter 
relating  to  unsettled  partnership  affairs;***  or  may  demur  to  the 
pleading."^  An  answer  to  a  bill  in  equity  by  a  partner  for  ac- 
counting should  be  certain  and  should  respond  to  the  entire 
pleading."*' 

§  856.  Cross-complaint. — Affirmative  relief  can  not  be 
secured  without  filing  a  cross-complaint,"^  unless  the  account- 
ing itself  involves  such  right."^  If  a  bill  for  an  accounting 
between  partners  contains  a  statement  that  the  complainant 
is  ready  and  willing  and  offers  to  pay  defendant  what,  if  any- 
thing, appears  to  be  due  on  taking  the  account,  it  is  not  necessary 
for  defendant  to  file  a  cross-bill  in  order  to  obtain  any  relief  which 
he  may  seek  on  the  subject  of  an  account.""  The  validity  of  a 
cross-complaint  is  determined  by  the  same  rules  governing  the 


s^Hutcheson  v.  Smith,  5  Ir.  Eq. 
117;  Conger  v.  Piatt,  25  U.  C.  Q.  B. 
277.  See  also  McSherry  v.  Brooks, 
46  Md.  103. 

osRidgway  v.  Grant,  17  III.  117; 
Mackey  v.  Auer,  8  Hun  (N.  Y.)  180; 
Crooks  V.  Smith,  1  Grant  Ch.  (U.  C.) 
356. 

s*5  Danels  v.  Taggart,  1  Gill  &  J. 
(Md.)  311;  Carter  v.  Holbrook,  3 
Cush.  (Mass.)  331;  Burditt  v.  Grew, 
8  Pick.  (Mass.)  108;  Major  v.  Todd, 
84  Mich.  85,  47  N.  W.  841;  Gordon 
V.  Hammell,  19  N.  J.  Eq.  216;  Isles 
V.  Tucker,  5  Duer  (N.  Y.)  393; 
Joseph  V.  Herzig,  135  App.  Div.  141, 
120  N.  Y.  S.  34;  Reeves  v.  Bushby, 
25  Misc.  226,  55  N.  Y.  S.  70;  Ten- 
nant  v.  Guy,  3  N.  Y.  S.  697;  Scott 
V.  Pinkerton,  3  Edw.  (N.  Y.)  70; 
Innes  v.  Evans,  3  Edw.  (N.  Y.)  454; 
Everitt  V.  Watts,  3  Edw.  (N.  Y.) 
486;  Cresson's  Appeal,  91  Pa.  St.  168; 
Koons  V.  Bute,  2  Phila.  (Pa.)  170; 
Merzlak  v.  Barbie,  32  Pittsb.  Leg.  J. 
(N.  S.)    (Pa.)   314;  Oplinger  v.  Op- 


linger,  9  North.  Co.  Rep.  (Pa.)  316; 
Congdon  v.  Aylsworth,  16  R.  I. 
281,  18  Atl.  247;  Davies  v.  Davies, 
1  Jur.  446,  2  Keen  534,  14  Eng.  Ch. 
534,  48  Eng.  Reprint  72?,. 

97  Shoemaker  v.  Smith,  74  Ind.  71 ; 
Miller  v.  Rapp,  135  Ind.  614,  34  N.  E. 
981,  35  N.  E.  693 ;  Helmer  v.  Yetzer, 
92  Iowa  627,  61  N.  W.  206;  Inglis 
V.  Floyd,  3Z  Mo.  App.  565;  Rodgers 
v.  Clement,  162  N.  Y.  422,  56  N.  E. 
901,  76  Am.  St.  342 ;  Heartt  v.  Corn- 
ing, 3  Paige  (N.  Y.)  566;  Petrakion 
V.  Arbelly,  23  N.  Y.  Civ.  Proc.  183, 
26  N.  Y.  S.  731;  Smith  v.  Under- 
bill, 19  N.  Y.  S.  249;  Eaton  v.  Eaton, 
43  N.  Car.  102;  Mills  v.  Carrier,  30 
S.  Car.  617,  9  S.  E.  350,  741 ;  Jacobs 

•V.  Goodman,  2  Cox  Ch.  282,  30  Eng. 
Reprint  130. 

98  Clinton  V.  Winnard,  135  111.  App. 
274;  Corcoran  v.  Sumption,  79  Alinn. 
108,  81  N.  W.  761,  79  Am.  St.  428; 
Scott  v.  Lalor,  18  N.  J.  Eq.  301. 

99  House  V.  John  Linn,  179  111.  App. 
114. 


26 — Row.  ON  Partn. — Vol.  2 


§    856  LAW    OF    PARTNERSHIP  1208 

validity  of  a  complaint.  It  was  said  in  an  Indiana  case  :^  "It 
is  further  insisted  that  the  cross-complaint  is  bad,  for  the  rea- 
son that  it  seeks  to  recover  a  sum  certain,  a  balance  due  against 
the  other  partners,  and  does  not  allege  that  the  debts  of  the  firm 
are  paid  and  the  amounts  due  the  firm  collected.  *  *  '^'  It  is 
not  a  demand  for  an  amount  due.  It  is,  like  the  complaint  itself, 
a  demand  for  accounting  and  for  the  payment  to  each  party  of 
whatever  balance  should  be  found  due.  'One  partner  may  main- 
tain an  action  to  compel  an  accounting  and  to  recover  such  sum 
as  may  be  found  due  him  upon  the  final  adjustment  of  the  part- 
nership affairs.'^  This  is  not  such  a  case  as  that  of  Lang  v.  Op- 
penheim.^  That  was  a  suit  brought  by  one  partner  to  recover 
from  another  for  an  amount  unadjusted  due  out  of  copartner- 
ship assets.  The  suit  in  that  case  could  not  lie,  since  the  amount 
claimed  might  be  needed  to  pay  creditors,  whose  rights  are  su- 
perior to  the  rights  of  partners.  In  the  case  at  bar  there  is,  on 
the  contrary,  a  simple  demand  for  an  accounting  and  for  the 
payment  of  whatever  may  be  found  due  to  each  partner.  The 
circumstance  that  the  cross-complaint  concludes  with  a  demand 
for  five  thousand  dollars  does  not  of  itself  change  a  complaint  for 
an  accounting  into  a  mere  demand  for  money  due.  We  think  the 
cross-complaint  stated  a  good  cause  of  action  for  an  accounting 
between  the  partners,  and  for  the  payment  to  each  of  whatever 
sum  should  be  found  due  him."  An  answer  to  a  bill  for  dissolu- 
tion of  a  copartnership  which  claims  a  larger  share  than  the  bill 
admits,  has  been  held  a  cross-bill,  to  which  a  special  reply  may 
be  filed.*  As  said  in  one  case  f  "A  cross-complaint,  to  withstand 
a  demurrer  for  want  of  facts,  must,  like  any  other,  state  facts 
sufficient  to  constitute  a  cause  of  action.^  The  only  facts  averred 
in  the  cross-complaint  are  that  the  parties  are  partners ;  that  the 
firm  owns  a  large  stock  of  goods;  that  it  is  largely  indebted; 
that  each  has  put  in  a  part  of  the  capital,  and  each  has  taken  out 

1  Miller  v.   Rapp,   135   Ind.  614,   34  4  Demain  v.  Huston,  70  W.  Va.  306, 
N.  E.  981,  35  N.  E.  693.  72,  S.  E.  923. 

2  Citing  Meredith  v.  Ewing,  85  Ind.  -'•  Shoemaker  v.  Smith,  74  Ind.  71. 
410.  *■'  Citing  Ewing  v.  Patterson,  35  Ind. 

3  Lang  V.  Oppenheim,  96  Ind.  47.  326. 


1209  PLEADING  §    857 

a  part;  that,  without  the  fault  of  the  appellee,  the  firm  has  not 
done,  and  is  not  doing,  a  profitable  business,  and  that  the  facts 
respecting  its  business  require  a  dissolution.  These  facts  did 
not  entitle  the  appellee  to  any  relief.  There  is  no  averment  as 
to  the  contract  by  which  the  firm  was  formed,  the  time  it  was  to 
exist,  or  the  method  of  its  dissolution.  It  is  not  averred  that 
the  appellant  has  violated  his  contract;  that  the  firm,  or  either 
member  of  it,  is  not  abundantly  able  to  pay  its  liabilities,  or  that 
the  appellant  is  not  willing  to  dissolve  the  firm,  pay  the  debts 
and  divide  the  assets.  In  short,  nothing  is  really  averred,  except 
that  the  firm  is  in  debt,  and  is  not  making  money.  These  facts 
furnish  no  ground  for  relief." 

§  857.  Extent  of  defense. — It  is  stated  by  Mr.  Bates,  in 
his  work  on  Partnership,  that  "a  defense  by  one  partner  which 
goes  to  the  whole  cause  of  action,  will  inure  to  all  the  partners."^ 
The  reason  is  plain.  In  the  first  place,  if  the  action  is  brought 
upon  partnership  liability,  the  defense  of  the  partner  appearing 
is  a  defense  to  the  whole  partnership  and  each  member  of 
it,  and  the  claim  must  fail.  In  the  second  place,  if  the 
decision  should  be  given  in  favor  of  the  defending  partner 
alone,  and  against  the  other  partner,  the  partner  in  whose 
favor  the  decision  was  given  would  still  be  liable,  upon  his  co- 
partner's right  to  contribution.  The  rule  holds  in  most  jurisdic- 
tions, "that  a  complaint  which  does  not  state  a  good  cause  of 
action  as  to  all,  though  it  does  as  to  some  of  the  plaintiffs,  is 
bad  as  to  all,  for  want  of  sufficient  facts  to  constitute  a  cause  of 
action."^  A  set-off  or  counterclaim  against  an  individual  partner 
is  not  a  defense  to  a  partnership  cause  of  action.®  As  held  in  an 
Illinois  case  :^^  "The  general  rule  is,  that  a  bank  has  a  right  of 
set-off,  as  against  a  deposit,  only  when  the  individual  who  is  both 

■^  Bates  Partnership,   §  1071.  Charleston  Cycle  Co.,  55  S.  Car.  528, 

8  Mcintosh  V.  Zaring,  150  Ind.  301,  33    S.    E.   787;    Hunter   v.    Hubbard, 
49  N.  E.  164.  26  Tex.   537;   Grier  v.   Strother,    153 

9  Smith  V.  Brannon,  21  Ky.  L.  267,  Mo.  App.  292,  133  S.  W.  404. 

51  S.  W.  178;  DeForest  v.  Andrews,  ^^  International  Bank  v.  Jones,  119 
27  Misc.  145,  29  Civ.  Proc.  R.  250,  58  III.  407,  9  N.  E.  885,  59  Am.  Rep.  807. 
N.    Y.    S.    358;    Pope    Mfg.    Co.    v. 


§    858  LAW    OF    PARTNERSHIP  1210 

depositor  and  debtor  stands,  in  both  these  characters  ahke,  in 
precisely  the  same  relation  and  on  precisely  the  same  footing 
toward  the  bank,  and  hence  an  individual  deposit  can  not  be  set 
off  against  a  partnership  debt."  Nonexistence  of  a  partnership 
obligation  may  be  pleaded  in  defense  ;^^  also  that  one  partner 
was  not  a  partner  nor  liable  as  a  partner  when  the  obligation 
sued  on  was  created/"  In  order  to  plead  a  good  defense  of  lack 
of  authority  in  the  partner  who  executed  the  obligation,  it  must 
appear  that  such  partner  had  neither  express  nor  implied  au- 
thority, that  his  act  had  not  been  adopted  or  ratified  and  that 
the  plaintiff  at  the  time  knew,  actually  or  constructively,  of  his 
want  of  authority/^ 

§  858.  Defenses  in  suits  between  partners. — In  suits  for 
an  accounting,  inter  sese,  all  matters  between  the  partners 
which  would  ordinarily  be  part  of  the  account  between  them 
will  be  taken  into  consideration,  even  when  not  set  up  in  plead- 
ings by  the  defendant/*  Were  this  not  the  fact,  there  could  be 
no  accounting  unless  the  defendant  partner  should  file  his  cross- 
petition.  The  very  nature  of  accounting  implies  an  account  on 
both  sides,  so  far  as  possible,  and  if  the  whole  case,  even  if  sub- 
mitted upon  the  petition  of  the  plaintiff,  should  show  an  amount 

11  Cain  Lumber  Co.  v.  Standard  App.  126,  66  S.  E.  382 ;  Dorn  v.  Tyler, 
Dry  Kiln  Co.,  108  Ala.  346,  18  So.  64  111.  App.  110;  Moffitt  v.  Roche,  92 
882;  Buck  v.  Smith,  2  Colo.  500;  Fox  Ind.  96;  Fennell  v.  Myers,  76  S.  W. 
V.  Clemmons,  30  Ky.  L.  805,  99  S.  W.  136,  25  Ky.  L.  589 ;  Vienna  v.  Harris, 
641.  14  La.  Ann.  382 ;  Kendall  v.  Carland, 

12  New  York  &c.  Contracting  Co.  5  Cush.  (Mass.)  74;  Irvine  v.  Myers, 
V.  Meyer,  51  Ala.  325;  Fowlkes  v.  4  Minn.  229;  Bates  v.  Scheik,  47  Mo. 
Baldwin,  2  Ala.  705;  Holman  v.  Car-  App.  642;  Tilli  v.  Vandegrift,  18  Pa. 
hart,  25  Ga.  608;  Rochester  v.  Trot-  Super.  Ct.  485;  Potter  v.  Price,  3 
ters,  4  Bibb.  (Ky.)  444;  Martien  v.  Pittsb,  (Pa.)  136;  Ellston  v.  Deacon, 
Manheim,  80  Pa.  St.  478;  Persons  L.  R.  2  C.  P.  20;  Leverson  v.  Lane, 
V.  Frost,  25  Tex.  Suppl.  129;  Harvey  13  C.  B.  (N.  S.)  278,  32  L.  J.  C.  P. 
V.  Mowat,  2  Quebec  Pr.  212.  10,  9  Jur.   (N.  S.)   670,  7  L.  T.  326. 

i3Manville  v.    Parks,   7   Colo.    128,  U  W.  R.  74;   Pitfield  v.  Trotter,  32 

2  Pac.  212 ;  King  v.  Mecklenburg,  17  Nova  Scotia  125 ;   Moore  v.  Gurney, 

Colo.  App.  312,  68  Pac.  984 ;  McCord  21  U.  C.  Q.  B.  127. 
Co.  V.  Callaway,  109  Ga.  796,  35  S.  E.         i*  Story  Equity  Pleading,  5  392a. 
171 ;  Griffin  v.  Colonial  Bank,  7  Ga. 


1211  PLEADING  §    859 

due  defendant,  then  the  defendant  would  necessarily  be  entitled 
to  a  decision,  regardless  of  whether  the  balance  was  shown  by 
his  cross-petition  or  not/°  In  fact,  such  an  action  often  results 
in  a  receivership,  with  the  duty  on  the  receiver  to  settle  up  the 
affairs  of  the  firm  as  he  finds  them.  In  such  a  case,  where  the 
statutes  make  provision  for  proving  claims,  this  method  should 
be  followed,  although  this  is  not  ordinarily  by  answer  or  other 
pleading,  but  simply  by  an  affidavit  filed  with  the  receiver. 

§  859.  Reply. — The  reply,  in  partnership  as  in  other  cases, 
should  be  filed  to  controvert  any  material  matters  set  up  affirma- 
tively in  the  answer,  and  should  be  so  drawn  as  to  fully  cover 
and  deny  such  allegations.  For  example,  we  have  seen  hereto- 
fore that  a  partner,  withdrawing  from  the  firm,  and  without 
leaving  his  name  in  the  firm  name,  is  not  liable  for  after-acquired 
indebtedness,  unless  the  creditor  had  known  of  his  former  con- 
nection with  the' firm,  and  had  no  notice,  actual  or  constructive, 
of  the  withdrawal.  Hence,  it  is  heW^  that  w4iere  such  a  de- 
fendant denies  that  he  was  a  partner.  It  is  essential  in  replying 
to  aver  that  plaintiff  had  known  defendant  w^as  a  partner  before 
placing  the  note  sued  upon,  and  it  is  not  sufficient  to  allege  that 
defendant  was  a  partner  prior  to  the  date  of  the  note,  and  that 
plaintiff  had  no  notice  of  his  retirement  or  of  a  dissolution.  The 
knowledge  of  plaintiff  of  defendant's  connection  is  essential.  A 
reply  of  ratification  to  an  answer  of  execution  without  authority 
is  not  good  unless  it  alleges  knowledge  of  the  act  which  was 
ratified.^^     Where  there  is  an  answer  that  a  debt  sued  on  was 

15  Saunders  v.  Wood,   15  Ark.  24;  26  N.  E.   1037;   Cook  v.  Jenkins,  79 

Craig  V.   Chandler,  6  Colo.  543;  At-  N.    Y.    575;    Scott    v.    Pinkerton,    3 

kinson    v.    Cash,    79    111.    53;    Acme  Edw.   (N.  Y.)   70;   Boyd  v.  Foot,  5 

Copying  Co.  v  McLure,  41   111.  App.  Bosw.  (N.  Y.)  110;  Reeves  v.  Bushby, 

397 ;  Quinn  v.  McMahan,  40  111.  App.  25  Misc.  226,  55  N.  Y.  S.  70 ;  Cong- 

593;  Helmer  v.  Yetzer,  92  Iowa  627,  don  v.   Aylsworth,    16  R.   I.   281,    18 

61   N.  W.  206;   Little  v.  Merrill,  62  Atl.  247;   Allen  v.  Allen,    11   Heisk. 

Maine  328;  Felder  v.  Wall,  26  Miss.  (Tenn.)  387. 

595 ;  Johnson  v.  Buttler,  31  N.  J.  Eq.  i^  Warren  v.  Ball,  37  111.  76. 

35 ;  Campbell  v.  Zabriskie,  8  N.  J.  Eq.  ^^  Finney  v.  Erie  City  Iron  Works, 

738 ;  White  v.  Reed.  124  N.  Y.  468,  109  Ala.  485,  20  So.  48. 


§    860  LAW    OF    PARTNERSHIP  1212 

that  of  an  individual  partner,  the  issue  of  assumption  of  such 
debt  by  the  firm  should  be  raised  by  reply.^^  A  reply  in  general 
denial  controverts  all  material  allegations  of  the  answer.  As 
said  in  one  case  :^^  "The  general  denial  controverted  the  truth 
of  the  matters  averred  in  the  answer.  Under  the  general  denial, 
the  appellee  was  entitled  to  disprove  whatever  the  appellants 
were  required  by  the  answer  to  prove,  and  as  they  were  required 
to  prove  the  conversion  of  partnership  funds  to  the  private  use 
of  the  appellee,  it  was  competent  for  him,  under  the  general  de- 
nial, to  disprove  a  conversion,  to  show  that  he  had  applied  such 
funds  to  partnership  purposes." 

§  860.  Departure. — There  must  be  no  departure  in  the 
reply  from  the  facts  stated  in  the  petition.  There  is  a  departure, 
where  suit  is  commenced,  the  petition  alleging  an  action  for 
money  loaned  defendants,  the  answer  stating  that  the  loan  was  to 
a  corporation  in  which  defendants  were  stockholders,  and  the 
reply  setting  up  that,  on  account  of  false  annual  reports  and  un- 
lawful organization,  the  defendants  became,  by  statute,  indi- 
vidually liable  to  the  amount  of  their  stock  on  a  partnership  lia- 
bility."" It  has,  however,  been  held  that  when  a  defendant  is 
sued  as  a  partner,  and  denies  the  fact  of  partnership,  there  is 
no  departure  by  reason  of  a  reply  setting  up  estoppel  by  repre- 
sentation of  defendant  to  plaintiff."^  In  short,  there  is  a  de- 
parture whenever  the  reply  brings  in  matters  inconsistent  with 
the  facts  alleged  in  the  petition,  and  the  reason  for  not  allowing 
the  departure  is  plain.  It  would  be  impossible  to  intelligently 
proceed  in  the  case,  where  the  petition  set  up  one  set  of  facts 
and  the  reply  set  up  another  set  inconsistent  with  those  first 
alleged.  If -proper  at  all  to  set  up  the  inconsistent  facts,  it  could 
only  be  done  by  amending  the  petition.  There  must  be  some 
definite  issue  established  by  the  pleadings.  Simply  stating  facts, 
however,  in  the  reply,  which  are  not  necessarily  inconsistent  with 

1^  Fordice  v.  Scribner,  108  Ind.  85,         20  g^lt  Lake  &c.  Bank  v.  Hendrick- 
9  N.  E.  122.  son.  40  N.  J.  L.  52. 

13  Hackney  v.  Williams,  46  Ind.  413.         -^  Rainsford  v.  Massengale,  5  Wyo. 

1,  35  Pac.  774. 


1213 


PLEADING 


§  861 


the  petition  but  which  are  not  included  therein,  and  in  reply  to  the 
facts  alleged  in  the  answer,  is  not  a  departure.  The  term  "de- 
parture" is  in  fact  self-explanatory,  as  used  in  a  nontechnical 

sense. 

§  861.  Proof  and  variance. — Whenever  the  existence  of 
a  partnership  is  made  a  necessary  issue  by  the  pleadings  of  either 
plaintiffs  or  defendants  the  party  who  alleged  its  existence  has 
the  burden  of  proving  It.-"  Of  course,  if  the  existence  of  a  part- 
nership is  not  in  issue,  it  is  unnecessary  to  prove  it."^    In  actions 


"  Tibbs  V.  Parrott,  1  Cranch  (C.  C.) 
313,  Fed.  Cas.  No.  14023;  Nich- 
olson V.  Patton,  2  Cranch  (C.  C.) 
164,  Fed.  Cas.  No.  10250;  Findlay 
V.  Stevenson,  3  Stew.  (Ala.)  48; 
Vaughan  v.  McGannon,  52  Ark.  244, 
12  S.  W.  557;  Trowbridge  v.  Sanger, 
4  Ark.  179;  Alford  v.  Thompson,  5 
Ark.  347;  Carlton  v.  Grissom,  98  Ga. 
118,  26  S.  E.  77;  Powell  Co.  v.  Finn, 
198  111.  567,  64  N.  E.  1036;  Smith  v. 
Hulett,  65  111.  495;  Yocum  v.  Ben- 
son, 45  111.  435;  King  v.  Haines.  23 
III.  340;  Hancock  v.  Hintrager,  60 
Iowa  374,  14  N.  W.  725;  Byington 
V.  Woodward,  9  Iowa  360 ;  Bernard 
V.  Parvin,  Morr.  (Iowa)  309;  Burn- 
ham  V.  Lutz,  8  Kans.  App.  361,  55 
Pac.  519;  Magee  v.  Dunbar,  10  La. 
546:  Head  v.  Sleeper,  20  Maine  314; 
Lighthiser  v.  Allison,  100  Md.  103, 
59  Atl.  182;  Haskins  v.  D'Este,  133 
Mass.  356;  Gray  v.  Gibson,  6  Mich. 
300;  Whitney  v.  Reese,  11  Minn.  138; 
Fetz  V.  Clark,  7  Minn.  217;  Stickney 
V.  Smith,  5  Minn.  486;  Irvine  v. 
Myers,  4  Minn.  229;  Bank  of  Com- 
merce V.  Selden,  1  Minn.  340;  Smith 
V.  Cromer,  66  Miss.  157,  5  So.  619; 
Lessing  v.  Sulzbacher,  35  Mo.  445 ; 
Oil  Well  Supply  Co.  v.  Metcalf,  174 
Mo.  App.  555,  160  S.  W.  897;  Clark 
v.  Kensell,  Wright  (Ohio)  480; 
Johnson  v.  J.  J.  Douglass  Co.,  8 
Okla.    594,    58    Pac.    743;    Hoyt    v. 


Kountze,  54  Nebr.  368,  74  N.  W. 
585 ;  Follmer  v.  Frommel,  63  Hun 
370,  18  N.  Y.  S.  318,  44  N.  Y.  St. 
353;  Wildrick  v.  Heyshem,  96  App. 
Div.  515,  89  N.  Y.  S.  78;  Halliday 
V.  McDougall,  22  Wend.  (N.  Y.) 
264;  Hughes  v.  Moles,  3  Lack.  Jur. 
(Pa.)  382;  Bonnet  v.  Tips  Hardware 
Co.  (Tex.  Civ.  App.),  59  S.  W.  59; 
Baptist  Book  Concern  v.  Carswell 
(Tex.  Civ.  App.),  46  S.  W.  858. 

23  McGill  V.  Dowdle,  33  Ark.  311 ; 
Hicks  V.  Branton,  21  Ark.  186;  Marx 
V.  Culpepper,  40  Fla.  322,  24  So.  59; 
Wright  V.  Curtis,  27  111.  514;  How- 
ard V.  Woodward,  52  Kans.  106,  34 
Pac.  348;  Derbigny  v.  Mondelli,  15 
La.  496 ;  Head  v.  Goodwin,  37  Maine 
181;  Naftzker  v.  Lautz,  137  Mich. 
441,  100  N.  W.  601 ;  Philpott  v.  Bech- 
tel,  104  Mich.  79,  62  N.  W.  174 ;  Dob- 
son  v.  Hallowell,  53  Minn.  98,  54  N. 
W.  939;  Derby  v.  Gallup,  5  Minn. 
119;  Jennings  v.  Russell,  47  Mo.  App. 
160;  Graves  v.  Norfolk  Nat.  Bank, 
49  Nebr.  437,  68  N.  W.  612 ;  Win  v. 
Devine.  62  N.  J.  L.  374,  41  Atl.  213 ; 
Waldo  V.  Beckwith,  1  N.  Mex.  97; 
Reed  v.  McConnell,  133  N.  Y.  425, 
31  N.  E.  22;  Millerd  v.  Thorn,  56  N. 
Y.  402,  15  Abb.  Prac.  (N.  S.)  371; 
Porter  v.  Cumings,  7  Wend.  (N.  Y.) 
172;  Mack  v.  Spencer,  4  Wend.  (N. 
Y.)  411;  Hall  v.  Younts,  87  N.  Car. 
285 ;  Palin  v.  Small,  63  N.  Car.  484 ; 


LAW    OF    PARTNERSHIP 


1214 


by  or  against  surviving  partners  as  in  other  actions,  the  burden  of 
proof  to  sustain  an  issue  is  on  the  person  who  raises  such  issue 
in  his  pleading.^*  Material  variance  between  proof  offered  by 
a  party  and  the  allegations  of  the  pleadings  is,  as  in  all  other 
suits  of  whatsoever  nature  fatal  to  the  cause  of  action  or  defense, 
in  actions  brought  by  or  against  partnerships  f"  by  surviving  part- 


Wallace  V.  Baisley,  22  Ore,  572,  30 
Pac.  432;  Tarns  v.  Hitner,  9  Pa.  St. 
441;  Bott  V.  Stoner,  2  Penny.  (Pa.) 
154;  Ege  v.  Kyle,  2  Watts  (Pa.) 
222;  Deadwood  First  Nat.  Bank  v. 
Hattenbach,  13  S.  Dak.  365,  83  N. 
W.  421 ;  Sanger  v.  Corsicana  Nat. 
Bank  (Tex.  Civ.  App.),  87  S.  W. 
1Z1;  Bass  v.  Clive,  4  Campb.  78,  4 
M.  &  S.  13;  Rordasnz  v.  Leach,  1 
Stark.  446,  2  E.  C.  L.  172. 

"*  Brown  v.  Farnham,  58  Minn. 
499,  60  N.  W.  344;  Baughan  v.  Gra- 
ham, 1  How.  (Miss.)  220;  Ledden  v. 
Colby,  14  N.  H.  2>Z,  40  Am.  Dec.  173 ; 
Fogarty  v.  Cullen,  49  N.  Y.  Super. 
Ct.  397.  See  Stable  v.  Poth,  220  Pa. 
335,  69  Atl.  864. 

25  Barry  v.  Foyles,  1  Pet.  (U.  S.). 
311,  7  L.  ed.  157;  Schiffer  v.  Ander- 
son, 146  Fed.  457,  16  C.  C.  A.  667; 
Carrington  v.  Ford,  4  Cranch  C.  C. 
231,  Fed.  Cas.  No.  2449;  Coffee  v. 
Eastland,  Fed.  Cas.  No.  2945,  Brunn. 
Sel.  Cas.  216,  Cooke  (Tenn.)  159; 
Darst  V.  Roth,  4  Wash.  C.  C.  471, 
Fed.  Cas.  No.  3582;  Warner-Smiley 
Co.  V.  Cooper,  131  Ala.  297,  31  So. 
28;  McMillan  v.  Otis,  74  Ala.  560; 
Wharton  v.  King,  69  Ala.  365 ;  Flake 
V.  Day,  22  Ala.  132;  Scott  v.  Dans- 
by,  12  Ala.  714;  Kilgore  v.  Shannon, 
6  Ala.  App.  537,  60  So.  520 ;  Carstens 
V.  Frye-Bruhn  &c.  Co.,  1  Alaska  140; 
Glausier  v.  Boston  Naval  Stores  Co., 
132  Ga.  549,  64  S.  E.  547;  Price  v. 
Bell,  88  Ga.  740,  15  S.  E.  810 ;  Cham- 


pion V.  Wilson,  64  Ga.  184;  Wood- 
worth  V.  Fuller,  24  111.  109;  Hurd  v. 
Culies,  18  111.  188;  Lucas  v.  Lament, 
190  111.  App.  47;  Dale  v.  Keefe,  178 
111.  App.  262;  Maiden  v.  Webster, 
30  Ind.  317;  Richards  v.  Hellen,  153 
Iowa  66,  133  N.  W.  393;  Hambro 
Distilling  &c.  Co.  v.  Price,  141  Iowa 
169,  119  N.  W.  541;  Padden  v.  Clark. 
124  Iowa  94,  99  N.  W.  152;  Bying- 
ton  v.  Woodward,  9  Iowa  360 ;  Crane 
v.  Ring,  48  Kans.  61,  29  Pac.  696; 
Waits  V.  McClure,  10  Bush  (Ky.) 
763;  Schroeder  v.  Turner,  68  Md. 
506,  13  Atl.  331;  Whiting  v.  With- 
ington,  3  Cush.  (Mass.)  413;  Stix 
v.  Mathews,  63  Mo.  371 ;  Schmidt  v. 
Schmaelter,  45  Mo.  502;  Rippey  v. 
Evans.  22  Mo.  157;  Hoyt  v.  Reed, 
16  Mo.  294;  Vanhoosier  v.  Dunlap, 
117  Mo.  App.  529,  93  S.  W.  350; 
American  Bank  v.  Campbell,  34  Mo. 
App.  45 ;  Wilson  v.  Yegen,  38  Mont. 
504,  100  Pac.  613 ;  Cooperstown  Bank 
V.  Woods,  28  N.  Y.  545;  Kayser  v. 
Sichel,  34  Barb.  (N.  Y.)  84;  Pease 
V.  Morgan,  7  Johns.  (N.  Y.)  468; 
Manhattan  Co.  v.  Ledyard,  1  Caines 
(N.  Y.)  192;  Collier  v.  Cereal  Co., 
150  App.  Div.  169,  134  N.  Y.  S.  847 
Menzie  v.  Wolff,  120  N.  Y.  S.  53 
Hohnes  v.  Daniels,  86  N.  Y.  S.  19 
King  V.  Timmons,  23  Okla.  407,  100 
Pac.  536;  Levins  v.  Stark,  57  Ore. 
189,  110  Pac.  980;  Sabin  v.  Michell, 
27  Ore.  66,  39  Pac.  635;  Spoolcot- 
ton  Co.  v.  King,  68  S.  Car.   196,  46 


1215  PLEADING  §    861 

ners;^*  or  actions  at  law  between  partners.^^  In  actions  for  ac- 
counting, the  same  rules  as  to  the  burden  of  supporting  an  issue 
by  competent  proof, "^  and  as  to  variance  between  pleading  and 
proof,  apply  as  in  other  partnership  cases. ^^  In  a  suit  by  partners, 
on  a  contract,  the  defendant  did  not  need  to  deny  the  fact  of  part- 
nership under  oath  in  order  to  present  the  question  of  a  variance, 
where  there  was  evidence  that  one  plaintiff  was  not  a  partner 
when  the  contract  was  made  and  performed.^"  Where  an  action 
was  brought  by  two  partners,  the  defendant  could  show  that 
there  were  other  partners,  who  had  an  interest  in  the  suit,  and 
thus  defeat  the  suit  for  want  of  parties  without  denying  the  fact 

S.  E.  1005 ;  Fant  v.  Gadberry,  5  Rich.     Ch.    (U.    C.)    539.      See    Hartzell    v. 

L.  (S.  Car.)  10;  Ball  v.  Strohecker,  2     Murray,  224  III.  Zll ,  79  N.  E.  674. 

28  Davis  V.  Wimberley,  86  Ga.  46, 
12  S.  E.  208 ;  Tucker  v.  Page,  69  111. 
179.  See  also  Hartzell  v.  Murray, 
224  111.  Zn,  79  N.  E.  674;  Shattuck 
V.  Lawson,  10  Gray  (Mass.)  405; 
Leabo  v.  Renshaw,  61  Mo.  292;  Reed 


Speers  (S.  Car.)  364;  Cornwall  v. 
McKinney,  12  S.  Dak.  118,  80  N.  W. 
171 ;  Wilson  v.  Smith,  S  Yerg. 
(Tenn.)  379;  Moore  v.  Williams,  31 
Tex.  Civ.  App.  287,  72  S.  W.  222; 
Duncan    v.    Randall,    2    Utah     131 ; 

Miner  v.   Downer,  20  Vt.  461;   Ful-  v.   McConnell,   133  N.  Y.  425,  31    N. 

lerton  v.   Seymour,  5  Vt.  249;   Gris-  E.  22;  Gay  v.  Fretwell,  9  Wis.  186; 

som  V.  Hofius,  39  Wash.  51,  80  Pac.  Carfrae  v.  Vanbuskirk,   1   Grant  Ch. 

1002;  Cornhauser  v.  Roberts,  75  Wis.  (U.  C.)   539. 

554,  44  N.  W.  744 ;  Whitman  v.  Wood,         29  Richards  v.  Eraser,  122  Cal.  456, 

6  Wis.  676;  Michael  v.  Kennedy,  166  55    Pac.    246;    Littlefield    v.    Beamis, 

Mo.  App.  462,  148  S.  W.  983  ;  Garza  V.  5   Rob.    (La.)    145;   Bass  v.   Taylor, 

Alamo  Live  Stock  &c.  Co.  (Tex.  Civ.  34  Miss.  342 ;  Mitchell  v.  O'Xeale,  4 

App.),   147  S.  W.  687;   Neal  v.  Ad-  Nev.   504;   Arnold  v.   Angell,   62   N. 

kins    (Tex.    Civ.    App.),    145    S.    W.  Y.    508;    Salter    v.    Ham,    31    N.    Y. 

264;  Story  v.  Richardson,  6  Bing.  N.  321;  Boyd  v.  Foot,  5  Bosw.   (N.  Y.) 

Cas.    123,    4   Jur.    26;    McDonald    v.  110;  Gaskell  v.  Nolte,  138  App.  Div. 

McKeen,  28  Nova  Scotia  329;   Pegg  875.  123  N.  Y.  S.  442;  Heye  v.  Til- 

V.  Plank,  3  U.  C.  C.  P.  396;  French  ford,  2  App.  Div.  346,  IZ  N.  Y.  St. 

v.  Weir,  17  U.  C.  Q.  B.  245.  428,  Z1  N.  Y.  S.  751 ;  Gorman  v.  Mad- 

26  Mead  v.  Raymond,  52  Mich.  14.  den,  27  S.  Dak.  319,  131  N.  W.  290; 
17  N.  W.  221.  Illstad  v.   Anderson,  2  N.   Dak.    167, 

27  Davis  V.  Wimberly,  86  Ga.  46,  49  N.  W.  659;  James  v.  Browne,  1 
12  S.  E.  208;  Tucker  v.  Page,  69  111.  Dall.  (Pa.)  339,  1  L.  ed.  165;  Mor- 
179;  Shattuck  v.  Lawson,  10  Gray  ris  v.  Wood  (Tenn.  Ch.),  35  S.  W. 
(Mass.)    405;   Leabo  v.  Renshaw,  61  1013. 

Mo.    292;    Gay    v.    Fretwell,    9   Wis.        so  Neal  v.  Adkins  (Tex.  Civ.  App), 

186 ;  Carfrae  v.  Vanbuskirk,  1  Grant  145  S.  W.  264. 


§    861  LAW    OF    rARTNERSHIP  1216 

of  partnership.^^  There  was  no  variance  in  a  suit  by  a  plaintiff 
individually,  which  was  on  a  claim  in  which  his  firm  was  inter- 
ested, according  to  his  testimony,  while  the  defendant  answered 
and  testified  that  the  contract  was  with  the  plaintiff  individually.^" 
It  has  been  held  that  there  is  no  variance  where  the  plaintiff  in 
an  action  for  goods  sold  alleged  that  the  contract  was  that  of 
the  defendants  as  partners,  but  showed  in  evidence  that  it  was 
made  by  them  as  individuals  through  an  authorized  agent.^^^ 
In  a  replevin  suit  against  a  partnership  where  no  personal  judg- 
ment is  sought  or  rendered,  it  is  immaterial  whether  a  certain 
person  is  a  partner,  and  the  failure  to  prove  him  such  will  not 
defeat  the  plaintiff's  right  to  recover.^*  A  joinder  of  too  many 
persons  as  defendant  partners  does  not,  in  some  jurisdictions, 
prevent  recovery  against  the  actual  partners. ^^  In  an  action  for 
conversion  against  a  partnership,  it  is  insufficient  to  prove  merely 
a  conversion  by  one  partner.^^  Where  it  is  admitted  that  the 
defendant  is  a  partnership  organized  under  the  laws  of  Michi- 
gan, this  does  not  show  whether  it  was  organized  under  one 
statute  as  an  association  suable  in  its  firm  name,  or  under  an- 
other statute  as  a  partnership  suable  in  the  names  of  its  general 
partners,  and  proof  as  to  which  statute  governs  is  necessary.^ ^ 
A  bill  for  an  accounting  on  the  theory  of  a  partnership  in  the 
operation  of  a  farm,  which  prayed  an  accounting  "in  respect  to 
said  copartnership,"  as  well  as  for  general  relief,  did  not  au- 
thorize the  granting  of  relief  on  the  theory  of  a  partnership 
merely  in  the  business  of  buying  and  selling  stock.^^  A  statement 
in  a  complaint  that  a  defendant  has  appropriated  from  firm  funds 
$3,000,  more  or  less,  states  only  an  approximation  of  the  amount 
appropriated,  and  does  not  preclude  the  court  from  finding  the 

31  Houston    &c.    R.    Co.    v.    Corsi-    Co.  v.  Van  Wyck,  146  App.  Div.  5, 
cana  Fruit  Co.  (Tex.  Civ.  App.),  170    130  N.  Y.  S.  563. 

S.  W.  849.  36  Kilgore  v.  Shannon,  6  Ala.  App. 

32  Bryant  v.  Phillips,  189  Mo.  App.    537,  60  So.  520. 

278,  176  S.  W.  294.  37  Collier    v.    Postum    Cereal    Co., 

33  Oil  Well  Supply  Co.  v.  Metcalf,  150    App.    Div.    169,    134    N.    Y.    S. 
174  Mo.  App.  555,  160  S.  W.  897.  847. 

34  Richards  v.  Hellen,  153  Iowa  66,  38  Miller  v.   Casey,   176  Mich.  221, 
133  N.  W.  393.  142  N.  W.  589. 

35  Alaska  Banking  &  Safe  Deposit 


1217  PLEADING  §    861 

exact  condition  of  the  account.^^  In  an  action  on  a  partnership 
dissolution  agreement,  where  defendant  pleaded  a  mutual  mis- 
take in  transcribing  the  agreement,  and  the  evidence  showed 
plaintiff  knew  of  the  mistake,  there  was  no  material  variance.*" 
In  an  action  for  goods  sold  to  a  firm,  where  no  exceptions  were 
filed  to  plaintiff's  pleadings,  and  the  counts,  though  inconsistent 
to  a  certain  extent,  pleaded  several  combinations  of  facts  suffi- 
cient to  show  defendant's  liability,  a  judgment  was  not  set 
aside  for  variance  between  the  pleadings  and  the  proof,  where 
the  evidence  was  sufficient  to  support  the  plaintiff's  allegation 
that  defendant  was  estopped  to  deny  the  existence  of  a  partner- 
ship, and  that  defendant  was  carrying  on  the  business  under  a 
firm  name,  of  which  his  own  name  formed  a  part/^  Where, a 
creditor  of  a  firm  declares  on  a  note,  in  which  indebtedness,  evi- 
denced by  an  account  prior  to  his  receiving  notice  of  a  part- 
ner's retirement,  was  merged,  he  may  not  recover  for  the  in- 
debtedness incurred  prior  to  the  notice,  if  there  is  no  alternative 
pleading  on  the  account  covering  that  time/^  Dismissal  as  to  a 
partner  who  was  made  defendant  in  an  action  on  behalf  of  a 
firm  by  a  partner  to  recover  an  alleged  unpaid  balance  due  the 
firm  after  a  fraudulent  settlement  with  two  of  the  partners,  ter- 
minated the  suit  as  a  partnership  action,  but  it  was  held  proper  to 
continue  it  to  determine  whatever  rights  plaintiff  might  estab- 
lish though  he  could  only  recover  his  proportionate  share  of  any 
unpaid  balance/^  Where  an  answer  in  an  action  by  one  partner 
against  his  copartners  for  an  accounting  of  the  affairs  of  the 
firm  of  M.  8z  G.,  engaged  in  buying  and  selling  live  stock,  al- 
leged that  during  the  course  of  said  partnership  plaintiff  en- 
gaged in  a  business  "contrary  to  the  provisions  of  this  said  part- 
nership," and  also  alleged  that  he  "bought  and  sold  live  stock  as 

39  Brandt    v.    Salomonson,    17    Cat.        '♦^  Rodgers-Wade  Furniture   Co.   v. 
App.  395,  119  Pac.  946.  Wynn    (Tex.  Civ.  App.),  156  S.  W. 

40  Wait  V.  McKibben,  92  Kans.  394,     340. 

140  Pac.  860.  « Storrie     v.     Ft.     Worth     Stock- 

41  Garza  V.  Alartio  Live  Stock  Com-    yards  Co.    (Tex.  Civ.  App.),   143  S. 
mission  Co.  (Tex.  Civ.  App.),  147  S.    W.  286. 

W.  687. 


§    862  LAW    OF    PARTNERSHIP  1218 

such  partner,"  from  which  he  made  profits  of  which  he  made  no 
accounting  to  the  defendants,  the  defendants  were  allowed  to 
show  that  plaintiff,  as  representative  of  the  firm  of  M.  &  G., 
under  an  agreement  between  the  partners  thereof  that  he  should 
do  so,  engaged  in  such  other  business  as  partner  with  others ;  and 
that  the  firm  of  M.  &  G.  was  entitled  to  his  share  of  the  profits 
in  such  other  business.'*^ 

§  862.  Separate  pleading  by  one  partner. — Each  of  the 
partners  has  a  right  to  plead  separately  from  the  others.*^  Such 
pleadings  do  not  bind  his  copartners  or  affect  them,'*^  except 
where  they  admit  the  allegations,  or  adopt  them.*^ 

§  863.  Demurrer. — Owing  to  the  fact  that  in  partnership 
law  there  are  so  many  matters  implied  from  the  fact  of  partner- 
ship, the  relations,  and  consequent  liability,  may  very  often  be 
determined  by  demurrer.  For  instance,  a  foreign  partnership 
can  not  sue,  as  such,  under  the  statutes  of  most  states,  but  must 
sue  in  the  individual  names  of  its  members.*^  Hence,  a  petition, 
showing  the  plaintiff  to  be  a  foreign  partnership,  but  without  the 
individual  partners  shown  as  plaintiffs,  is  subject  to  demurrer,  as 
it  shows  on  its  face  a  lack  of  capacity  to  sue.  If,  however,  an 
action  is  commenced  in  a  name,  such  as  John  Smith  and  Company, 
it  has  been  held  not  subject  to  demurrer  for  want  of  legal  ca- 
pacity to  sue,  inasmuch  as  at  least  one  plaintiff  (John  Smith) 
has  such  legal  capacity.*®     It  is  not  the  intention  to  enter  into 

*4  Gorman  v.   Madden,  27  S.   Dak.  (Conn.)    272;    Nixon  v.   Downey,  42 

319,  131  N.  W.  290.  Iowa   78;    Orleans    Bank   v.   Whitte- 

45  Plowman  v.  Riddle,  7  Ala.  775;  more,    15   La.   276;    Brandt  v.    Shep- 

Friend  v.  Duryee,  17  Fla.  Ill,  35  Am.  ard,    39   Minn.    454,    40    N.    W.    521; 

Rep.  89;  Machinists'  Bank  v.  Krum,  Corcoran   v.    Trich,   9   Pa.    Cas.    110, 

15   Iowa  49;    Vallandingham  v.    Du-  11  Atl.  677. 

val,  7  J.  J.   Marsh.    (Ky.)    262;   Or-  47  Consaul    v.    Sheldon,    35     Nebr. 

leans    Bank    v.    Whittemore,    15    La.  247,  52  N.  W.  1104;  Barnett  v.  Wat- 

276;   Allison   Bros.    Co.   v.   Hart,   56  son,  1  Wash.   (Va.)  372. 

Hun  282,  30  N.  Y.  St.  697,  9  N.  Y.  ^s  Brownson  v.  Metcalfe,  1  Handy 

S.  692;   Rufifner  v.   Montgomery,  61  (Ohio)    188. 

W.  Va.  62,  56  S.  E.  388.  *9  Brookmire  v.  Rosa,  34  Nebr.  227, 

4G  Anderson    v.    Henshaw,    2    Day  51  N.  W.  840. 


1219  PLEADING  §   865 

a  detailed  discussion  of  the  question  of  demurrer  here,  as  it  be- 
longs to  works  on  pleading,  but  only  to  touch  upon  the  subject 
as  it  relates,  in  general,  to  partnership  law.  It  is  sufficient  to  say 
here  that  whenever,  by  the  ordinary  and  usual  terms  of  pleading, 
the  facts  set  forth  in  the  pleading  do  not,  when  considered  in 
connection  with  the  law  governing  them,  establish  a  cause  of 
action  or  a  defense,  as  the  case  may  be,  then  a  demurrer  may  be 
proper.^"  If  a  person  is  sued  upon  a  partnership  liability  and 
no  partnership  liability  is  shown  in  the  pleadings,  then  a  demurrer 
is  proper.^^  A  demurrer  is  proper  when  the  facts  pleaded  in  a 
complaint  by  one  partner  against  another  show  no  right  of 
action.^"  A  petition  which  alleges  a  partnership,  that  the  plaintiff 
was  wrongfully  excluded  from  the  business,  and  asking  an  ac- 
counting, but  which  does  not  show  the  terms  or  the  plaintiff's 
interest  in  the  business,  has  been  held  demurrable. ^^ 

§  864.  Motion  for  judgment  on  the  pleadings. — In  the 
event  that  the  pleadings  do  not  show  any  cause  of  action  against 
a  partnership,  a  motion  for  judgment  on  the  pleadings,  on  the 
part  of  the  partnership,  should  be  granted.  The  converse  is  also 
true,  and  if  the  petition  shows  partnership  liability,  and  the 
answer  shows  no  defense  thereto,  judgment  should  also  be 
granted  on  the  pleadings.  For  example,  if  a  firm  is  sued  upon 
a  note,  given  by  one  partner  on  the  firm,  for  his  own  debt,  and 
the  petition  shows  that  the  plaintiff  knew  this,  and  its  fraudulent 
nature,  a  motion  for  judgment  on  the  pleadings  should  be  granted. 
The  practice,  however,  at  least  in  regard  to  details,  is  not  the 
same  in  all  jurisdictions. 

§  865.  Summons. — The  most  important  principles  as  to 
the  service  of  process  and  summons  were  discussed  in  the  chap- 
so  Massey  v.  Pike,  20  Ark.  92 ;  Fox  "Ridgway  v.  Grant,  17  111.  117; 
V.  Clemmons,  30  Ky.  L.  805,  99  S.  Whitlock  v.  S.  G.  Mozley  &  Co.,  142 
W.  64 ;  Thompson  v.  Young,  90  Md.  Ga.  305,  82  S.  E.  886 ;  Lane  v.  Lodge, 
72,  44  Atl.  1039 ;  Beacannon  v.  Liebe,  139  Ga.  93,  76  S.  E.  874 ;  Mackey  v. 
11  Ore.  443,  5  Pac.  273.  Auer,  8  Hun  (N.  Y.)   180. 

51  Wood    V.    Martin,    115    Ga.    147,        ss  Rose  v.   Moate    (Ga.),  87   S.  E. 
41   S.  E.  490.  20. 


§    866  LAW    OF    PARTXERSHIP  1220 

ter  on  Actions,  under  the  heading  of  Process.^*  In  case  the 
suit  is  against  each  partner  individually,  each  one,  being  a  sep- 
arate defendant,  must  be  served  with  summons.  Wherever,  by 
statute,  suit  may  be  commenced  against  the  partnership  in  the 
firm  name,  it  is  usually  provided,  as,  for  example,  in  Ohio,  that 
service  may  be  made  by  leaving  a  copy  at  the  usual  place  of 
business  of  the  firm,  or  with  any  member  of  the  partnership.^^ 
If  the  partnership  have  a  usual  place  of  doing  business  in  each 
of  several  counties,  it  may  be  sued  in  any  of  them,  but,  if  sued 
in  the  firm  name,  it  must  be  in  a  county  where  it  has  an  actual 
place  of  business.^*'  Where  only  one  of  several  co-defendant 
partners  is  served  before  the  running  of  the  statute  of  limita- 
tions, this  will,  it  is  held,  stop  the  running  of  the  statute  against 
the  others,  and  they  may  be  served  at  a  later  time.^^  The  service, 
like  service  in  other  classes  of  cases,  may  be  either  actual  or  con- 
structive, and  under  the  same  conditions  and  limitations.  In 
case  there  is  an  amendment  to  a  pleading,  substituting  the  indi- 
vidual partners  for  the  firm  name,  it  is  essential  that  a  new  sum- 
mons be  served. ^^ 

§  866.  Verification. — In  many  states  verification  of  a 
partnership  pleading  by  one  partner,  even  when  required,  is  held 
sufficient.^^  A  partner  is,  as  has  been  seen,  an  agent  for  the  firm  in 
so  far  as  he  acts  within  the  scope,  or  apparent  scope  of  his  author- 
ity and  the  firm  business.  He  is,  therefore,  authorized,  in  the  ab- 
sence of  a  contract  to  the  contrary,  to  verify,  in  the  usual  and  or- 
dinary course  of  events,  pleadings  of  the  firm.  Moreover,  in  such 
states  as  provide  by  law  that  where  several  parties  are  united  in 
interest,  and  plead  together,  one  may  verify  for  all;  one  partner, 

^*  See  ante  §  817.  dl ;  Lessem  v.  Wilson,  43  Iowa  488; 

^5  Rev.  Stats,  of  Ohio,  §  5039.  Mooney   v.    Ryerson,    8    N.    Y.    Civ. 

s<'  Grady  v.   Gosline,   48   Ohio   665,  Proc.  435 ;   Lacy  v.  Wilkinson,  7  N. 

29  N.  E.  768.  Y.  Civ.  Proc.  104 ;  Alartinez  v.  Cor- 

^^  Cowie      V.      Meyers,      10      Ohio  doba,  5  Philippine  545 ;   Cheatham  v. 

Dec.  91.  Pearce,  89  Tenn.  668,  15  S.  W.  1080; 

^8  Dobell      V.      Loker,      1      Handy  Moody  v.    Alter,    12   Heisk.    (Tenn.) 

(Ohio)    574,   12  Ohio   Dec.  297.  142;  Garland  v.  Hickey,  75  Wis.  178, 

59  Garner  v.  Simpson,  Minor  (Ala.)  43  N.  W.  832. 


1221  PLEADTN-G  §    866 

where  several  are  so  joined,  may  make  the  affidavit  for  all."" 
In  case,  however,  their  interests  are  not  united,  and  where  they 
do  not  plead  together,  each  must  sign  his  own  affidavit,  the 
same  as  if  they  were  nonpartners. 

60  See  Ohio  Rev.  Stats.,  §  51021. 


CHAPTER  XXVII 


EVIDENCE 


SECTION 

875.  Evidence — Generally. 

876.  Burden  of  proof. 

877.  Proof  of  partnership — Generally. 

878.  Presumptions    as    to    partnership 

matters. 

879.  A    mixed    question    of    law    and 

fact. 

880.  How  facts  are  proved. 

881.  Facts  to  be  proved. 

882.  Proof  of  partnership  agreement. 

883.  Proof    of    partnership — Uniform 

Partnership  Act. 

884.  Agreement — Proof  by  assent  and 

ratification. 

885.  Proof  by  certificate. 

886.  Parol  proof  to  establish  partner- 

ship. 

887.  Proof    of    acts    and    conduct    to 

show  partnership. 

888.  Admissions  by  partners — Gener- 

ally. 

889.  Admissions    and    declarations    in 

actions      by      third       persons 
against  partners. 

890.  Representations    made    in    pres- 

ence of  partner,  or  in  course 
of  business. 

891.  Representations   against  interest. 

892.  Representations  in  interest. 

893.  Admissions  by  judgment. 

894.  Records  and  pleadings  in  former 

car 

895.  Proof    of    firm    name    as    prima 

facie   evidence   of   partnership. 

896.  Use  of  individual  names  of  part- 

ners in  firm  name. 


SECTION 

897.  Profit  sharing  as  proof  of  part- 

nership. 

898.  Proof  of  sharing  in  profits  and 

losses. 

899.  Sharing  in  profits,  or  profits  and 

losses — Prima  facie  case. 

900.  Proof  of  sharing  in  profits  and 

losses — Not  conclusive. 

901.  Liability  to  third  persons — Proof. 

902.  Suits  between  partners — Proof. 

903.  Suits     against    third    persons  — 

Proof. 

904.  Intention. 

905.  Proof  by  holding  out. 

906.  Proof    by    holding    out — Nature 

and  degree. 

907.  Proof  by  holding  out — Estoppel. 

908.  Proof  by  holding  out — Acts  con- 

stituting an  estoppel. 

909.  Partnership   liability  by  estoppel 

— Uniform  Partnership  Act. 

910.  Proof  by  reputation. 

911.  Partnership  in  individual  name. 

912.  Admissibility       of       partnership 

books  generally. 

913.  Compelling   production    of    part- 

nership books. 

914.  Partnership  books  and  papers  as 

evidence — Between  partners. 

915.  Presumption  of  access  to  books 

— Denying  correctness. 

916.  Partnership  books  and  papers  as 

evidence — Against  partners. 

917.  Partnership  books  and  papers  as 

evidence — Against     third     per- 
sons. 


1222 


1223 


EVIDENCE 


876 


SECTION 

918.  Partnership  books  and  papers  as 

evidence — In     favor    of     third 
persons. 

919.  Authority  of  partner — Presump- 

tion. 

920.  Liability    of    nominal    partners — 

First  rule. 

921.  Liability    of    nominal    partners — 

Second  rule. 

922.  Liability  of  dormant  partner. 


SECTION 

923.  Liability    of    dormant    partner — 

Limitation. 

924.  Authority  of  partner — Particular 

cases. 

925.  Authority  of  partner  after  disso- 

lution. 

926.  Dissolution — Notice    of    dissolu- 

tion. 

927.  Admissions  after  dissolution. 

928.  Admissions  of  surviving  partner. 

929.  Accounting — Burden  of  proof. 


§  875.  Evidence — Generally. — Reference  should  be  made 
to  the  definitions  of  partnership;^  to  the  tests  of  partnership ;- 
to  the  law  as  to  the  power  of  one  partner  to  bind  the  firm,^  and 
to  the  rules  of  partnership  accounting,*  for  the  purpose  of  mak- 
ing more  intelligent  and  comprehensible  the  law  as  to  proof  in 
establishing  the  rights  and  liabilities  of  the  persons  composing 
the  partnership  among  themselves  or  as  between  such  partnership 
and  third  persons,  since  in  almost  all  cases  the  rules  as  to  the 
admissibility  of  evidence  and  the  amount  required  are  closely 
dependent  upon  the  substantive  law. 

§  876.  Burden  of  proof. — In  an  action  on  a  contract  pur- 
porting to  have  been  executed  in  a  firm's  name,  or  in  an  action 
against  alleged  partners  on  an  account  or  on  an  implied  agree- 
ment, the  burden  of  proof  is  upon  the  plaintiff  to  show  that  the 
persons  sued  as  partners  were  in  fact  such;  and  the  proof  must 
establish  that  such  persons  were  partners  at  the  time  the  con- 
tract was  executed  or  the  account  made.^    In  some  jurisdictions 


1  Ante  Chapter  2. 

2  Ante  Chapter  3. 

3  Ante  Chapter  15. 

4  Ante  Chapters  21,  23. 

^  See  Guice  v.  Thornton,  76  Ala. 
466;  Smith  v.  Moynihan,  44  Cal.  53; 
Kent  v.  Cobb,  24  Colo.  App.  264,  133 
Pac.  424;  Rick  v.  Neitzy,  1  Mackey 
(D.  C.)  21  ;  Davidson  v.  Wilson,  3 
Del.  Ch.  307;  Cowart  v.  Fender.  137 
Ga.    586,    73    S.    E.    822,    Ann.    Cas. 

27 — Row.  ON  Partn. — Vol.  2 


1913  A,  932n;  Smith  v.  Knight, 
71  111.  148,  22  Am.  Rep.  94;  De 
St.  Aubin  v.  Laskin,  74  111.  App. 
455 ;  Henshaw  v.  Root,  60  Ind. 
220;  Graham  v.  Henderson,  35  Ind. 
195;  Miller  v.  Baker,  161  Iowa  136. 
140  N.  W.  407;  Hall  v.  Clagett,  48 
Md.  223;  Howe  v.  Thayer.  17  Pick. 
(Mass.)  91;  Campbell  v.  Sherman,  49 
Mich.  534,  14  N.  W.  484;  Watts  v. 
Pierson,  170  Mo.  App.  532,  156  S.  W. 


§    876  LAW    OF    PARTNERSHIP  1224 

the  burden  is  not  on  the  plaintiff  who  asserts  liability  of  the 
defendants  as  partners,  to  prove  the  fact  of  partnership  unless 
it  is  denied;^  or  in  some  states,  denied  by  verified  plea;^  and 
if  not  so  denied,  the  burden  is  then  on  the  defendants  to  dis- 
prove its  existence,  or,  in  some  jurisdictions,  the  failure  to  file 
such  a  plea  may  operate  as  a  conclusive  admission.^  If  a  re- 
plevin petition  charges  a  partnership,  and  there  is  no  such 
denial  as  required  by  statute  the  plaintiff  need  not  prove 
a  particular  person  to  be  a  member  of  the  firm.^  Where,  in 
a  suit  against  an  alleged  partnership,  one  defendant  answered 
that  he  could  not  admit  or  deny  the  allegations  of  the  peti- 
tion for  want  of  sufficient  information,  and  the  other  denied 
the  indebtedness  and  pleaded  no  partnership,  the  plaintiff  had, 
as  against  the  latter  defendant,  the  burden  of  proving  both 
the  debt  and  the  partnership,  and  it  was  error  to  charge  that  the 
only  issue  was  one  of  partnership/**  So  where  the  plaintiff  de- 
clared against  a  defendant  individually,  but  sought  to  charge  him 
as  a  partner,  the  burden  was  held  to  be  upon  the  plaintiff  to  show 
the  partnership;  but  it  has  been  held  that  Avhen  the  evidence 
prima  facie  establishes  the  partnership,  or  when  it  is  such  tiiat 
a  partnership  may  reasonably  be  inferred,  the  burden  is  cast  upon 
the  defendant  to  show  an  incorporation  where  it  was  sought  to 
avoid  individual  liability  on  the  ground  that  the  company  was 
incorporated,  and  a  prima  facie  case  of  partnership  was  held  to  be 
made  out  where  the  proof  shows  that  the  defendant,  sought  to  be 
charged,  represented  that  the  company  was  composed  of  himself 
and  two  others,  and  that  it  was  solvent,  but  without  any  admis- 

724 ;    Walgamood    v.    Randolph,    22  « Bredhoflf  v.  Lepman,  181  111.  App. 

Nebr.   493,   35   N.   W.   217;   Oglesby  247. 

V.  Thompson,  59  Ohio  St.  60,  51  N.  7  Thompson  v.  Piot,  52  Pa.  Super. 

E.  878;  Ashley  v.  WilHams,  17  Ore.  Ct.  305.     See  ante  §§  847,  848. 

441,  21   Pac.  556;  Hallstead  v.  Cole-  »  Bredhoff  v.  Lepman,  181  111.  App. 

man,  143  Pa.  St.  352,  22  Atl.  977,  13  247.     See  ante  §§  847,  848. 

L.    R.    A.   370;    State   v.    Penman,   2  ^  Richards  v.  Hellen,  153  Iowa  66, 

Desaus.  (S.  Car.)  1;  Maupin  v.  Dan-  133  N.  W.  393. 

iel,  3  Tenn.  Ch.  223 ;  Slater  v.  Arnett,  i°  American   Cotton  College  v.  At- 

81  Va.  432.  lanta  Newspaper  Union,  138  Ga.  App. 

147,  74  S.  E.  1084. 


1225  EVIDENCE  §   876 

sion  or  intimation  that  it  was  a  corporation."  A  check  executed 
in  the  firm's  name,  admitted  without  proof  of  execution,  was 
held  sufficient  evidence  of  partnership,  as  the  rule  is  that  the 
existence  of  partnership  may  be  inferred  from  indirect  evi- 
dence/^ So,  the  rule  is  that  a  firm's  liability  is  presumed  where 
the  note  or  contract  is  executed  in  the  partnership  name  and  the 
burden  is  not  on  the  plaintiff  or  holder  to  show  affirmatively  that 
it  was  given  as  a  partnership  transaction/^  But  where  the  exe- 
cution of  such  note  or  contract  is  denied  under  oath,  the  burden 
is  on  the  plaintiff  to  prove  not  only  the  execution  of  the  instru- 
ment, but  the  authority  to  execute  it  as  a  partnership  instru- 
ment/* Where  the  action  is  between  partners,  as  for  accounting 
or  dissolution,  the  burden  is  on  the  plaintiff  to  prove  the  exist- 
ence of  a  partnership,  and  this,  it  has  been  held,  requires  stronger 
proof  than  where  an  action  is  brought  against  parties  as  partners, 
and  clear  and  positive  evidence/^  In  an  action  against  a  surviving 
partner  on  a  firm  debt  a  prima  facie  case  of  partnership  must  be 
made  out/*'  In  a  proceeding  to  establish  a  wife's  interest  as  her 
husband's  partner,  the  plaintiff  must  show  the  existence  of  the 
partnership  at  the  time  of  the  wife's  death/^  Where  one  partner 
seeks  to  recover  against  another  it  has  been  held  that  the  existence 
of  the  partnership  must  be  proved  with  legal  certainty/®  Where 
partners  are  sued  in  their  individual  name,  the  fact  of  the  part- 
ly Clark  V.  Jones,  87  Ala.  474,  6  So.  "  Hobson  v.  Porter,  2  Colo.  28 ; 
362;  Cook  v.  Martin,  5  Sm.  &  M.  De  St.  Aubin  v.  Laskin,  74  111.  App. 
(Miss.)   379.  455;  Byington  v.  Woodward,  9  Iowa 


i2Henshaw  v.  Root,  60  Ind.  220 
Byington  v.  Woodward,  9  Iowa  360. 

i3Knapp  V,  McBride,  7  Ala.  19 
Ensminger  v.  Marvin,  5  Blackf 
(Ind.)  210;  Byington  v.  Woodward 
9  Iowa  360;  McMullan  v.  McKenzie, 


360. 

15  Bettinger  v.  Bettinger  (Iowa), 
150  N.  W.  1025 ;  Chapin  v.  Cberry,  243 
Mo.  375,  147  S.  W.  1084 ;  Simpson  v. 
Gernandt  (Nebr.),  152  N.  W.  549. 

isLetson  v.  Hall,  1  Ala.  App.  619, 


2    Greene     (Iowa)     368;    Barrett    v.  55  So.  944. 

Swann,    17  Maine  180;  Waldo  Bank  "Watson  v.  Hamilton,  180  Ala.  3, 

V.    Greely,    16   Maine  419 ;   Whitaker  60  So.  63. 

V.    Brown,    16   Wend.    (N.    Y.)    505;  is  Maunsell  v.  Willett,  36  La.  Ann. 

Vallett  V.  Parker,  6  Wend.    (N.  Y.)  322. 

615 ;  Doty  v.  Bates,  11  Johns.  (N.  Y.) 

544. 


§    877  LA\V    OF    PARTNERSHIP  1226 

nership  and  not  of  the  firm's  name  is  the  material  allegation  to 
be  proved;  and  it  was  held  sufficient  to  prov^  the  partnership 
whether  the  firm  name  was  proved  or  not/^ 

§  877.  Proof  of  partnership — Generally. — Courts  and  law 
writers  recognize  the  fact  that  no  absolute  rule  can  be  given 
either  as  to  the  quantum  or  kind  of  proof  sufficient  to  establish 
the  relation  of  partnership  among  the  persons  sought  to  be 
charged.  It  is  apparent  that  the  proof  must  be  sufficient  to 
bring  the  parties  within  the  comprehension  of  the  definitions  pre- 
viously given.  That  is,  the  evidence  must  be  sufficient  to  show 
some  arrangement  or  agreement  between  the  persons  sought  to 
be  charged  as  partners  to  contribute  money,  goods,  skill  or  labor 
to  some  business  enterprise  or  venture,  to  the  end  that  the  profits 
derived  therefrom  may  be  divided  between  them;  or  generally 
an  agreement  to  the  ef¥ect  that  they  share  in  the  profits  and 
losses.  But  it  may  be  sufficient,  as  will  be  seen,  to  prove  that  one 
of  the  persons  sought  to  be  charged  shall  have  permitted  the 
others  to  use  his  credit  or  to  hold  him  out  as  jointly  answerable 
with  themselves.  The  question  as  to  what  constitutes  a  partner- 
ship is  one  of  law,  but  whether  or  not  it  exists  is  a  question  of 
fact  to  be  determined  from  the  evidence.  To  establish  the  fact 
of  partnership  as  between  themselves  much  stricter  proof  is 
usually  said  to  be  required  than  in  cases  between  partners  and 
third  persons.  One  reason  for  this  is  that  it  is  within  the  power 
of  the  partners  to  give  stronger  evidence  on  the  subject  of  the 
partnership  than  a  third  person  could  ordinarily  produce.^"  The 
rule  has  been  stated  thus :  "The  fact  of  the  existence  or  nonexist- 
ence of  a  partnership  as  between  themselves  must  be  gathered 
from  the  intention  of  the  parties,  and  the  court  in  arriving  at  the 
intention  must  form  its  conclusions  from  deductions  drawn  by 
analogy  from  principles  of  law  applied  to  the  facts  and  circum- 
stances developed  in  the  case.""^     It  has  been  held  that  partner- 

13  Stickney  v.  Smith,  5  Minn.  486.        McGregor  v.  Cleveland,  5  Wend.  (N. 

20Chisholm  v.  Cowles,  42  Ala.  179;     Y.)    475. 
Robinson   v.    Green,    5    Harr.    (Del.)         21  Heise  v.  Barth,  40  Md.  259;  Bull 
115;  Walker  v.  Matthews,  58  111.  196;     v.  Schuberth,  2  Md.  38;  Gray  v.  Gib- 
son, 6  Mich.  300. 


1227  EviDEXCE  §  87S 

ship  IS  a  fact  which  may  be  proved  as  any  other  fact  by  persons 
having  knowledge  thereof."^ 

§  878.  Presumptions  as  to  partnership  matters. — Pre- 
sumptions also  arise  out  of  methods  of  partnership  dealings. 
Thus,  each  partner  is  presumed  to  have  knowledge  of  the  part- 
nership books,  and  the  books  are  presumed  to  be  correct.  Of 
course,  this  presumption  is  disputable  and  may  be  rebutted  by 
proof  that  the  partner  had  no  actual  knowledge  or  opportunity 
to  inspect  or  examine  the  books. "^  In  the  absence  of  evidence  to 
the  contrary  it  has  been  presumed  that  partners  are  equally  in- 
terested in  the  capital  and  in  the  profits  of  the  business."*  And 
it  has  been  held  that  they  are  also  presumed  to  be  equally  liable 
to  the  payment  of  losses  in  the  same  proportion  that  they  are 
entitled  to  share  the  profits. ^^  As  a  general  rule,  and  in  the  ab- 
sence of  any  indications  to  the  contrary,  the  law  presumes  that 
certain  existing  facts  remain  the  same  until  proven  to  have 
changed.  The  rule  as  to  the  existence  of  a  partnership  relation 
follows  the  general  rule,  and  if  a  partnership  is  shown  to  have 
existed,  a  presumption  arises  that  it  continues^^  until  a  dissolu- 
tion is  shown,  and  that  it  so  continues  under  the  same  terms  and 
conditions.-^     The  majority  of  the  cases  where  the  above  rule 

--  St.   Louis  &c.   Co.  V.   McPeters,  Farr  v.  Johnson,  25  111.  522 ;  Moore 

124  Ala.  451,  27  So.  518;  Central  R.  v.  Bare,  11  Iowa  198;  Harris  v.  Car- 

&c.  Co.  V.  Smith,  76  Ala.  572,  52  Am.  ter,    147    Mass.   313,    17    N.    E.   469; 

Rep.  353 ;  McGrew  V.  Walker,  17  Ala.  Gould   v.    Gould,   6   Wend.    (N.    Y.) 

824 ;  Lockridge  v.  Wilson,  7  Mo.  560 ;  263 ;    Logan   v.   Dixon,   73   Wis.   533, 

McGregor  v.  Cleveland,  5  Wend.   (N.  41  N.  W.  713;  Farrar  v.  Beswick,  1 

Y.)  475.  Moo.  &  Rob.  527. 

23  United  States  Bank  v.  Binney,  5  25  Irvine  &  Muir  Lumber  Co.  v. 
Mason  (U.  S.)  176;  Wheatley  v.  Holmes,  26  Cal.  App.  453,  147  Pac. 
Wheeler,  34  Md.  62  ;  Shoemaker  Piano  229;  Robinson's  Executors  Case,  2 
Mfg.  Co.  V.  Bernard,  2  Lea  Tenn.)  DeGex.  M.  &  G.  517. 

358;    Layton   v.    Hall,   25    Tex.   204;         26  Butler  v.  Henry,  48  Ark.  551,  3 

Saunders  v.  Duval,  19  Tex.  467.     See  S.     W.     878 ;     Irby     v.     Brigham,     9 

also  Fairchild  v.  Fairchild,  64  N.  Y.  Humph.  (Tenn.)  750;  Mann  v.  Clapp, 

471;   Allen  v.   Coit.   6  Hill    (N.  Y.)  1    White   &  W.    Civ.    Cas.    Ct.   App. 

318;    Pond   v.    Clark,   24   Conn.   370;  (Tex.),  §  502. 
Stuart  V.  McKichan,  74  111.  122.  27  Reybold  v.  Dodd,  1  Harr.  (Del.) 

24  Brewer  v.  Browne,  68  Ala.  210;  401. 
Turnipseed  v.   Goodwin,  9  Ala.  372; 


§    878  LAW    OF    PARTNERSHIP  1228 

is  recognized  are  based  upon  proof  of  partnership  within  a  few 
months,  or  at  most,  a  few  years  before  the  time  in  question,  and 
it  is  doubted  that  the  rule  generally  applies  unless  the  time  inter- 
vening is  a  reasonable  time.  At  least  the  weight  of  the  presump- 
tion would  be  lessened  after  a  long  and  unreasonable  period  of 
time,  and  it  would  be  ofifset  by  a  small  amount  of  evidence  to 
the  contrary.  It  has  been  held  that  proof  of  existence  after  the 
execution  of  a  partnership  instrument  is  not  proof  of  existence 
at  the  time  of  execution. ^^  It  has  been  held  that  a  presumption 
of  partnership  arises  from  the  use  of  a  name  such  as  is  commonly 
employed  when  a  partnership  exists,-^  but  there  are  many  other 
cases  holding  that  there  is  no  presumption  of  partnership  from 
the  mere  use  of  a  firm  name.^*'  Where  several  persons  carry  on 
the  same  business  together  they  may  be  presumed  to  be  partners,^^ 
and  certainly  where  they  participate  in  the  profits  of  the  busi* 
ness  a  partnership  will  be  presumed.^"  Each  partner  has  the  right 
to  sign  the  firm  name  to  commercial  paper,  and  it  will  be  pre- 
sumed, when  the  firm  name  so  appears,  that  it  was  signed  by  one 
with  authority  to  do  so  and  for  the  purposes  of  the  firm;  and  the 
burden  of  proof  is  on  the  partners  to  show  the  contrary. ^^  But 
proof  that  the  instrument  was  given  in  other  than  a  partnership 

28  Byington  v.  Woodward,  9  Iowa  Miller  v.  O'Boyle,  89  Fed.  140 ;  Parker 
360.  V.  Canfield,  Zl  Conn.  250,  9  Am.  Rep. 

29  Bell  V.  Massey,  14  La.  Ann.  831;  317;  Miller  v.  Rapp,  135  Ind.  614,  34 
Cobb  V.  Martin,  32  Okla.  588,  123  N.  E.  981,  35  N.  E.  693;  Ryder  v. 
Pac,  422.  See  also  Haug  v.  Haug,  90  Wilcox,  103  Mass.  24 ;  St.  Louis  Bank 
111.  App.  604,  and  Mary  v.  Lampre,  v.  Altheimer,  91  Mo.  190;  Alifflin  v. 
6  Rob.  (La.)  314.  Smith,    17    Serg.    &    R.    (Pa.)     165; 

=^0  Clark  v.  Jones,  87  Ala.  474,  6  So.  Cothran  v.  Marmaduke,  60  Tex.  370. 
362;    Willey    v.    Crocker-Woolworth        ^3  Lg  j^gy  y_  Johnson,  2  Pet.  (U.  S.) 


Nat.  Bank,  141  Cal.  508,  75  Pac.  106 
Robinson  v.  Magarity,  28  111.  423 
Byington  v.  Woodward,  9  Iowa  360 


186,  7  L.  ed.  391;  Jones  v.  Rives,  3 
Ala.  11,  13;  Miller  v.  Hines,  15  Ga. 
197 ;  Gregg  v.  Fisher,  3  111.  App.  261 ; 


Munton  v.  Rutherford,  121  Mich.  418,  Magill  v.   Merrie,   5   B.   Alon.    (Ky.) 

80  N.  W.  112;  Brennan  v.  Partridge,  168;  Waldo  Bank  v.  Greely,  16  Maine 

67  Mich.  449,  35  N.  W.  85.  419 ;   Thurston  v.  Lloyd,  4  Md.  283 ; 

31  McMullan  v.  Mackenzie,  2  Greene  Manufacturers'  &c.  Bank  v.  Winship, 

(Iowa)  368.  5  Pick.  (Mass.)  11,  16  Am.  Dec.  369; 

32Meehan  v.  Valentine,    145   U.   S.  Littell  v.  Fitch,  11  Mich.  525;  Vallett 

611,  12  Sup.  Ct  972,  36  L.  ed.  835;  v.  Parker,  6  Wend.  (N.  Y.)  615. 


1229  EVIDENCE  §   879 

transaction  will  rebut  the  presumption.^*  It  has  often  been 
stated  that  participation  in  the  profits  of  a  business  raises  a  pre- 
sumption of  the  existence  of  a  partnership.^^  But  this  presump- 
tion is  overcome  by  proof  of  the  real  contract  and  the  circum- 
stances of  the  case.^®  No  presumption  of  partnership  arises  from 
mere  joint  ownership.^^  A  mere  joint  purchase  of  real  estate 
in  the  names  of  a  bankrupt  and  another,  with  no  proof  that 
either  could  sell  it  without  the  consent  of  the  other,  and  no 
evidence  of  any  business  done  in  a  firm  name,  will  not  establish  a 
partnership.^'^  Community  of  interest  in  the  joint  ownership  of 
property  is  not  necessarily  evidence  of  partnership  and  where 
a  community  of  interest  is  held  by  members  of  a  social  or  fra- 
ternal organization,  the  presumption  is  against  the  existence  of 
a  partnership.^* 

§  879.  A  mixed  question  of  law  and  fact. — ^The  question 
as  to  the  existence  of  partnership  relations  is  a  mixed  question  of 
law  and  of  fact.  What  constitutes  a  partnership  is  a  question  of 
law,  and  must  be  decided  by  the  court.  The  existence  or  non- 
existence of  the  facts  necessary  to  bring  the  relation  within  the 
rule  of  partnership  so  determined,  is  a  question  of  fact  for  the 
jury  to  determine.*"  Upon  an  admitted  statement  of  facts,  it  is 
then  sim.ply  a  question  of  law,  and  the  court  will  determine 
whether  or  not  the  facts  so  admitted  bring  the  relation  within 

3*N.  Y.  &c.  Ins.  Co.  V.  Bennett,  5  v.  Brand,  176  Mo.  App.  395,  158  S.  W. 

Conn.  574,   13  Am.  Dec.   109;   Lucas  709. 

V.  Baldwin,  97  Ind.  471 ;  Eastman  v.  ^'^  St.  John  v.  Coates,  63  Hun  460, 

Cooper,  15  Pick.  (Mass.)  276,  26  Am.  18  N.  Y.   S.  419,  45   N.  Y.   St.  431; 

Dec.  600;  Butler  v.  Stocking,  8  N.  Y.  Neill  v.   Shamburg,   158   Pa.   St.  263, 

408,  Seld.  notes  123.  27  Atl.  992 ;  Stannard  v.  Smith,  40  Vt. 

s^Berrj'    v.    Pelneault,    188    Mass.  513. 

413,  74  N.  E.  917 ;  Fourth  Nat.  Bank  ss  Mayes    v.    Palmer,   208    Fed.    97, 

V.   Altheimer,   91    Mo.   190,   3   S.   W.  125  C.  C.  A.  325. 

858 ;  Willoughby  v.  Hildreth,  182  Mo.  39  Willoughby  v.  Hildreth,  182  Mo. 

App.  80,  167  S.  W.  639 ;  Tamblyn  v.  App.  80,  167  S.  W.  639. 

Scott,  111  Mo.  App.  46,  85  S.  W.  918.  ^o  Gilpin  v.  Temple,  4  Harr.   (Del.) 

sGBluefields  S.  S.  Co.  v.  Lala  Fer-  190;   Doggett  v.  Jordan,  2  Fla.  541; 

reras    Cangelosi    S.    S.    Co.,    133    La.  Drake  v.    Elwyn,    1    Caines    (N.    Y.) 

424,   63    So.   96;    Ellis  v.    Brand,   176  184;    Cobb   v.   Martin,   32   Okla.    588, 

^lo.  App.  383,  158  S.  W.  705 ;  Aehle  123  Pac.  422.     See  ante  §§  103,  825. 


§    880  LAW    OF    PARTNERSHIP  1230 

the  rule  defining  partnership.*^  It  has  been  held  in  Alabama 
that,  although  after  the  facts  are  ascertained,  the  partnership 
relation  becomes  a  matter  of  law,  nevertheless,  a  witness  who 
knows  the  fact  may  state,  in  so  many  words,  that  a  partnership 
existed  between  the  parties,  but  that  the  party  against  whom  the 
testimony  is  offered,  may  cross-examine  the  witness  as  to  the 
sources  of  his  knowledge,  and  show,  if  such  be  the  case,  that  the 
witness  speaks  from  opinion  merely,  and  with  no  actual  knowl- 
edge of  the  facts/^  It  is,  however,  doubted  that  this  rule  is 
general,  inasmuch  as  it  is  not  in  accord  with  the  visual  rule  of 
evidence  generally,  that  the  witness  should  simply  state  the  facts, 
and  that  the  jury,  acting  under  the  instructions  of  the  court  as 
to  the  law  applicable,  should  determine  the  final  question  in- 
volved. It  is  impossible  to  see  any  logical  reason  for  making 
an  exception  to  the  general  rule  of  evidence  in  partnership  cases. 

§  880.  How  facts  are  proved. — Proof  of  a  partnership, 
as  between  the  alleged  partners,  must  be  stronger  than  as  against 
the  alleged  partner  by  a  third  person.*^  The  reason  for  this  rule 
we  have  seen  heretofore.  The  actual  existence  of  the  partnership 
which  implies  intention  is  necessary  as  between  the  alleged 
partners  themselves,  while  a  third  party  may  hold  the  alleged 
partners  to  partnership  relations,  or  to  a  partnership  as  far  as  the 
third  party  is  concerned,  even  when  there  is  no  actual  partner- 
ship as  between  the  alleged  partners  themselves.  Universal 
partnerships  are  rare,  and  the  courts  will  not  hold  a  partnership 
universal  unless  the  evidence  thereof  is  very  clear.**  Evidence 
that  a  person  was  "interested"  in  a  certain  business  does  not 
establish  the  existence  of  a  partnership  therein  on  the  part  of 
such  person.*^  Strict  proof  is  required  of  one  who  seeks  to 
prove  a  verbal  contract  of  partnership  against  the  representatives 
of  a  deceased  person,  both  as  to  the  existence  and  the  provisions 
of  such  partnership  contract.**'     Partnership,  like  every  other 

41  Everitt  v.  Chapman,  6  Conn.  347.        4*  Gray  v.  Palmer,  9  Cal.  616. 

42  McGrew  v.  Walker,  17  Ala.  824.        45  Levy  v.  McDowell,  45  Tex.  220. 
43Roliin';on     v.     Green,     5     Harr.        46  Xelly  v.  Devlin,  47  N.  Y.  Super. 

(Del.)   115.  Ct.  555. 


1231  EVIDENCE  §   881 

fact,  must  be  proved  by  competent  evidence,  and  it  can  not  be 
shown  by  mere  supposition.*^  It  may,  however,  be  shown  not 
only  by  an  actual  written  contract,  but  by  parol,  by  the  acts  of 
the  parties,  their  admissions — in  fact,  by  the  circumstances  of 
the  case.^^  The  simple  denial  of  the  fact  of  partnership  by  one 
sought  to  be  charged  as  a  partner  is  admissible  in  evidence/^ 
Such  denial  will,  however,  not  avail  the  defendant  if  the  evi- 
dence, as  a  whole,  shows  that,  in  fact,  the  essential  elements  of 
a  partnership  are  present.''"  Likewise,  a  person  suing  on  a  note, 
alleged  to  be  given  by  a  partnership,  may  testify  that  at  the  time 
he  received  the  note,  he  believed  the  defendants  to  hpve  been 
partners.^^  Such  testimony,  however,  could  be  attacked  by  com- 
pelling the  party  so  testifying  to  give  the  facts  upon  which  he 
based  his  belief,  and  it  is  not  believed  that  his  testimony  as  to 
his  belief  would  have  any  bearing  upon  the  question  of  partner- 
ship unless  the  facts  upon  which  he  relied  justified  such  a  belief. 

§  881.  Facts  to  be  proved. — The  facts  to  be  proved  to 
establish  a  partnership  vary  somewhat  in  the  various  jurisdic- 
tions, depending  upon  the  different  tests  of  partnership  adopted, 
as  explained  heretofore.  If  intention  governs,  it  must  be  clearly 
shown.  If  the  contract  of  partnership  is  in  writing,  it  will  con- 
trol, unless  the  contract  is  clearly  ambiguous,  in  which  case 
parol  evidence  may  be  introduced  to  explain  the  ambiguity.  If 
the  partnership  agreement  is  not  in  writing,  the  intention  of  the 
parties  must  be  ascertained  from  their  words  and  conduct.  Even 
when  the  contract  is  in  writing,  according  to  the  usual  rule  in 
contracts,  it  may  be  changed  or  modified  by  a  subsequent  written 
or  verbal  contract  assented  to  by  each  member  of  the  firm,  and 
this  change  may  be  shown  by  acts  of  the  partners.  This  should 
be  remembered :  that  a  true  partnership,  one  between  the  part- 
ners themselves,  can  not  be  proved  except  by  showing  their 
voluntary  consent,  either  express  or  implied  from  their  acts.    In 

4''' Hudson  V.  Simon,  6  Cal.  453.  ^o  Cogswell  v.  Wilson,  11  Ore.  371, 

48KelIeher  v.  Tisdale,  23  111.  405.  4  Pac.  1130. 

43  Chambers  v.  Grout,  63  Iowa  342,  ^i  Seekell  v.  Fletcher,  53  Iowa  330, 

19  N.  W.  209.  5  N.  W.  200. 


§    881  LAW    OF    PARTNERSHIP  1232 

such  a  case  the  Intention  is  essential,  and  must  be  shown  by  com- 
petent evidence.^^  As  a  general  rule,  and  in  most  jurisdictions, 
partnership  relation  as  to  third  parties  may  be  shown  in  several 
ways,  chief  of  which,  perhaps,  is  proof  of  sharing  of  profits 
and  losses.  Mr.  Lindley,  in  his  work  on  Partnership,  says  that, 
"the  writer  is  not  aware  of  any  case  in  which  persons  who  have 
agreed  to  share  profits  and  losses  have  not  been  held  to  be 
partners. "^^  Our  Federal  courts  have  held  that,  in  order  to 
establish  the  existence  of  a  partnership,  inter  sese,  there  must  be 
shown  to  be  an  existing  community  of  interest  and  participation 
in  profit  and  loss.^*  It  has  been  held,  however,  that  it  need  not 
be  proved  that  each  partner,  as  between  themselves,  is  liable  to 
share  indefinitely  in  the  losses  of  the  concern.  It  is  sufficient 
if  it  be  shown  that  the  partners  share  in  the  profits  and  the 
losses,  so  far  as  they  affect  the  capital  invested.'^^  If  it  be  shown 
that  two  or  more  persons  have  purchased  real  estate  jointly,  and 
it  is  sought  to  hold  them  as  partners,  it  should  be  shown  by  com- 
petent evidence  that  their  intention  was  to  sell  the  real  estate  for 
their  joint  profit.^*'  An  agreement  between  two  or  more  parties 
to  share  the  profits  of  a  joint  enterprise,  nothing  being  said  as  to 
losses,  is  prima  facie  an  agreement  to  share  losses  also,  in  the 
absence  of  a  statute  to  the  contrary,  and  further  proof  is  In  such 
case  unnecessary,  as  to  such  intention  to  share  losses.^^  This 
presumption,  however,  may,  at  least  inter  sese,  be  rebutted  by 
evidence  showing  that  the  intention  of  the  parties  was  not  to 
enter  partnership  relations,  or  to  share  losses.  An  Illinois  case, 
however,  goes  to  the  extent  of  holding  that  an  agreement  to 
share  the  net  profits  necessarily  implies  a  sharing  of  the  losses. ^^ 
This  case,  however,  Is  believed  to  apply  the  rule  to  a  greater 
extent  than  is  followed  generally,  and  the  rule  above  given,  that 

52  Hedge's  Appeal,  6i  Pa.   St.  273.    Hulett  v.  Fairbanks,  40  Ohio  St.  233  ; 

53  Lindley   Partnership,   p.    10.  Canada  v.  Barksdale,  76  Va.  899. 
54FeHchy    v.    Hamilton,    1    Wash.        57  Dix    v.    Otis,    5    Pick.     (Alass.) 

(U.  S.)  491.  Fed.  Cas.  No.  4719.  38;   Heyhoe  v.   Burge,  9  C.   B.   431, 

55  Brigham  v.  Dana,  29  Vt.  1.  19  L.  J.  C.  P.  243. 

56  Richards    v.    Grinnell,    6Z    Iowa  58  wilcox    v.    Dodge,    12    111.    App. 
44,  18  N.  W.  668,  50  Am.  Dep.  727;  517. 


1233  EVIDENCE  §    882 

it  is  prima  facie  evidence  rather  than  conclusive  evidence,  is 
thought  to  be  the  more  proper  and  generally  adopted  law.  For 
instance,  it  is  generally  held  that  servants  may  be  paid  salaries 
proportionate  to  the  profits  of  the  business  without  thereby  be- 
coming partners.  The  rule  is  well  and  clearly  laid  down  by  the 
court  in  the  Connecticut  case  of  Parker  v.  Canfield,^^  as  follows : 
"Participation  in  the  profits  of  a  business  is  strong  presumptive 
evidence  of  a  partnership  in  it.  This  rule  and  the  reason  apply 
as  well  to  a  party  who  receives  a  sum  equal  to  a  certain  share 
of  the  profits  of  a  business  as  to  a  party  receiving  such  a  share 
of  profits  by  the  name  of  profits.  There  are  some  cases,  how- 
ever, where  money  received  may  appropriately  be  regarded  as 
a  sum  measured  by  profits  rather  than  as  profits  themselves,  but 
whether  it  shall  be  so  regarded  depends  upon  no  arbitrary  use 
of  phrases,  but  upon  the  nature  of  the  contract  and  the  real 
consideration  upon  which  the  money  is  received.  A  share  of 
profits  paid  to  agents  to  secure  exertion  is  not  such  a  participation 
in  profits  as  to  make  the  agent  liable  as  partner,  and  in  such 
cases  the  money  so  paid  is  spoken  of  as  a  sum  equal  to  or  meas- 
ured by  profits,  rather  than  as  a  share  in  the  profits  themselves." 
There  is  perhaps  no  rule  of  law  more  clearly  established  by  a 
long  line  of  cases  than  the  above.®'' 

§  882.  Proof  of  partnership  agreement. — The  fact  of 
partnership  necessarily  implies  the  consent  of  the  persons  joining 
in  the  enterprise  or  undertaking.  As  between  the  persons  them- 
selves no  one  can  be  charged  as  a  partner  against  his  consent,  and 
in  order  to  establish  a  liability  against  a  party  as  a  partner  for 
or  on  account  of  the  acts  of  others  the  proof  must  show  that 
the  partnership  was  formed  by  express  agreement ;  or  that  the 
party,  sought  to  be  charged,  has  been  guilty  of  some  act  by  which 
he  is  estopped  from  setting  up  that  he  is  not  in  fact  a  partner.®^ 

^^37  Conn.  250.  74;    Richardson    v.    Hughltt.    76    N. 

'■•0  Price  V.  Alexander,  2  G.  Greene  Y.    55 ;    Miller   v.    Bartlett,    15    Serg. 

(Iowa)  427,  52  Am.  Dec.  526;  Chaf-  &  R.   (Pa.)   137;  Nicholaus  v.  Tliiel- 

fraix    V.    Price,    29    La.    Ann.    176;  ges,  50  Wis.  491,  7  N.  W.  341. 
Meserve  v.  Andrews,  104  Mass.  360 ;         •'i  Haycock    v.    Williams,    54    Ark. 

Smith    V.    Perry,    5    Dutch    (N.    J.)  384.   16   S.   W.   3;   Lincoln   Park  &c. 


§    882  LAW    OF    PARTNERSHIP  1234 

Where  a  person  has  not  in  any  manner  been  held  out  to  the  com- 
munity as  a  partner  in  business,  and  a  plaintiff,  seeking  neverthe- 
less to  charge  him  as  such  partner,  produces  a  written  agreement 
between  the  partners  to  prove  such  a  partnership,  the  whole  of 
the  agreement  must  be  read  together,  and  the  plaintiff  can  not 
use  such  parts  of  the  agreement  as  tend  to  establish  a  partnership, 
and  reject  such  parts  as  tend  to  show  the  contrary.*'"  Where  it 
is  sought  to  charge  defendants  as  partners,  for  goods  delivered, 
a  contract  providing  for  a  joint  enterprise  between  defendants 
in  the  business  for  which  the  goods  were  furnished,  is  admissible, 
and  is  prima  facie  proof  of  partnership.*'^  It  is  not  essential, 
however,  either  to  produce  or  prove  a  written  article  of  agree- 
ment ;  nor  is  it  required  to  prove  a  particular  form ;  it  is  sufficient 
to  prove  mutual  consent  of  two  or  more  competent  minds,  or 
as  hereafter  shown,  it  may  be  implied  from  conduct  and  circum- 
stances, if  sufficiently  significant  and  expressive  to  convince  the 
mind.''*  But  the  proof  must  show  that  the  contract  is  complete 
and  assented  to  by  all  persons  sought  to  be  charged.*'^  It  has  been 
held  that  a  person  can  not  be  made  a  partner  so  as  to  bind  him, 
in  the  absence  of  proof  of  his  consent,  admissions  or  acts.^®    And 

V.  Swatek,  204  111.  228,  68  N.  E.  429 ;  Appeal,    62,    Pa.    St.    273 ;    Farmers' 

Bishop    V.    Georgeson,    60    111.    484 ;  Bank  v.  Smith,  26  W.  Va.  541 ;  Woods 

Phillips  V.  Phillips,  49  111.  437 ;  Leon-  v.   Ward,   48  W.   Va.  652,   Z7   S.   E. 

ard  V.   Sparks,   109  La.  Ann.  543,  Zi  520 ;  Setzer  v.  Beale,  19  W.  Va.  274 ; 

So.    594;    Halliday    v.    Bridewell,    36  Miller  v.   Stone,  69  Wis.  617,  34  N. 

La.   Ann.  238;    Pickerell  v.   Fisk,    11  W.  907;  Holgate  v.  Downer,  8  Wyo. 

La.    Ann.    277;    Gray    v.    Gibson,    6  334,  57  Pac.  918. 

Mich.    300;    Lucas    v.    Cole,    57    Mo.  ^2  ;M]anhattan    Brass    Mfg.    Co.    v. 

143;  Freeman  v.  Bloomfield,  43  Mo.  Sears,     31     N.     Y.     Super.     Ct.     (1 

391;  Groves  v.  Tallman,  8  Nev.  178;  Sweeny)   426. 

Sargent  v.  Collins,  3  Nev.  260 ;  Hal-  es  piock  v.  Williams,  175   111.  App. 

lenback  v.  Rogers,  57  N.  J.  Eq.  199,  319. 

40  Atl.  576 ;  Central  City  Sav.  Bank  64  Causler  v.  Wharton,  62  Ala.  358. 

V.  Walker,  66  N.  Y.  424 ;  Baldwin  v.  es  Metcalf  v.  Redmon,  43  111.  264 ; 

Burrows,    47    N.    Y.    199;    Willis    v.  Morrill   v.    Spurr,    143    Mass.   257,   9 

Crawford,  38  Ore.  522,  63  Pac.  985,  N.  E.  580;  Stewart  v.  Robinson,  115 

64  Pac.  866.  53  L.  R.  A.  904 ;  Daw-  N.  Y.  328,  22  N.  E.  160,  163,  5  L.  R. 

son    v.    Pogue,    18   Ore.   94,   22    Pac.  A.    410;    Cantara    V.    Blackwell,    14 

637,  6  L.  R.  A.  176;  Kelley  v.  Bourne,  Wash.  294,  44  Pac.  657. 

15    Ore.    476,    16    Pac.    40;    Hedge's  ^^'^  Bishop  v.  Georgeson,  60  111.  484. 


1235  EVIDENCE  §   883 

it  has  been  held  that  "A  partnership  is  never  created  between 
parties  by  imphcation  or  operation  of  law,  apart  from  an  ex- 
pressed or  implied  intention  and  agreement  to  constitute  the  re- 
lation."^^  Ordinarily,  the  limits  of  partnership  liability  are  de- 
termined by  the  agreement  in  the  absence  of  estoppel.''^  A  prima 
facie  case  of  partnership  may  be  made  out  against  persons  asso- 
ciated in  carrying  on  a  certain  business  by  evidence  showing  that 
they  are  common  proprietors  of  a  business  conducted  for  their 
mutual  benefit."'' 

§  883.     Proof  of  partnership — Uniform  Partnership  Act. 

— The  Uniform  Partnership  Act  lays  down  certain  rules  for  de- 
termining the  existence  of  a  partnership  which  govern  very 
largely  the  admissibility  and  weight  of  evidence  in  actions  under 
that  act.  Section  seven  provides :  "In  determining  whether  a 
partnership  exists  these  rules  shall  apply  :  ( 1 )  Except  as  pro- 
vided by  section  16  [relating  to  partner  by  estoppel]  persons  who 
are  not  partners  as  to  each  other  are  not  partners  as  to  third 
persons.  (2)  Joint  tenancy,  tenancy  in  common,  tenancy  by  the 
entireties,  joint  property,  common  property,  or  part  ownership 
does  not  of  itself  establish  a  partnership,  whether  such  co-owners 
do  or  do  not  share  any  profits  made  by  the  use  of  the  property. 
(3)  The  sharing  of  gross  returns  does  not  of  itself  establish  a 
partnership,  whether  or  not  the  persons  sharing  them  have  a 

'''"'  Bushnell     v.     Consolidated     Ice  111.  App.  429 ;  Gensburg  v.  Field,  104 

Mach.  Co.,  138  111.  67,  27  N.  E.  596 ;  Iowa  599,  74  N.   W.   3 ;   Schmidt  v. 

Wilson   V.    Cobb,   28   N.  J.   Eq.    177;  Ittman,  46  La.  Ann.  888,  15  So.  310; 

Hallenbeck  v.   Rogers,   57   N.  J.   Eq.  Case  v.  Baldwin,  136  Mass.  90;  Webb 

199,   40  Atl.  576;   Gibb's   Estate,    157  v.  Johnson,  95   Mich.  325,  54  N.  W. 

Pa.  St.  59,  27  Atl.  383,  22  L.  R.  A.  947;   Meyers  v.   Boyd,   44   Mo.  App. 

276 ;  Hedge's  Appeal,  63  Pa.  St.  273 ;  378 ;  Farr  v.  Wheeler,  20  N.  H.  569 ; 

Holgate  V.   Downer.  8  Wyo.  334,   57  Clements  v.  Mitchell,  59  N.  Car.  171 ; 

Pac.   918;    1   Bates   Partnership,    §   3.  Holt   v.    Kernodle,   23    N.    Car.    199; 

"8  Henderson    v.    E.    W.    Emerson  Rowland   v.    Estes,    190   Pa.    St.    111. 

Co.,  105  Ark.  697,  151  S.  W.  251.  42  Atl.  528;  Wagner  v.   Sanders,  62 

69  Chafifee  v.  Rentf  roe,  32  Ga.  477 ;  S.    Car.   73,   39   S.    E.   950 ;    Brigham 

Winstanley  v.  Gleyre,  146  111.  27,  34  v.    Dana,    29    Vt.    1 ;    Wipperman    v. 

N.   E.  628 ;   Field  v.   Filers,   103   111.  Stacy,  80  Wis.  345,  SO  N.  W.  336. 
App.    374 ;    Creighton    v.    Garcia,    41 


§    884  LAW    OF    PARTNERSHIP  1236 

joint  or  common  right  or  interest  in  any  property  from  which 
the  terms  are  derived.  (4)  The  receipt  by  a  person  of  a  share 
of  the  profits  of  a  business  is  prima  facie  evidence  that  he  is  a 
partner  in  the  business,  but  no  such  inference  shall  be  drawn  if 
such  profits  were  received  in  payment:  (a)  As  a  debt  by  instal- 
ments or  otherwise,  (b)  As  wages  of  an  employe  or  rent  to  a 
landlord,  (c)  As  an  annuity  to  a  widow  or  representative  of  a  de- 
ceased partner,  (d)  As  interest  on  a  loan,  though  the  amount  of 
payment  vary  with  the  profits  of  the  business,  (e)  As  the  con- 
sideration for  the  sale  of  the  good  will  of  a  business  or  other 
property  by  instalments  or  otherwise." 

§  884.     Agreement — Proof  by   assent   and   ratification. — 

The  rule  requiring  proof  of  an  agreement  among  persons  in  order 
to  bind  them  does  not  require  that  it  be  shown  that  the  persons 
seeking  to  be  charged  as  partners  actually  signed  a  written  agree- 
ment ;  nor  is  it  carried  to  the  extent  of  holding  that  the  proof  must 
show  that  the  parties  met  and  simultaneously  and  mutually  agreed 
to  certain  definite  propositions.  The  law  does  not  require  such 
strict  proof.  It  is  sufficient  to  show  that  the  parties  assented 
to  or  acquiesced  in  a  general  arrangement  or  to  the  introduction 
of  a  new  member  in  the  firm.  Thus,  where  one  partner  without 
the  consent  of  his  copartners  introduced  a  stranger  into  the  firm, 
and  it  appeared  that  the  other  partners  were  made  acquainted  with 
the  facts  but  made  no  objection,  and  the  business  was  conducted 
with  the  new  member  as  a  part  of  the  firm,  it  was  held  that  the 
consent  of  the  other  persons  could  be  implied  from  the  acquies- 
cence and  acts  of  the  parties.'^"  So,  while  an  agent  for  a  certain 
purpose  has  no  power  to  form  a  partnership  between  his  princi- 
pal and  a  third  person,  yet  it  was  held  that  where  an  agent  did 
form  such  a  partnership  in  the  name  of  the  principal  w^ith  his 
knowledge,  and  it  further  appeared  that  the  principal  acted  as 
partner  in  the  firm  thus  formed  without  objection  it  was  held  to 

ToTabb  V.  Gist,  1   Brock.    (U.   S.)  Rapp,  135  Ind.  614,  34  N.  E.  981,  35 

33,  6  Call  279,  Fed.  Cas.  No.  13719 ;  N.    E.    693 ;     Mason    v.    Connell,     1 

Meaher  v.  Cox,  37  Ala.  201;  Rosen-  Whart.    (Pa.)    381. 
stiel  V.  Gray,  112  111.  282;  Miller  v. 


1237  EVIDENCE  §    S8d 

be  a  ratification  of  the  partnership  agreement  ana  the  principal 
was  Hable  as  a  partner."  And  where  partnership  articles  pro- 
vided that  at  the  death  of  one  partner  his  children  should  suc- 
ceed to  the  share  of  the  father,  and  upon  the  death  of  the  father 
as  such  partner  the  children  who  were  of  lawful  age  continued 
to  draw  the  same  amount  monthly  from  the  firm  as  the  father 
had  drawn,  it  was  held  that  this  was  an  acceptance  of  the  suc- 
cessorship  to  the  rights  and  liabilities  of  the  deceased  partner,  and 
that  the  children  were  liable."  But  the  mere  receipt  of  money 
coming  from  the  supposed  partnership  business,  without  the 
knowledge  of  the  person  sought  to  be  charged  with  it,  is  not 
a  sufficient  ratification  to  charge  the  person  receiving  the  money.''^ 

§  885.  Proof  by  certificate. — Some  statutes  require  that 
a  mercantile  or  trading  partnership  shall  record  in  some  of  the 
public  records  either  the  articles  of  partnership  or  a  statement  of 
the  names  of  the  persons  composing  the  firm.  Such  statutes 
further  provide  that  on  the  recording  of  the  instrument  or  the 
names  of  the  members  of  the  firm  the  officer  having  custody  of 
the  record  shall  issue  under  his  name  and  the  seal  of  his  office  a 
certificate  to  the  effect  that  such  persons  are  partners  and  that 
they  are  authorized  to  conduct  their  business  in  such  firm  name. 
Where  the  statute  requires  this  record  and  certificate  it  has  been 
held  that  in  actions  by  or  against  such  partners  the  official  cer- 
tificate is  competent  evidence  and  sufficient  proof  of  such  part- 
nership and  that  the  persons  named  therein  are  the  partners  in 
the  firm.''*  But  in  states  having  such  statutes  and  providing  that 
the  official  certificates  shall  be  prima  facie  evidence,  it  has  been 
held  that  such  a  certificate  is  not  the  only  method  of  proving 
the  partnership,  but  that  it  may  be  proved  in  the  absence  of  such 
certificate  and  as  if  there  were  no  such  statutory  requirement, 

"Williams  v.   Butler,  35   111.  544;  Am.    Rep.    Ill;    Central    City    Sav. 

Wright  V.  Boynton,  37  N.  H.  9,  72  Bank  v.  Walker,  66  N.  Y.  424. 

Am.  Dec.  319.  '*  Mortimer  v.  Harder,  93  Cal.  172, 

72  Nave  V.  Sturges,  5  Mo.  App.  557.  28  Pac.  814 ;  Milligan  v.  Butcher,  23 

"  Love   V.    Payne,   73   Ind.   80,   38  Nebr.  683,  37  N.  W.  596. 


§    886  LAW    OF    Px\RTNERSHIP  1238 

or  as  any  other  fact  is  proved."  This  rule,  however,  will  not 
hold  if  the  statute  should  provide  that  the  certificate  is  exclusive. 
Such  a  provision  is,  however,  very  improbable,  at  least  when 
the  partnership  is  sued  by  third  persons,  as  it  would,  in  many 
instances,  furnish  a  shield  for  persons  not  wanting  to  incur  part- 
nership liability,  but  who  are,  in  fact,  partners,  and  who  could 
neglect,  for  this  reason,  to  register  their  partnership.  It  would 
revolutionize  the  law  of  partnership  and  break  down  those  rules 
which  have  gradually  crept  into  the  law  of  partnership  for  the 
protection  of  those  persons  dealing  with  partnerships.  The  mere 
testimony  of  a  partner  that,  so  far  as  he  knew,  the  firm  had  not 
complied  with  statutory  requirements,  will  not  establish  a  de- 
fense that  no  certificate  was  filed.'^ 

§  886.  Parol  proof  to  establish  partnership. — The  best 
evidence  of  partnership  is  usually,  as  is  the  case  in  other  matters, 
written  evidence.  But  other  evidence  is  admissible,  and  may 
even  supersede  the  written  evidence.  The  existence  of  the  part- 
nership, and  the  extent  of  each  party's  interest  therein  may  be 
shown  by  parol,  under  certain  conditions.'''^  In  an  action  by  a 
third  person  against  alleged  partners  according  to  rules  else- 
where stated  it  is  sufBcient  to  establish  their  liability  to  show 
the  admissions  of  such  fact  by  the  alleged  partners,  or  that  they 
have  held  themselves  out  to  the  public  as  such.  The  rule  is  that 
such  proof  may  be  made  by  parol.  It  is  generally  held  that  in 
actions  by  third  persons  against  persons  who  are  alleged  to  be 
partners,  such  partnership  may  be  established  by  parol  evidence 
even  where  it  appears  from  the  evidence  on  the  trial  of  the  case 
that  there  is  a  written  agreement  between  the  parties  as  to  the 
partnership.  The  plaintiff  will  not  be  required  to  produce  the 
written  articles  in  order  to  establish  partnership.^^    And  in  actions 

75Hanfek  v.   Held,   75   Nebr.   210,  App.  669;  Van  Housen  v.  Copeland, 

106  N.  W.  171 ;  Maxwell  v.  HIggins,  79  111.  App.  139. 

38  Nebr.  671,  57  N.  W.  388.  "Griffin  v.  Stoddard,  12  Ala.  783; 

76  Croft  V.  Bain,  49  Mont.  484,  143  Crawford   v.    Stove    Pipe   Works,   83 
Pac.  960.  Cal.  629,  24  Pac.  836;   Daugberty  v. 

77  Frankenstein    v.    North,    79    111.  Heckard,  89  111.  App.  544 ;  Henshaw 


1239  EVIDENCE  §    887 

by  partners  against  third  persons  it  has  been  held  proper  to  prove 
such  fact  by  parol  evidence,  although  a  written  article  of  agree- 
ment exists  which  contains  the  partnership  agreement ;  but  when 
it  is  made  to  appear  that  the  terms  of  the  partnership  are  material, 
then  the  articles  themselves  must  be  produced. '^^ 

§  887.     Proof  of  acts  and  conduct  to  show  partnership. — 

Partnership  may  be  established  by  proof  of  acts  and  conduct. 
No  rule  can  be  given  as  to  what  particular  acts  or  conduct  must 
be  proved  in  order  to  establish  the  relation;  nor  can  the  nature 
and  character  of  the  acts  be  designated.  It  is  only  essential  that 
the  proof  be  sufficient  to  establish  such  acts  and  conduct  from 
which  the  partnership  may  be  reasonably  inferred.  As  tending 
to  establish  the  relation  of  partnership  proof  may  be  made  of  the 
acts  and  conduct  such  as  advertisements  in  newspapers  that  were 
taken  and  read  by  the  party  sought  to  be  charged  as  a  partner; 
or  advertisements  by  cards,  letterheads,  placards  or  signs;  per- 
sonal supervision  of  the  business  and  receipt  of  goods  in  the  firm 
name ;  the  fact  that  the  party  sought  to  be  charged  was  introduced 
as  a  member  of  the  partnership,  and  any  representations,  conduct 
or  circumstances  are  proper  and  competent  wdiich  are  naturally 
calculated  or  likely  to  beget  the  belief  that  the  parties  were  part- 
ners.^**    The  fact  of  the  existence  of  a  partnership  may  be  proved 

V.  Root,  60  Ind.  220;  Villa  v.  Jonte,  "Field  v.  Tenney,  47  N.  H.  513. 
17  La.  Ann.  9 ;  Bryer  v.  Weston,  16  so  Chaffee  v.  Rentf  roe,  32  Ga.  477 ; 
Maine  261 ;  Bishop  v.  Austin,  66  Gary  v.  Simpson,  15  Ga.  App.  280,  82 
Mich.  515,  33  N.  W.  525 ;  Rosenbaum  S.  E.  918 ;  Fletcher  v.  Pullen,  70  Md. 
V.  Howard,  69  Minn.  41,  71  N.  W.  205,  16  Atl.  887,  14  Am.  St.  355; 
823 ;  McEvoy  v.  Bock,  37  Minn.  402,  Peninsular  &c.  Bank  v.  Currie,  123 
34  N.  W.  740;  Bissell  v.  Warde,  129  Mich.  666,  82  N.  W.  511;  Bissell  v. 
Mo.  439,  31  S.  W.  928;  Brem  v.  Alii-  Warde,  129  Mo.  439,  31  S.  W.  928; 
son,  68  N.  Car.  412;  Reed  v.  Kremer,  Atwood  v.  Peregoy,  22  Nebr.  238, 
111  Pa.  St.  482,  5  Atl.  237,  56  Am.  34  N.  W.  378;  Princeton  &c.  Co.  v. 
Rep.  295;  Edwards  v.  Tracy.  62  Pa.  Gulick,  16  N.  J.  L.  161;  Sargent  v. 
St.  374 ;  Widdifield  v.  Widdifield,  2  Collins,  3  Nev.  260 ;  Dobson  v.  Cham- 
Bin.  (Pa.)  245;  Furber  v.  Carter,  bers,  78  N.  Car.  334;  Lowenstein  v. 
11  Humph.  (Tenn.)  271;  Cutler  v.  Keller  (Tex.  Civ.  App.),  46  S.  W. 
Thomas,  25  Vt.  73;  Piano  Mfg.  &c.  878;  Davis  v.  Bingham  (Tex.  Civ. 
Co.  V.  Frawley,  68  Wis.  577,  32  N.  App.),  46  S.  W.  840;  Cowie  v.  Ah- 
W.  768.  renstedt,  1  Wash.  416,  25  Pac.  458. 

28 — Row.  ON  Partn.— Vol.  2 


§    888  LAW    OF    PARTNERSHIP  1240 

by  the  habit  and  course  of  cleahiig,  and  by  the  conduct  and  dec- 
larations of  the  partners. ^^  Proof  of  the  business  intimacy  of 
two  persons  has  been  held  competent  in  connection  with  other 
facts  as  a  circumstance  tending  to  prove  partnership.*^  Where 
the  action  is  for  accounting  between  the  partners,  the  court  may 
consider  the  acts  and  conduct  of  the  parties  at  the  time  of  and 
subsequent  to  the  date  of  the  agreement  between  them.*^  What- 
ever may  be  the  quantum  or  degree  of  proof  required,  it  is  held 
that  the  existence  of  a  partnership  may  be  estabhshed  by  circum- 
stantial evidence  as  well  as  by  direct  proof.^*  In  suits  against 
alleged  partners,  where  the  partnership  is  denied  by  the  alleged 
partners,  the  existence  of  the  partnership  relation  may  be  proved 
by  direct  evidence,  or  by  evidence  of  the  acts,  conduct  and  declara- 
tions of  the  alleged  partners.®^  This  applies,  in  general,  simply 
to  the  party  making  the  declaration.®^  In  an  action  by  an  em- 
ploye against  an  alleged  partnership,  newspaper  items  written 
some  time  after  he  began  work  stating  that  defendant  was  the 
treasurer  of  the  firm,  were  held  inadmissible,  on  the  ground  that 
the  plaintiff  could  not  have  relied  on  them  in  accepting  the  em- 
ployment.*'^ As  to  a  defendant  who  pleaded  no  partnership,  it 
was  not  error  to  exclude  a  letter  written  to  him  from  the  other 
defendant  eleven  months  after  the  contract  sued  on.** 

§  888.     Admissions  by  partners,   generally. — The    admis- 
sions of  one  partner  or  person  engaged  in  the  joint  prosecution 

Books,   papers,   accounts   and   similar  ss  Wright  v,  Amann,  192  Fed.  649. 

writings  may  be  admissible  to  show  ^^  Loucks    v.    Paden,    63    111.    App. 

existence    of    a   partnership    between  545;    Rogers   v.    Murray,    110   N.    Y. 

persons    who    are    described    or    re-  658,    18  N.   E.  261,  2   Silv.   Ct.  App. 

ferred  to  therein  as  partners.     Cobb  101. 

V.    Martin,    32    Okla.    588,    123    Pac.  ssjones     v.     Purnell,     S     Pennew. 

422.  (Del.)   444,  62  Atl.   149. 

^1  Irvine    &    Muir    Lumber    Co.    v.  s'' Chamberlin  v.  Fisher,   117  Mich. 

Holmes,  26  Cal.  App.  453, 147  Pac.  229 ;  428,  75  N.  W.  931. 

Richardson  v.  Keely,  58  Colo.  47,  142  ^'^  Gettins    v.    Hennessey,    60    Ore. 

Pac.  167 ;  Smith  v.  Hart,  179  111.  App.  566,  120  Pac.  369. 

98 ;  Bryer  v.  Weston,  16  Maine  261.  ^^  American  Cotton  College  v.  At- 

82McGrew  v.  Walker,  17  Ala.  824;  lanta  Newspaper  Union.  138  Ga.  147, 

Letson  V.  Hall,   1  Ala.  App.  619,  55  74  S.  E.  1084. 
So.  944. 


1241 


EVIDENCE 


§    888 


of  a  common  commercial  enterprise,  within  its  scope  and  in  fur- 
therance thereof  during  its  continuance,  are  generally  received 
against  all  the  partners  or  persons  engaged  therein,""  for,  by 
the  very  act  of  association,  each  is  constituted  the  agent  of  all.°^ 
But  they  are  not  received  to  prove  the  partnership,  and  evidence 
should  first  be  introduced  to  prove  that  fact."^    So  it  is  generally 


90  Fail  V.  McArthur,  31  Ala.  26; 
Pierce  v.  Roberts,  57  Conn.  31,  17 
Atl.  275;  McCutchin  v.  Bankston,  2 
Ga.  244 ;  Rudy  v.  Katz,  23  Ky.  L.  1697, 
66  S.  W.  18;  Fickett  v.  Swift,  41 
Maine  65,  66  Am.  Dec.  214;  Collett  v. 
Smith,  143  Mass.  473,  10  N.  E.  173; 
Coleman  v.  Pearce,  26  Minn.  123,  1  N. 
\V.  846;  Lea  v.  Guice,  13  Smed.  & 
M.  (Miss.)  656;  Cady  v.  Kyle,  47 
Mo.  346;  Baker  v.  Union  Stockyards 
Nat.  Bank,  63  Nebr.  801,  89  N.  W. 
269,  93  Am.  St.  484 ;  Tucker  v.  Peas- 
lee,  36  N.  H.  167;  Gulick  v.  Gulick, 
14  N.  J.  L.  578;  Brown  Chemical  Co. 
V.  Atkinson,  91  N.  Car.  389;  Ben- 
ninger  v.  Hess,  41  Ohio  St.  64 ;  Boyd 
V.  Thompson,  153  Pa.  St.  78,  25  Atl. 
769,  34  Am.  St.  685 ;  Western  Assur. 
Co.  V.  Fowle,  65  Wis.  247,  26  N.  W. 
104;  Latch  v.  Wedlake,  11  Ad.  &  L. 
959,  39  E.  C.  L.  504.  In  Weed  v. 
Kellogg,  6  McLean  (U.  S.)  44,  Fed. 
Cas.  No.  17345,  the  admissions  of  a 
silent  partner  were  held  receivable. 
See  also  Garrett  v  Woodward,  2 
Cranch  (C.  C.)  190.  So,  as  to  ad- 
missions of  partner,  since  deceased, 
in  an  action  against  his  representative. 
Clark's  Exrs.  v.  Van  Riemsdyk,  9 
Cranch  (U.  S.)  153,  3  L.  ed.  688; 
McElroy  v.  Ludlum,  32  N.  J.  Eq. 
828,  and  against  the  surviving  part- 
ner. Smitha  v.  Cureton,  31  Ala.  652 ; 
Dodds  V.  Rogers,  68  Ind.  110;  Dore- 
mus  V.  McCormick,  7  Gill  (Md.)  49; 
Klock  V.  Beekman,  18  Hun  (N.  Y.) 
502 ;  Harrison  v  Neeley,  41  Ohio  St. 
334 ;    Adams    v.    Brownson,    1    Tyler 


(Vt.)  452.  But  see  Ostrom  v.  Jacobs, 
9  Mete.  (Mass.)  454;  Romer  v. 
Jaecksch,  39  Md.  585 ;  Evers  v.  Life 
Assn.,  59  Mo.  429. 

91  Pearce  v.  Roberts,  57  Conn.  31 ; 
Coit  V.  Tracy,  8  Conn.  268 ;  Hahn 
V.  St.  Clair  &c.  Co.,  50  111.  465 ;  Web- 
ster V.  Stearns,  44  N.  H.  498,  502; 
Scull's  Appeal,  115  Pa.  St.  141,  7 
Atl.  588;  Sandilands  v.  Marsh,  2  B. 
&  Aid.  673;  Nicholls  v.  Dowding, 
1  Stark.  65;  Wood  v.  Bradick,  1 
Taunt.  104,  9  Rev.  Rep.  711 ;  Rex  v. 
Hard  wick,  11  East  578.  See  leading 
article  on  the  general  subject  in  26 
Cent.  L.  J.  491.  As  to  when  entries 
in  partnership  books  are  admissible, 
see  Chick  v.  Robinson,  95  Fed.  619, 
Zl  C.  C.  A.  205,  and  extended  note 
to  such  case  as  reported  in  52  L.  R. 
A.  833. 

92  Scott,  Harper  &c.  Co.  v  Dansby, 
12  Ala.  714;  Smith  v.  Ferrario,  113 
Ga.  872,  39  S.  E.  428;  Vannoy  v. 
Klein,  122  Ind.  416,  23  N.  E.  526; 
Folk  V.  Wilson,  21  Md.  538,  83  Am. 
Dec.  599;  Dutton  v.  Woodman,  9 
Cush.  (Mass.)  255,  57  Am.  Dec.  46; 
Winchester  v.  Whitney,  138  Mass. 
549;  Rimel  v.  Hayes,  83  Mo.  200; 
Henry  v.  Willard,  IZ  N.  Car.  35; 
Pirie  &c.  Co.  v.  Gillit,  2  N.  Dak.  255, 
50  N.  W.  710;  Cowan  v.  Kinney,  12> 
Ohio  St.  422 ;  Walker  v.  Tupper,  152 
Pa.  St.  1,  10,  25  Atl.  172;  McCorkle 
v.  Doby,  1  Strob.  L.  (S.  Car.)  396, 
47  Am.  Dec.  560.  But  they  may  be 
admissible  against  himself  to  show 
that  he  was  a  partner  and  who  con- 


888 


LAW    OF    PARTNERSHIP 


1242 


inadmissible  for  one  partner  to  disprove  the  existence  of  the 
partnership  by  the  declarations  of  his  copartners  when  the  ques- 
tion of  partnership  is  at  issue  between  them  and  third  persons.^' 
And  they  must  have  been  made,  as  a  rule  at  least,  during  the 
existence  of  the  partnerships*  and  within  the  scope  of  the  part- 
nership business.s^  If  made  prior  to  the  existence  of  the  part- 
nership, they  are  not  receivable  against  the  other  parties  unless 
a  joint  responsibility  is  shown, °°  nor  are  they  receivable  to  create 
any  new  liability  against  the  other  parties  if  made  after  the 
dissolution  of  the  partnership.^'' 


stituted  the  members.  Edwards  v. 
Tracy,  62  Pa.  St.  374.  Lenhart  v. 
Allen,  32  Pa.  St.  312;  Hawkins  &c. 
Co.  V.  Lee,  8  Lea  (Tenn.)  42;  Carr  v. 
Wright,  1  Wyo.  157.  See  also  Rudy 
V.  Katz,  23  Ky.  L.  1697,  66  S.  W. 
18.  So,  the  partnership  may  be  proved 
by  the  successive  declarations  of 
each  and  all  of  the  partners.  Reed 
V.  Kremer,  111  Pa.  482,  5  Atl.  237, 
56  Am.  Rep.  295.  See  generally  note 
to  Vanderhurst  v.  De  Witt,  95  Cal. 
57,  30  Pac.  94,  20  L.  R.  A.  595.  En- 
tries in  books  claimed  to  be  part- 
nership books  are  not  of  themselves 
admissible  to  prove  the  partnership 
without  in  some  way  connecting  the 
person  claimed  to  be  a  partner  there- 
with. See  note  to  Chick  v.  Robin- 
son, 95  Fed.  619,  Zl  C.  C.  A.  205,  52 
L.  R.  A.  833. 

s^Danforth  v.  Carter,  4  Iowa  230; 
Clark  V.  Huffaker,  26  Mo.  264 ;  Car- 
lyle  V.  Plumer,  11  Wis.  96. 

^*  Cooper  V.  Wood,  1  Colo.  App. 
101,  27  Pac.  884;  Munson  v.  Wick- 
wire,  21  Conn.  513 ;  Winslow  v.  New- 
Ian,  45  111.  145 ;  Hitt  v.  Allen,  13  III. 
592;  Boor  v.  Lowery,  103  Ind.  468, 
3  N.  E.  151,  ^Z  Am.  Rep.  519;  Con- 
ery  v.  Hayes,  19  La.  Ann.  325 ;  First 
Nat.  Bank  v.  Strait,  65  Minn.  162, 
67  N.  W.  987;  Webster  v.  Stearns, 
44  N.  H.  498;   McKee  v.  Hamilton, 


ZZ  Ohio  7 ;  Barrett  v.  Russell,  45  Vt. 
43;  Catt  v.  Howard,  3  Stark.  3,  23 
Rev.  Rep.  751,  3  E.  C.  L.  570;  Bur- 
ton V.  Issitt,  5  B.  &  Aid.  267.  But 
an  assignment  of  assets  is  not  neces- 
sarily an  end  of  the  partnership. 
Hunter  v.  Hubbard,  26  Tex.  537. 
Foster  v.   Fifield,  29  Maine   136. 

95  Winchester  &  Partridge  Mfg. 
Co.  V.  Creary,  116  U.  S.  161,  29  L. 
ed.  591,  6  Sup.  Ct.  369 ;  People's  Nat. 
Bank  V.  Harper,  114  Ga.  603,  40  S. 
E.  717;  Boor  v.  Lowery,  103  Ind. 
468,  3  N.  E.  151,  53  Am.  Rep.  519; 
Hickman  v.  Reineking,  6  Blackf. 
(Ind.)  387;  Wells  v.  Turner,  16  Md. 
133;  Collett  v.  Smith,  143  Mass.  473, 
10  N.  E.  173;  Heffron  v.  Hanaford, 
40  Mich.  305;  Slipp  v.  Hartley,  50 
Minn.  118,  52  N.  W.  386,  Z6  Am.  St. 
629;  Union  Nat.  Bank  v.  Underbill, 
102  N.  Y.  ZZd,  7  N.  E.  293;  Hester 
V.  Smith,  5  Wyo.  291,  40  Pac.  310. 
But  see  Odiorne  v.  Maxcy,  15  Mass. 
39.  It  may  not  always  be  necessary 
that  they  should  be  made  within  the 
real  scope  of  the  partnership  busi- 
ness, if  within  the  apparent  scope  or 
autliority  held  out  by  all. 

9«Catt  V.  Howard,  3  Stark.  3,  23 
Rev.  Rep.  751,  3  E.  C.  L.  570. 

97  Bell  V.  Morrison,  1  Pet.  (U.  S.) 
351,  7  L.  ed.  174 ;  Thompson  v.  Bow- 
man, 6  Wall.   (U.  S.)   316,  18  L.  ed 


1243 


EVIDENCE 


889 


§  889.  Admissions  and  declarations  in  actions  by  third 
persons  against  partners. — In  actions  by  third  persons 
against  others  to  hold  them  as  partners,  the  declarations  or  ad- 
missions made  by  one  in  the  absence  of  the  others,  tending  to 
establish  the  existence  of  such  partnership,  are  only  admissible 
in  the  first  instance  against  the  party  making  them,  but  may  be 
shown  to  charge  him  as  a  partner,  where  he  has  denied  it.®^ 


12,6;  Curry  v.  White,  51  Cal.  530; 
Mozingo  V.  Ross,  150  Ind.  588,  691, 
50  N.  E.  687,-  41  L.  R.  A.  612,  65 
Am.  St.  387;  Yandes  v.  Lefavour,  2 
Blackf.  (Ind.)  371;  Walker  v.  Du- 
berry,  1  A.  K.  Marsh.  (Ky.)  189; 
Bentley  v.  White,  3  B.  Mon.  (Ky.) 
263,  38  Am.  Dec.  186 ;  White  v.  Kear- 
ney, 9  Rob.  (La.)  495  ;  Ward  v.  How- 
ell, 5  Har.  &  J.  (Md.)  60;  Owings 
V.  Low,  5  Gill  &  J.  (Md.)  134;  First 
Nat.  Bank  v.  Strait,  65  Minn.  162, 
67  N.  W.  987;  National  Bank  v. 
Meader,  40  Minn.  325,  41  N.  W. 
1043;  American  Iron  Mt.  Co.  v. 
Evans,  27  Mo.  552;  Little  v.  Fergu- 
son, 11  Mo.  598;  Nichols  v.  White, 
85  N.  Y.  531 ;  Hackley  v.  Patrick,  3 
Johns.  (N.  Y.)  536;  Detrick  v.  Mc- 
Lean, 112  N.  Car.  840,  17  S.  E.  165; 
Flanagin  v.  Federal  Champion,  2  N. 
J.  Eq.  51 ;  Kerper  v.  Wood,  48  Ohio 
St.  613,  29  N.  E.  501,  656;  Hogg  v. 
Orgill,  34  Pa.  St.  344;  Crumless  v. 
Sturgess,  6  Heisk.  (Tenn.)  190;  Bur- 
ton V.  Issitt,  5  B.  &  Aid.  267;  Kil- 
gour  V.  Finlyson,  1  H.  Bl.  155.  See 
also  on  the  general  subject,  the  elab- 
orate note  to  Gilmor  v.  Ham,  142 
N.  Y.  1,  40  Am.  St.  554  et  seq.  But 
entries  upon  the  firm  books  by  one 
partner,  made  during  the  existence 
of  the  partnership,  and  known  to  the 
other,  may  be  admitted  against  the 
latter  even  after  the  termination  of 
the  partnership.  Bunnell  v.  Hender- 
son,   23    N.    J.    Eq.    174;    Walden    v. 


Sherburne,  15  Johns.  (N.  Y.)  409. 
See  also  Wills  Point  Bank  v.  Bates, 
72  Tex.  137,  10  S.  W.  348;  Munson 
V.  Wickwire,  21  Conn.  513.  And  in 
some  jurisdictions  a  distinction  is 
drawn  between  admissions  made  after 
dissolution  in  regard  to  what  took 
place  during  the  existence  of  the 
partnership  and  not  creating  any  new 
liability,  and  those  that  would  create 
a  new  liability,  and  the  former  are 
held  admissible.  Curry  v.  Kurtz,  ZZ 
Miss.  24;  Cochran  v.  Cunningham, 
16  Ala.  448,  50  Am.  Dec.  186 ;  Parker 
V.  Merrill,  6  Maine  41 ;  Cady  v.  Shep- 
herd, 11  Pick.  (Mass.)  400,  22  Am. 
St.  379;  Gay  v.  Bowen,  8  Mete. 
(Mass.)  100;  Pennoyer  v.  David,  8 
Mich.  407;  Rich  v.  Flanders,  39  N. 
H.  304;  Pierce  v.  Wood,  23  N.  H. 
519;  Simpson  v  Geddes,  2  Bay  (S. 
Car.)  533;  Fripp  v.  Williams,  14  S. 
Car.  502;  Nalle  v.  Gates,  20  Tex. 
315 ;  Pritchard  v.  Draper,  1  Russ.  & 
M.  191,  Taml.  332;  Wood  v.  Brad- 
dick,  1  Taunt.  104,  9  Rev.  Rep.  711. 
See  also  Kirk  v.  Hiatt,  2  Ind.  322; 
Lefavour  v.  Yandes,  2  Blackf. 
(Ind.)  240.  Of  course,  where  the 
partner  has  authority  in  winding  up 
the  partnership,  he  may  make  ad- 
missions that  may  be  competent. 

98  Richardson  v.  Keely,  58  Colo. 
47,  142  Pac.  167 ;  Cary  v.  Simpson, 
15  Ga.  App.  280,  82  S.  E.  918 ;  Beno- 
liel  v.  Homac  (N.  J.),  94  Atl.  605. 


§    889  LAW    OF    PARTNERSHIP  1244 

Thus  a  declaration  of  one  partner  as  to  the  existence  of  the 
partnership,  not  made  in  the  presence  of  his  copartner,  is  not 
admissible  to  prove  the  existence  of  the  partnership,  as  to  the 
copartner-^**  The  answer  of  one  defendant  can  not  be  used  as 
evidence  of  the  question  of  partnership  between  such  defendant 
and  one  deceased,  as  against  the  administrator  of  the  decedent, 
who  is  a  codefendant/  Likewise,  where  there  is  an  issue  as  to 
whether  a  business  is  carried  on  by  defendants  as  partners,  the 
admission  of  one  of  them  to  the  effect  that  the  business  belonged 
to  him  and  his  codefendant  could  not  be  considered  in  determin- 
ing the  liability  of  the  other  defendants,  or  the  relation  of  them 
to  the  others.'  But  where  a  partnership  alleged  to  exist  between 
defendants  had  been  denied  by  them,  declarations  of  each  at 
different  times  to  different  persons,  in  the  absence  of  the  other, 
were  held  admissible  against  both  to  establish  the  partnership.^ 
The  rule  as  to  nonadmissibility  of  declarations  of  a  partner  is, 
however,  subject  to  an  exception,  where  there  is  other  evidence 
as  to  the  partnership.  Where  the  existence  of  a  partnership  is 
denied,  and  there  is  no  evidence  of  its  existence,  the  statement 
of  a  partner  binds  no  one  but  himself ;  but  this  rule  has  no  appli- 
cation where  there  is  other  testimony  establishing  the  existence 
of  the  partnership.^  And  if  the  existence  of  the  alleged  partner- 
ship be  prima  facie  established  by  evidence  other  than  such  dec- 
larations, then  the  acts,  declarations  and  admissions  of  each  may 
be  proved  to  strengthen  such  prima  facie  case.^     So  a  pamphlet 

^9  Owensboro  Wagon  Co.  v.  Bliss,  ^  Earle  v.  Art  Library  Pub.  Co.,  95 

132  Ala.  253,  31   So.  81,  90  Am.   St.  Fed.  544. 

907 ;  First  Nat.  Bank  v.  Leland,  122  2  Stiervel   v.    Borman,   63   Ark.   30, 

Ala.  289,  25  So.   195;   Smith  v.   Fer-  27   S.   W.   404.      See   also    Rector   v. 

rario,    113    Ga.    872,    39    S.    E.    428;  Robins,  74  Ark.  434,  86  S.  W.  667. 

Thompson   v.    Mallory,    108   Ga.   797,  s  Nilsson  v.  McDole,  7Z  Wash.  312, 

33  S.  E.  986;  Gardner  V.  North  West-  lol   Pac.  1141. 

ern   Mfg.   Co.,   52   III.   367;    Franklin  *  McCann    v.    McDonald,    7    Nebr. 

V.   Hoadley,   145   App.   Div.  228,   130  305. 

N.  Y.   S.  47;   Smith  v.   Southern  R.  ^  Campbell    v.    Hastings,    29    Ark. 

Co.,   89   S.    Car.   415,   71    S.    E.  989;  512;   Daugherty  v.  Heckard,   189  111. 

Providence   Mach.   Co.  v.   Browning,  239,  59  N.  E.  569;   Conlan  v.  Mead, 

70  S.  Car.  148,  49  S.  E.  325.  172  111.  13,  49  N.  E.  720;  Hohnadel 


1245  EVIDENCE  §    889 

published  by  one  defendant,  before  the  account  sued  on  com- 
menced, in  which  he  referred  to  his  codefendant  as  the  manag- 
ing partner,  may  be  admissible."  Such  declarations  of  an  alleged 
copartner  are  cumulative  evidence  to  other  competent  evidence 
tending  to  show  the  partnership.  In  an  Illinois  case  in  which 
the  question  of  partnership  was  raised,  the  court  charged  that 
the  jury  could  consider  the  statements  of  the  copartner  as  bear- 
ing upon  the  partnership,  provided  they  first  found  from  the  evi- 
dence that  the  said  alleged  partner,  sought  to  be  held,  had  held 
himself  out  as  a  partner,  and  that  the  plaintiffs  had  notice  thereof, 
and  acted  thereon.  It  was  held  by  the  higher  court  that  this 
charge  was  correct,  and  that  the  jury  could  not  have  been  mis- 
led thereby.'^  In  an  action  against  a  partnership  for  personal 
injuries  in  a  mill,  where  the  existence  of  the  partnership  had  been 
established  and  the  only  issue  was  whether  the  firm  or  one  mem- 
ber individually  owned  or  operated  the  mill,  declarations  of  the 
partners  as  to  the  nature  of  their  holdings  were  held  admissible 
in  evidence,  though  not  made  in  the  presence  of  each  other.® 
And  receipt  of  mail  directed  to  defendant  in  a  firm  name  within 
a  month  after  making  of  plaintiff's  alleged  contract  with  them 
has  even  been  held  admissible  to  show  that  they  were  partners.^ 
Where  a  defendant  claimed  that  an  alleged  partner  was  merely 
an  employe,  sharing  in  the  profits  as  compensation  for  his  serv- 
ices, a  contract  between  that  defendant  and  a  third  person,  under 
which  the  third  person  was  compensated  for  his  services  in  that 
manner,  was  inadmissible. ^°  In  an  action  against  a  partner  for 
goods  sold  to  the  firm  evidence  that  he  told  defendant  he  was 

V.  Ellsworth,  154  111.  App.  484 ;  Cur-  ^  piock  v.  Williams,   175   111.   App. 

rier  v.  Silloway,  1  Allen  (Mass.)  19;  319. 

Lea  V.  Guice,  13  Sm.  &  M.    (Miss.)  ^  Conlan  v.  Mead,  172  111.  13,  49  N. 

656;  Dixon  v.  Hood,  7  Mo.  414,  38  E.  720. 

Am.    Dec.   461 ;    Willoughby   v.    Hil-  «  McCaskey  v.  Gantt  Bros.,  184  Ala. 

dreth,   182   Mo.   App.  80,   167   S.   W.  642,  64  So.  316. 

639;    Oil   Well    Supply   Co.   v.   Met-  ^  Vich  v.  Watts,  155  Iowa  664,  136 

calf,   174  Mo.  App.   555,   160   S.  W.  N.  W.  910. 

897;    Edwards  v.  Tracy,  62   Pa.   St.  lo  Phipps  v.  Little,  213   Mass.  414, 

374.  100  N.  E.  615. 


§    890  LAW    OF    TARTNERSHIP  1246 

a  partner  and  thus  obtained  credit  for  the  firm,  is  admissible/^ 
and  where  the  defendants  in  an  action  on  a  note  defended  on  the 
ground  that  the  person  executing  the  note  was  not  a  partner,  it 
was  sufficient  to  prove  that  each  of  them  had  admitted  he  was 
a  partner.^^  It  is  competent  to  question  the  witness  as  to 
whether  the  parties  associated  had  entered  into  a  certain  de- 
scribed agreement,  and  were  operating  a  business  under  it/^ 

§  890.  Representations  made  in  presence  of  partner,  or  in 
course  of  business. — There  is  another  exception  to  the  gen- 
eral rule  above  stated.  In  case  the  admissions  of  partnership 
were  made  by  an  alleged  partner  in  the  presence  of  and  in  the 
knowledge  of  the  person  sought  to  be  charged,  they  are  com- 
petent evidence  if  such  person  consented  to  the  issue,  either 
expressly  or  impliedly.  Even  in  case  the  party  denying  the  fact 
of  partnership  was  not  present  at  the  time  the  said  admissions 
were  made,  but  later,  when  the  said  admissions  were  repeated  to 
him,  and  he  admitted  their  truth,  the  admission  of  such  state- 
ments of  the  other  party  is  proper.^*  And  it  seems  to  be  the 
rule  that  declarations  of  a  partner  when  made  in  the  prosecu- 
tion of  the  partnership  business  are  admissible.  On  this  subject 
the  Supreme  Court  of  Indiana  said :  "The  declarations  of  one 
partner  are  admissible  in  proper  cases  against  the  firm,  on  the 
ground  that  in  such  cases  the  law  implies  an  agency  on  the  part 
of  the  one  to  bind  the  firm  in  transactions  relating  to  its  busi- 
ness.   In  order  that  such  declarations  may  be  admitted,  they  must 

11  Brown     v.     Brown     (Tex.     Civ.  335 ;   Adee  v.   Cornell,   25   Hun    (N. 

App.),   155  S.  W.  551.  Y.)    78;   Quincey  v.   Young,   5   Daly 

i2Swygert   v.    Bank   of    Haralson,  (N.    Y.)    327;    Smith    v.    Wright,    4 

13  Ga.  App.  640,  79  S.  E.  759.  Abb.  Dec.    (N.  Y.)   274,   1  Abb.   Pr. 

13  0'Donohue    v.    Bruce,    92    Fed.  243;    Wray    v.    Spence,    145    Pa.    St. 

858,  35  C.  C.  A.  52 ;  Cain  Lumber  Co.  399,  22  Atl.  693 ;   Given  v.  Albert,  5 

V.   Standard  Dry  Kiln   Co.,   108  Ala.  Watts  &  S.  (Pa.)  333;  Wood  v.  Con- 

346,  18  So.  882;  Butte  Hardware  Co.  nell,   2    Whart.    (Pa.)    542;    Reab    v. 

v.    Wallace,    59    Conn.    336,    22    Atl.  Pool,   30   S.   Car.   140,   8   S.   E.  703; 

330;    Barwick   v.    Alderman,   46    Fla.  Ruppell   v.   Roberts,   4   N.    &   M.   31, 

433,  35  So.  13;  Thornton  v.  McDon-  30  E.  C.  L.  574. 

aid,  108  Ga.  3,  33  S.  E.  680 ;   Perry  i*  Huyssen  v.  Lauson,  90  Mo.  App. 

v.   Randolph,   6   Sm.   &   M.    (Miss.)  82. 


1247  EVIDENCE  §    891 

have  been  made  in  the  course  of  the  partnership  business,  and 
with  respect  to  a  transaction  pertaining  to  its  business. "^^  And 
declarations  made  by  the  partners  themselves  while  engaged  in 
the  partnership  business  have  been  held  competent  in  their  favor 
to  establish  the  partnership/" 

§  891.  Representations  against  interest. — The  admission 
of  a  party  sought  to  be  charged  as  a  partner,  that  he  was  a  mem- 
ber of  the  partnership,  is  competent  evidence  against  him  to  prove 
him  a  partner,  and  it  matters  not  whether  the  admission  was  made 
directly  to  a  party  seeking  to  charge  him  or  to  a  third  person. ^^ 
It  has  been  held  that  in  an  action  against  defendants  as  partners 
for  goods  sold  and  delivered  to  a  firm  on  the  order  of  one  of 
the  alleged  partners,  it  was  error  not  to  permit  plaintiff  to  intro- 
duce letters  from  such  defendant  and  from  the  firm,  received  in 
the  ordinary  course  of  business,  for  the  purpose  of  showing  that 
such  defendant  was  connected  in  business  with  the  firm,  and  had 
charge  of  its  financial  transactions/^  A  Michigan  decision  even 
goes  so  far  as  to  hold  that  in  an  action  against  persons  as  copart- 
ners to  recover  for  produce  sold  the  alleged  firm,  it  was  error 
to  refuse  to  allow  defendants  to  testify  concerning  the  relation 
existing  between  them/^  A  partnership  alleged  to  exist  between 
defendants  having  been  denied  by  them,  declarations  of  each  at 
different  times  to  different  persons,  in  the  absence  of  the  other, 
are  held  admissible  against  both  of  the  partners,  to  establish  the 
partnership,  and  it  is  also  held  that  where  goods  were  sold  to 
an  alleged  partnership  in  1910  and  1911,  alleged  declarations  of 
the  partners,  as  to  the  existence  of  the  firm,  made  in  1908  and 
1909,  were  admissible,  and  not  objectionable  for  remoteness."" 
On  the  contrary,  declarations  of  a  partner,  relating  to  the  exist- 

15  Boor   V.    Lowery,    103    Ind.    468,     Everett-Ridley-Ragan     Co.,     110    Ga. 
3  N.  E.  151,  53  Am.  Rep.  519;  Brit-     303,  34  S.  E.  1004. 

ton  V.  Britton,  19  Ind.  App.  638,  49  is  Barth  v.  Paul,  50  Misc.  600,  99 
N.  E.  1076.  N.  Y.  S.  425. 

16  Gilbert  v.  Whidden,  20  Maine  i9  Scholtz  v.  Friend,  128  Mich.  72, 
367.  87  N.  W.  130. 

"  Barwick  v.  Alderman,  46  Fla.  20  Nilsson  v.  McDole,  73  Wash.  312, 
433,   35    So.    13.     See   also   Dodds   v.     131  Pac.  1141. 


§    892  LAW    OF    PARTNERSHIP  1248 

ence  of  the  partnership,  made  after  the  creation  of  a  debt  sued 
for,  are  inadmissible  to  estop  a  defendant  from  denying  that  he 
was  a  partner  at  the  time  of  the  purchase,  since  the  issue  is  the 
existence  of  the  partnership  at  the  time  of  the  creation  of  the 
debt."^  Showing  the  same  rule  as  to  time,  a  Colorado  case  holds 
that  a  bill  of  sale,  severing  defendant's  connection  with  the  firm, 
made  before  plaintiff  had  even  dealt  with  the  firm,  is  admissible 
to  show  the  defendant's  withdrawal,  though  plaintiff  had  no  no- 
tice of  the  same.^"  Where  one  person  is  sought  to  be  held  upon 
negotiable  paper  signed  by  another  person,  upon  the  ground 
that  the  individual  name  signed  was  the  signature  of  a  partner- 
ship composed  of  the  party  signing  and  the  party  sought  to  be 
charged,  the  nature  of  the  consideration  of  the  negotiable  in- 
strument, and  the  statement  made  by  the  codefendant  at  the 
time  it  was  given,  and  papers  signed  or  written  by  him,  or  by 
his  procurement,  and  bearing  upon  the  question  of  the  partner- 
ship, are  admissible  in  evidence  against  the  party  sought  to  be 
charged."^  In  a  suit  against  an  alleged  partnership,  where  one 
alleged  partner  denied  the  partnership,  printed  letter-heads  con- 
taining the  alleged  partnership  name  and  the  names  of  the  alleged 
partners  as  "associate  presidents,"  together  with  evidence  that 
such  letter-heads  were  used  by  said  defendant,  are  admissible.-* 

§  892.  Representations  in  interest. — Declarations  made 
by  one  sought  to  be  charged  as  a  partner,  to  the  effect  that  he 
was  not  a  member  of  the  firm  in  question,  are  inadmissible.^^ 
Nor  can  existence  of  a  partnership  be  proved  by  declarations  of 
the  person  asserting  such  existence.^*^  Representations  against 
interest  may  be,  as  a  rule,  admitted  in  evidence,  while  self-serv- 
ing declarations,  can  not,  as  a  rule,  be  admitted. 

2iHuyssen  v.  Lauson,  90  Mo.  App.  lanta  Newspaper  Union,  138  Ga.  147, 

82.  74  S.  E.  1084. 

22MulIins     V.     Gilligan,     12     Colo.         25  Marks  v.  Hardy,  117  Ky.  663,  78 

App.  13,  54  Pac.  1106.  S.  W.  IIOS.     See  also  Gilroy  v.  Lof- 

23  Brannon    v.    Hursell,    112    Mass.  tus,  21  Misc.  317,  47  N.  Y.  S.  138. 
63.  26  Graham  v.  Swann,  148  Ky.  608, 

24  American  Cotton  College  v.  At-  147  S.  W.  11. 


1249  EVIDENCE  §    894 

§  893.  Admissions  by  judgment. — Partnership  may  be 
proved  by  a  judgment  against  the  firm  as  an  admission.  But  the 
effect  of  an  admission  can  not  be  given  to  a  judgment  rendered 
on  a  controverted  or  contested  HabiHty.  In  order  for  a  judg- 
ment to  have  the  effect  of  such  an  admission  it  must  have  been 
rendered  on  default  after  personal  service  or  the  like;  such  a 
judgment  is  admissible  in  a  subsequent  action  by  a  stranger 
against  the  same  defendants  to  charge  them  as  partners.^^  But 
such  a  judgment  used  as  an  admission  has  only  the  effect  of  an 
admission  and  is  not  conclusive ;  it  is  competent  for  the  defend- 
ants to  show  all  the  facts  and  circumstances  under  w^hich  such 
an  admission  was  made.^* 

§  894.  Records  and  pleadings  in  former  cases. — There 
seems  to  be  some  difference  of  opinion  in  different  jurisdictions 
as  to  when  records  of  former  cases  are  admissible  in  evidence 
to  establish  a  partnership.  One  line  of  decisions  hold  that,  un- 
der certain  circumstances  the  records  of  a  former  suit,  showing 
the  partnership,  may  be  introduced  in  evidence,  even  though  the 
parties  plaintiff  in  the  second  suit  may  be  different  from  those 
in  the  first  suit."^  A  second  line  of  decisions  hold  that  in  order 
for  such  evidence  to  be  admissible,  the  former  suit  should  have 
been  between  the  same  parties  as  in  the  suit  in  which  the  evidence 
is  sought  to  be  introduced.^"  A  third  rule  has  been  adhered  to. 
In  an  action  upon  a  promissory  note,  where  a  defendant  is  sought 
to  be  held  as  a  partner,  evidence  of  suits  and  judgments  in  which 
said  defendant  was  joined  as  a  partner,  both  by  and  against  the 
firm,  prior  to  the  execution  of  the  note  sued  upon,  was  held  to 
'^e  inadmissible.^^ 

27  Central  R.  &c.  Co.  v.  Smith,  76  Latham  v.  Kenniston,  13  N.  H.  203; 

Ala.    572,    52   Am.    Rep.    353 ;    Flesh-  City  Bank  v.  Dearborn,  20  N.  Y.  244 ; 

man  v.  ColHer,  47  Ga.  253 ;  ColHer  v.  Marks  v.  Sigler,  3  Ohio  St.  358. 
Cross,  20  Ga.  1 ;  Parks  v.  Mosher,  71         ^s  Parks  v.  Mosher,  71  Maine  304. 
Maine    304 ;    Prentiss    v.    Kelley,    41         29  Cragin    v.    Carleton,    21     Maine 

Maine   436;    Cragin    v.    Carleton,    21  492;  Marks  v.  Sigler,  3  Ohio  St.  358. 
Maine    492 ;     Ellis    v.    Jameson,     17         3o  Button    v.    Woodman,    9    Cush. 

Maine  235;   Dutton   v.   Woodman,   9  (Mass.)  255,  57  Am.  Dec.  46. 
Cush.  (Mass.)  255,  57  Am.  Dec.  46;        3 1  Collier  v.  Cross,  20  Ga.  1. 


§    895  LAW    OF    PARTNERSHIP  1250 

§  895.  Proof  of  firm  name  as  prima  facie  evidence  of  part- 
nership.— It  is  not  absolutely  essential  to  the  existence  of  a 
partnership  that  the  persons  either  agree  upon  or  use  a  firm  name. 
But  it  is  almost  the  universal  custom  for  persons  to  adopt  and  use 
what  is  known  and  styled  as  a  firm  name,  and  in  such  name  they 
transact  their  business.  Each  partner  as  the  agent  of  each  other 
and  of  the  firm  is  authorized  to  execute  the  contracts  and  do  the 
business  of  the  partnership  in  such  firm  name.  From  this  gen- 
eral, if  not  universal  custom  of  employing  the  firm  name  for 
the  conduct  of  the  business,  the  rule  has  arisen  that  proof  of 
the  firm  name  is  prima  facie  evidence  of  partnership.^^  Proof 
of  the  fact  that  the  business  was  conducted  in  the  firm  name 
coupled  with  further  proof  of  the  fact  that  the  persons  alleged 
to  have  constituted  the  partnership  each  gave  his  personal  atten- 
tion to  the  business,  raises  a  strong  presumption  that  they  were 
in  fact  partners.^^  Proof  of  the  fact  that  goods  came  to  the  place 
of  business  of  the  partners  in  the  firm  name,  with  the  knowl- 
edge of  the  alleged  partners,  was  held  sufficient  prima  facie  proof 
of  the  alleged  partnership.^*  So,  the  proof  of  the  execution  of 
a  note  in  the  firm  name  by  one  of  the  partners  is  an  admission 
of  the  existence  of  such  firm  and  is  prima  facie  the  debt  of  the 
firm.^^  It  seems  to  be  the  rule  that  the  use  of  the  words  "and 
company"  is  prima  facie  evidence  that  the  firm  is  composed  of 
more  persons  than  those  whose  names  appear  in  the  firm  name. 
This  is  especially  true  where  the  statute  requires  that  such  words 
shall  represent  an  actual  partner.^**  An  instrument  executed  by 
one  of  the  partners  in  the  firm  name,  but  in  nowise  connected 

32  Reed    v.    Reed,    6    Ky.    L.    521;    S.  W.  22;  Parker  v.  Oakley  (Tenn.), 
Charman     v.      Henshaw,      15      Gray     57  S.  W.  426. 

(Mass.)    293;   Schultze  v.   Steele,  69  ^4  chaff ee  v.  Rentfroe,  32  Ga.  477. 

Mo.    App.   614 ;    Meriden    Nat.    Bank  3^  Griener  v.  Ulerey,  20  Iowa  266 

V.  Gallaudet,  120  N.  Y.  298,  24  N.  E.  Holmes    v.    Porter,    39    Maine    157 

994;      Livingston     v.      Roosevelt,     4  Barrett    v.    Swann,    17    Maine    180 

Johns.  (N.  Y.)  251,  4  Am.  Dec.  273;  Etheridge  v.  Binney,  9  Pick.  (Mass.) 

Schroth  V.  Gedney,  30  Misc.  (N.  Y.)  272;     Whitlock     v.     McKechnie,     1 

808,  61  N.  Y.  S.  923.  Bosw.  (N.  Y.)  427. 

33  Haug  V.  Haug,  90  111.  App.  604 ;  se  Whitlock  v.  McKechnie,  1  Bosw. 
Glass  V.   Walker,   17  Ky.  L.   189,  30  (N.  Y.)  427. 


1251  EVIDENCE  §    896 

with  the  transaction  in  question  was  held  competent  evidence  as 
an  admission  of  partnership.^^  In  an  action  on  a  note  executed 
by  one  partner  in  the  firm  name  in  order  to  hold  the  other  part- 
ners the  proof  must  show  that  the  note  was  executed  in  the  part- 
nership business  and  for  the  purpose  of  the  partnership.^^  And 
in  an  action  on  a  note  executed  in  the  name  of  the  firm  where 
the  execution  was  denied,  it  was  held  proper  and  competent  to 
show  that  in  other  transactions  with  other  parties,  prior  to  the 
execution  of  the  note  in  suit  the  party  denying  the  execution  of 
the  note  had  acquiesced  in  the  use  of  his  name  by  the  other  part- 
ner.^**  So,  where  it  appears  that  printed  cards  containing  the 
name  or  the  style  of  the  firm,  were  distributed  in  the  vicinity  of  the 
place  of  the  business  of  the  firm,  and  one  of  them  was  shown 
to  be  fastened  on  the  inside  of  the  door  of  the  storeroom  in  which 
the  firm  did  business,  this  was  held  sufficient  proof  of  the  firm 
name.'*'*  So,  a  writing  signed  by  defendant  as  "treasurer"  of  a 
firm  has  been  held  admissible  to  prove  the  existence  of  the  part- 
nership.*^ Receipt  of  mail  which  was  directed  to  defendants  in 
a  firm  name  within  a  month  after  the  making  of  plaintiff's  al- 
leged contract  with  them  has  been  held  admissible  to  show  that 
they  were  partners.*"  Though  the  name  of  a  partner  was  omitted 
from  affidavits  and  deeds,  this  was  held  not  to  prevail  over  con- 
stant recognition  in  other  respects  that  he  was  a  member  of 
the  firm.*^ 

§  896.  Use  of  individual  names  of  partners  in  firm  name. 
— A  partnership  may  be  proved  by  the  use  of  an  individual's 
name  on  advertisements,  circulars,  bills  and  letter-heads,  on  office 
doors  and  signs,  as  a  part  of  a  firm  name  and  by  other  like  mat- 
s''' Crowell  V.  Western  Reserve  ^o  Michael  v.  Workman,  5  W.  Va. 
Bank,  3  Ohio  St.  406.  391. 

38  Bays  V.  Conner,   105  Ind.  415,  5         ■*!  Gary   v.    Simpson,    15    Ga.    App. 
N.  E.  18 ;  Graves  v.  Kellenberger,  51     280,  82  S.  E.  918. 

Ind.  66;  Ditts  v.  Lonsdale,  49  Ind.  ^^  vich  v.  Watts,  155  Iowa  664,  136 
521.  N.  W.  910. 

39  Ditts  v.  Lonsdale,  49  Ind.  521.  43  Demain    v.    Huston,    70   W.    Va. 

3C6,  73  S.  E.  923. 


§    897  LAV,'    OF    PARTNERSHIP  1252 

ters,**  This  rule  is  based  upon  the  principle  of  estoppel,  and 
while  the  party  so  allowing  the  use  of  his  name  in  the  partner- 
ship, may  or  may  not  be  an  actual  partner  therein,  he  will  be 
held  to  partnership  liability  to  all  those  who  deal  with  the  firm, 
relying  on  the  alleged  partner's  connection  with  the  firm.  In 
order  for  such  evidence  to  be  admissible,  however,  it  is  essential 
that  it  be  shown  that  the  party  sought  to  be  charged  knew  of 
the  use  of  his  name,  or  assented  thereto,  as  otherwise  no  ques- 
tion of  estoppel  could  arise  as  against  him/^  In  order  to  show 
such  knowledge  by  the  alleged  partner,  the  fact  that  handbills, 
with  the  name  of  the  firm  signed  to  them,  were  posted  at  various 
places  in  the  town  where  defendant  resided,  and  that  one  of  the 
bills  was  posted  on  the  door  of  the  house  where  the  alleged 
partner  boarded,  has  been  held  to  be  admissible  in  evidence.*'"' 
Letters  and  memoranda,  written  or  assented  to  by  the  alleged 
partner,  which  show  the  essentials  of  the  partnership,  and  the 
alleged  partner's  connection  therewith,  are  admissible  for  such 
purpose.^^ 

§  897.  Profit  sharing  as  proof  of  partnership. — The  rule 
adopted  and  followed  by  the  early  authorities  and  adjudications 
was  that  proof  of  an  agreement  to  share  in  the  profits  of  a  busi- 
ness was  regarded  as  sufficiently  decisive  to  charge  a  party  thus 
sharing  with  liability  as  a  partner  as  to  third  persons.  But 
the  exceptions  to  this  rule  have  become  so  numerous  and  pro- 
nounced that  it  scarcely  remains  as  a  rule  of  proof  in  partnership 
matters.  There  are  now  so  many  instances  in  which  the  com- 
pensation of  servants  and  agents  is  determinable  by  the  profits 
of  the  business  that  the  mere  proof  of  profit  sharing  is  no  longer 
decisive  of  the  question  of  the  liability  of  the  person  so  sharing 
the  profits  as  a  partner.  The  recent  and  modified  rule  on  this  sub- 
ject maybe  thus  stated :  Participation  in  the  profits  of  the  business 

44  Uhl  V.  Harvey,  78  Ind.  26 ;  Amer-  46  Tumliii  v.  Goldsmith,  40  Ga. 
ican  Cotton  College  v.  Atlanta  News-  221 ;  Barcroft  v.  Haworth,  29  Iowa 
paper  Union,   138  Ga.   147,   74   S.   E.     462. 

1084 ;  Phipps  v.  Little,  213  Mass.  414,         47  Baxter  v.  West,   1  Drew.  &  Sm. 
100  N.  E.  615.  173. 

45  McNeill  V.  Reynolds,  9  Ala.  313. 


1253 


EVIDENCE 


§  897 


is  prima  facie  strong  evidence  of  a  partnership  in  it.  Many  ad- 
judicated cases  hold  that  proof  of  an  agreement  to  share  in  the 
profits  of  a  business  or  undertaking  engaged  in  by  two  or  more,  is 
sufficient  to  estabhsh  the  fact  of  partnership  in  the  absence  of  any 
other  proof. *^  Some  cases  hold  that  if  the  proof  shows  that  a 
person  shares  in  the  profits  as  a  principal,  and  not  as  a  mere 
agent,  factor  or  servant,  it  is  sufficient  to  establish  the  fact  of 
partnership.^^     Some  exceptions  have  apparently  been  made  to 


48  Citizens'  Nat.  Bank  v.  Hine,  49 
Conn.  236;  Parker  v.  Canfield,  2)1 
Conn.  250,  9  Am.  Rep.  317;  Dalton 
City  Co.  V.  Hawes,  Zl  Ga.  115;  Dal- 
ton City  Co.  V.  Dalton  Mfg.  Co.,  Z2) 
Ga.'243;  Irvin  v.  Nashville  &c.  R. 
Co.,  92  111.  103,  34  Am.  Rep.  116; 
Illinois  &c.  Co.  v.  Reed,  102  Iowa  538, 
71  N.  W.  423;  Holbrook  v.  Oberne, 
56  Iowa  324,  9  N.  W.  291 ;  Aultman 
V.  Fuller,  53  Iowa  60,  4  N.  W.  809 ; 
Kuhn  V.  Newman,  49  Iowa  424 ; 
Scott  V.  Colmesnil,  7  J.  J.  Marsh. 
(Ky.)  416;  Craig  v.  Alverson,  6  J. 
J.  Marsh.  (Ky.)  609;  Saufley  v.  How- 
ard, 7  Dana  (Ky.)  367;  Cooley  v. 
Broad,  29  La.  Ann.  345,  29  Am.  Rep. 
332;  Chafifraix  v.  Price,  29  La.  Ann. 
176;  Hallet  v.  Desban,  14  La.  Ann. 
529;  Marks  v.  Stein,  11  La.  Ann.  509; 
Holden  v.  French,  68  Maine  241 ;  Pet- 
tee  V.  Appleton,  114  Mass.  114; 
Scholtz  V.  Freud,  128  Mich.  12,  87 
N.  W.  130;  Canton  Bridge  Co.  v. 
Eaton  Rapids,  107  Mich.  613,  65  N. 
W.  761;  Sager  v.  Tupper,  38  Mich. 
258;  Bohrer  v.  Drake,  ZZ  Minn.  408, 
23  N.  W.  840;  Brownlee  v.  Allen, 
21  Mo.  123 ;  Lomme  v.  Kintzing,  1 
Mont.  290;  Strader  v.  White,  2 
Nebr.  348;  Eastman  v.  Clark,  53  N. 
H.  276,  16  Am.  Rep.  192;  Bromley 
V.  Elliot,  38  N.  H.  287,  75  Am.  Dec. 
182;  Brown  v.  Cook,  3  N.  H.  64; 
Brundred  v.  Muzzy,  25  N.  J.  L.  268; 
Alagovern    v.    Robertson,    116   N.    Y, 


61,  22  N.  E.  398,  5  L.  R.  A.  589; 
Hackett  v.  Stanley,  115  N.  Y.  625, 
22  N.  E.  745;  Mason  v.  Partridge, 
66  N.  Y.  633 ;  Leggett  v.  Hyde,  58  N. 
Y.  272,  47  How.  Pr.  524,  17  Am.  Rep. 
244;  Manhattan  &c.  Co.  v.  Sears,  45 
N.  Y.  797,  6  Am.  Rep.  177;  Wolf  v. 
Lawrence,  ZZ  Misc.  481,  62  N.  Y.  S. 
900;  Jones  v.  Call,  93  N.  Car.  170; 
Falkner  v.  Hunt,  1Z  N.  Car.  571; 
Holt  V.  Kernodle,  23  N.  Car.  199; 
Cox  V.  Delano,  14  N.  Car.  89;  Cho- 
teau  V.  Raitt,  20  Ohio  St.  132 ;  Wood 
V.  Vallette,  7  Ohio  St.  172;  Merrall 
V.  Dobbins,  169  Pa.  St.  480,  32  Atl. 
578;  Wessels  v.  Weiss,  166  Pa.  St. 
490,  31  Atl.  247;  Kifer  v.  Smyers 
(Pa.),  15  Atl.  904;  Hart  v.  Kelley, 
83  Pa.  St.  286;  Irwin  v.  Bidwell,  12 
Pa.  St.  244;  Chapman  v.  Lipscomb, 
18  S.  Car.  222;  Morris  v.  Wood 
(Tenn.  Ch.),  35  S.  W.  1013;  Buchan- 
an V.  Edwards  (Tex.  Civ.  App.),  51 
S.  W.  ZZ ;  Edwards  v.  Buchanan,  14 
Tex.  Civ.  App.  268,  36  S.  W.  1022; 
Stratton  v.  O'Connor  (Tex.  Civ. 
App.),  34  S.  W.  158;  Duryea  v. 
Whitcomb,  31  Vt.  395 ;  Dow  v.  Demp- 
sey,  21  Wash.  86,  57  Pac.  355 ;  Upton 
v.  Johnston,  84  Wis.  8,  54  N.  W.  266 ; 
Rosenfield  v.  Haight,  53  Wis.  260, 
10  N.  W.  378,  40  Am.  Rep.  770; 
Sprout  V.  Crowley,  30  Wis.  187 ;  Ap- 
pleton V.  Smith,  24  Wis.  331. 

49  Hallet   V.    Desban,    14    La.    Ann. 
529. 


§    898  LAW    OF    PARTNERSHIP  1254 

this  general  rule,  but  such  exceptions  are  found  to  rest  in  a  real 
distinction.  A  familiar  illustration  of  the  apparent  exception  is 
found  in  the  case  where  joint  owners  of  a  ship  became  partners 
by  using  it  in  a  joint  enterprise  under  an  agreement  to  share  in 
the  profits  and  losses  for  the  particular  venture.  It  was  held 
that  the  joint  owners  were  partners  in  the  use  of  earnings, 
although  as  to  the  vessel  itself  they  were  joint  owners.  The 
holding  is  in  effect  that  there  was  partnership  without  com- 
munity of  interest.^''  Of  this  rule  the  Supreme  Court  of  Penn- 
sylvania say  :  ^'Participation  in  the  profits  is  not  conclusive  proof 
of  the  existence  of  the  partnership  relation,  but  both  in  England 
and  in  this  country  it  is  cogent  evidence  upon  the  question.  It 
puts  the  defendant  upon  his  proofs  explanatory  of  the  fact. 
If  he  is  able  to  show  that  such  participation  was  referable  to  some 
other  reason,  such  as  compensation  for  services  rendered  by  him 
as  agent,  broker,  salesman  or  otherwise,  the  prima  facies  is  over- 
come."^^  The  rule  has  been  stated  that  sharing  profits  does  not 
of  itself  necessarily  constitute  a  partnership  but  merely  tends 
to  show  that  the  person  who  has  a  right  to  share  profits  is  a 
partner.^^ 

§  898.  Proof  o£  sharing  in  profits  and  losses. — The  exist- 
ence of  an  actual  partnership  as  held  by  one  class  of  cases  may 
be  conclusively  established  by  proof  of  an  actual  community  of 
interest  accompanied  by  an  agreement  to  participate  in  the  profits 
and  to  share  in  the  losses  of  the  business  or  venture.  And  proof 
of  an  actual  sharing  in  profits  and  losses  is  generally  held  suffi- 
cient without  direct  proof  of  an  agreement,  and  that  the  estab- 
lishment of  these  facts  is  conclusive  evidence  of  partnership.^" 
The  general  rule  is  that  either  proof  of  an  agreement  to  share, 

^oBigelow   V.    Elliot,    1    Cliff.    (U.  ^i  Gibbs  Estate,  157  Pa.  59,  27  Atl. 

S.)    28,   Fed.   Cas.   No.    1399;    Ilendy  383,   22    L.    R.    A.   276;    Edwards    v. 

V.   March,  75  Cal.  566,   17  Pac.  702;  Tracy,  62  Pa.  St.  374. 

Kingsbury   v.    Tharp,    61    Mich.    216,  ^-  Richardson    v.    Keely,    58    Colo. 

28    N.    W.    74;    Howe    v.    Howe,    99  47,  142  Pac.  167. 

Mass.   71  ;   Williams  v.   Lawrence,   ^7  ^^  Brown  v.  Higginbotham,  5  Leigh 

N.  Y.  462;   Merritt  v.  Walsh,  32  N.  (Va.)   583,  27  Am.  Dec.  618. 
Y.  685. 


1255  EVIDENCE  §   899 

or  proof  of  an  actual  sharing,  in  profits  and  losses  is  sufficient 
proof  of  a  partnership.  The  reason  given  for  this  is  that  the 
sharing,  or  the  agreement  to  share,  in  profits  and  losses  consti- 
tutes a  partnership.^* 

§  899.  Sharing  in  profits,  or  profits  and  losses — Prima 
facie  case. — Another  class  of  cases  establishes  the  rule  that 
proof  of  an  agreement  to  share,  or  proof  of  sharing  in  the  profits, 
or  the  profits  and  losses  of  the  business  is  prima  facie  evidence 
of  a  partnership.  On  this  rule  it  was  said  by  Mr.  Story :  "Ad- 
mitting that  a  participation  in  the  profits  will  ordinarily  establish 
the  existence  of  a  partnership  between  the  parties  in  favor  of 
third  persons  in  the  absence  of  all  opposing  circumstances,  it 
remains  to  be  considered  whether  the  rule  ought  to  be  regarded 
as  anything  more  than  presumptive  proof  thereof  and  liable  to 
be  repelled  and  overcome  by  other  circumstances."^^  The  same 
principle  was  stated  by  the  Illinois  Supreme  Court  as  follows : 
"Where  parties  agree  to  share  in  the  profits  of  a  business,  the 
law  will  infer  a  partnership  between  them  in  the  business  to  which 
the  agreement  refers ;  but  this  presumption  may  be  disproved. 
It   is  prima   facie  evidence  and   will  control  until   rebutted."^'' 

^^Stafiford  V.  Sibley,  113  Ala.  447,  830,  26  N.  W.  783;  Baldwin  v.  Eddy, 

21  So.  459;  Hendy  v.  March,  75  Cal.  64  Minn.  425,  Q  N.  W.  349. 

566,    17    Pac.    702 ;    Fisher   v.    Sweet,  ^^  Story  Partnership,  §  38. 

67    Cal.   228,    7    Pac.   657 ;    Harris   v.  s"  Lockwood  v.  Doane,  107  111.  235 ; 

Hillegass,   54   Cal.  463;    Robinson   v.  Niehoff  v.  Dudley,  40  111.  406;  Illing- 

Compher,  13  Colo.  App.  343,  57  Pac.  worth   v.    Parker,   62    111.    App.   650; 

754 ;   Bucknam  v.   Barnum,   15   Cojm.  Straus    v.    Kohn,    83    111.    App.    497 ; 

67;  Gray  v.  Blasingame,  110  Ga.  343,  Fourth    Nat.    Bank  v.   Altheimer,   91 

35    S.    E.   653;    Morse   v.    Richmond,  Mo.  190,  3  S.  W.  858;  Gill  v.  Ferris, 

97  111.  303;  Pierce  v.  Shippee,  90  111.  82    Mo.    156;    Philips   v.    Samuel,    76 

371;  Mudd  v.  Bates,  1Z  111.  App.  576;  Mo.  657;   Campbell  v.  Dent,  54  Mo. 

Uhl  V.  Harvey,  1'^  Ind.  26 ;   Hart  v.  325 ;  Roper  v.  Schaef  er.  35  AIo.  App. 

Hiatt,    2    Ind.    Ten    245,    48    S.    W.  30;  Goddard  &c.  Co.  v.  Berry,  58  Mo. 

1038 ;   Staples  v.   Sprague,  75   Maine  App.  665 ;  Burnett  v.  Snyder,  81   N. 

458;    Funck    v.    Haskell,    132    Mass.  Y.  550,  Zl  Am.  Rep.  527;   Kootz  v. 

580;    Getchell    v.    Foster,    106    Mass.  Tuvian,    118    N.    Car.    393,   24    S.    E. 

42 ;  Kingsbury  V.  Tharp,  61  Mich.  216,  776;    Southern   Fert.   Co.  v.   Reames, 

28  N.   W.  74;    Smith  v.   Walker,   57  105   N.   Car.  283,    11    S.  E.  467.     An 

Mich.  456,  22  N.  W.  267,  24  N.  W.  agreement   to    share   the   profits    and 

29 — Row.  ON  Partn. — Vol.  2 


§    900  LAW    OF    PARTNERSHIP  1256 

Ordinarily,  in  an  agreement  to  share  in  the  profits  of  a  business 
or  venture,  where  nothing  is  said  about  losses,  it  is  held  to  amount 
prima  facie  to  an  agreement  to  share  losses  also,  and  consequently 
it  was  held  that  an  agreement  to  share  profits  was  prima  facie 
an  agreement  for  a  partnership.^''  The  prima  facie  case  thus  made 
by  proof  of  an  agreement  to  share  in  the  profits  may  be  over- 
come by  proof  showing  that  the  profits  were  not  received  as 
such,  but  simply  as  a  measure  of  compensation ;  but  in  the  ab- 
sence of  any  such  rebutting  evidence  the  prima  facie  case  thus 
made  becomes  conclusive.^^  Proof  that  profits  were  received  as 
compensation,  and  there  was  no  sharing  of  losses,  shows  that  one 
is  not  a  partner.^^  An  agreement  to  share  losses  so  as  to  create 
a  partnership  need  not  be  shown  by  express  agreement,  but  may 
be  inferred  from  other  provisions  of  the  partnership  contract, 
the  nature  of  the  business,  and  the  relation  of  the  parties  to  it.*"' 
In  an  action  by  a  creditor  against  partners  to  recover  against  the 
partnership  and  upon  a  note  for  loaned  money  executed  in  the 
name  of  the  individual  partner,  in  whose  name  the  partnership 
business  was  conducted,  it  was  held  that  the  burden  of  the  proof 
was  upon  the  plaintiff  to  show  that  the  money  was  borrowed  for, 
or  appropriated  to  the  use  of  the  firm,  or  that  the  name  was  in 
fact  used  to  denote  all  of  the  partners.*'^ 

§  900.  Proof  of  sharing  in  profits  and  losses — Not  con- 
clusive.— There  is  another  class  of  cases  that  holds  that  even 
proof  of  sharing  or  an  agreement  to  share  in  the  profits  and 
losses  is  not  conclusive  evidence  of  the  fact  of  partnership.  This 
rule  applies  generally  in  cases  involving  controversies  between 
the  parties  themselves  or  with  a  third  person  who  had  actual 

losses  of  a  venture  is  no  more  than  91   Mo.  190,  3  S.  W.  858;  Roper  v. 

prima  facie  evidence  of  partnership,  Schaefer,  35  Mo.  App.  30. 

and  may  be  rebutted  by  proof  of  an-  ^^  Freeman  v.  Miller,  157  App.  Div. 

other   agreement.     Roberts   v.   Nunn  715,  142  N.  Y.  S.  797. 

(Tex.  Civ.  App.),  169  S.  W.  1086.  ^o  Haswell  v.   Standring,   152  Iowa 

"  Straus  V.  Kohn,  83  111.  App.  497 ;  291,  132  N.  W.  417. 

Illingworth   v.    Parker,   62    111.    App.  ^i  Gernon  v.   Hoyt,  90  N.   Y.  631 ; 

650.  Bank    of    Rochester    v.    Monteath,    1 

58  Fourth  Nat.  Bank  v.  Altheimer,  Den.  (N.  Y.)  402. 


1257  EVIDENCE  §    900 

knowledge  of  the  partnership  agreement,  knew  its  terms  and 
was  famihar  with  the  deahngs  of  the  partners  among  them- 
selves.*'^ In  this  class  of  cases  the  intention  of  the  parties  is  con- 
trolling as  gathered  either  from  their  agreement  or  their  method 
of  conducting  the  business.  And  where  the  contract  is  in  writing 
the  intention  must  be  collected  from  the  instrument  itself,  sub- 
ject to  the  same  rules  of  constraction  and  interpretation  as  in 
the  case  of  writings  generally.  In  such  cases  courts  will  seek  to 
ascertain  and  then  enforce  the  intention  of  the  parties.*'^  The 
reason  given  as  to  why  proof  of  sharing  in  profits  and  losses  is 
not  conclusive  on  the  question  of  partnership  is  that  such  proof 
does  not  necessarily  show  that  each  partner  is  a  principal  as  to 
the  partnership  and  an  agent  as  to  the  other  partners.  The  au- 
thority of  the  several  partners  is  held  to  be  a  necessary  conse- 
quence of  their  community  of  interest  and  there  is  no  partner- 
ship without  it.  It  must  be  shown  that  each  partner  has  the  right 
"to  make  contracts,  incur  liabilities,  manage  the  whole  business, 
and  dispose  of  the  whole  property  of  the  partnership,  for  its 
purposes,  in  the  same  manner  and  with  the  same  power  as  all  the 
partners  could  when  acting  together."^* 

62Couch  V.  Woodrufif.  63  Ala.  466;  N.    Y.    186;    Osbrey    v.    Reimer,    49 

Lee  V.  Cravens,  9  Colo.  App.  272,  48  Barb.  (N.  Y.)  265;  Smith  v.  Wright, 

Pac.   159;   Snell  v.   De  Land,  43   111.  5    Sandf.    (N.    Y.)    113;    Morgan    v. 

323;  Fawcett  v.  Osborn,  32  111.  411,  Stearns,    41    Vt.    398;     Brigham    v. 

83   Am.    Dec.   278;    National    Surety  Dana,  29  Vt.   1. 

Co.  V.  T.  B.  Townsend  Brick  &c.  Co.,  •'^  Lgg  y.  Wimberly,  102  Ala.  539, 
74  111.  App.  312 ;  Dwinel  v.  Stone,  30  15  So  444 ;  Bestor  v.  Barker,  106  Ala. 
Maine  384;  Banchor  v.  Cilley,  38  240,  17  So.  389;  Tayloe  v.  Bush,  75 
Maine  553 ;  Canton  Bridge  Co.  v.  Ala.  432 ;  National  &c.  Co.  v.  Town- 
Eaton  Rapids,  107  Mich.  613,  65  N.  send  &c.  Co.,  176  111.  156,  52  N.  E. 
W.  761;  Monroe  v.  Greenhoe,  54  938;  Stevens  v.  Faucet,  24  111.  483; 
Mich.  9,  19  N.  W.  569 ;  Connolly  v.  Chaffraix  v.  Lafitte,  30  La.  Ann.  631 ; 
Davidson,  15  Minn.  519,  2  Am.  Rep.  Canton  Bridge  Co.  v.  Eaton  Rapids, 
154;  Clifton  v.  Howard,  89  Mo.  192,  107  Mich.  613,  65  N.  W.  761 ;  Kellogg 
1  S.  W.  26,  58  Am.  Rep.  97 ;  Kellogg  &c.  Co.  v.  Farrell,  88  Mo.  594 ;  Bank 
«&c.  Co.  V.  Farrell,  88  Mo.  594;  Mc-  of  Osceola  v.  Outhwaite,  50  Mo.  App. 
Donald  v.  Matney,  82  Mo.  358;  Bank  124. 

of    Osceola    v.    Outhwaite,    50    Mo.        64  ggrthold  v.  Goldsmith,  24  How. 

App.    124;    Baldwin    v.    Burrows,    47  (U.   S.)    536,   16  L.   ed.  762;    Lee  v. 

N.  Y.  199;  Pattison  v.  Blanchard.  5  Cravens,   9  Colo.   App.  272,   48   Pac. 


§  901 


LAW    OF    PARTNERSHIP 


1258 


§  901.  Liability  to  third  persons — Proof. — Persons  con- 
ducting a  joint  enterprise  or  business  may  be  liable  as  partners 
to  third  persons  when  they  are  not  in  fact  partners  as  between 
themselves.  Persons  have  often  been  adjudged  to  be  liable  as 
partners  as  to  third  persons,  when  they  could  not  be  so  regarded 
as  between  themselves.''^  Much  less  proof  will  suffice  to  establish 
the  liability  of  partners  to  third  persons  than  is  required  to  show 
a  partnership  between  themselves.  Circumstances  much  less  con- 
clusive are  sufficient  to  establish  a  partnership  as  to  third  per- 
sons.^" It  requires  much  more  evidence  to  establish  the  existence 


159;  Winslow  v.  Young,  94  Maine 
145,  47  Atl.  149;  Braley  v.  Goddard. 
49  Maine  115;  Dwinel  v.  Stone,  30 
Maine  384;  Beecher  v.  Bush,  45 
Mich.  188,  7  N.  W.  785,  40  Am.  Rep. 
465;  Ashby  v.  Shaw,  82  Mo.  76; 
Musser  v.  Brink,  68  Mo.  242;  Bank 
of  Osceola  v.  Outhwaite,  50  Mo.  App, 
124 ;  Eastman  v.  Clark,  53  N.  H.  276, 
16  Am.  Rep.  192 ;  Cox  v.  Hickman,  8 
H.  L.  Cas.  268,  9  C.  B.  (N.  S.)  47, 
30  L.  J.  C.  P.  125,  7  Jur.  (N.  S.) 
105,  8  Wkly.  Rep.  754;  Mollwo  v. 
Court  of  Wards,  L.  R.  4  P.  C.  419. 

65  Humphries  v.  McCraw,  5  Ark. 
61;  Olmstead  v.  Hill,  2  Ark.  346; 
Price  V.  Alexander,  2  Greene  (Iowa) 
427,  52  Am.  Dec.  526;  Stanchfield  v. 
Palmer,  4  Greene  (Iowa)  23;  Cham- 
pion V.  Bostwick,  18  Wend.  (N.  Y.) 
175,  31  Am.  Dec.  376;  Gill  v.  Kuhn, 
6  S.  &  R.  (Pa.)  333;  Kellogg  v.  Gris- 
wold,  12  Vt  291. 

66  Collyer  Partnership,  89,  97 ;  Let- 
son  V.  Hall,  1  Ala.  App.  619,  55  So. 
944;  Daugherty  v.  Heckard,  189  111. 
239,  59  N.  E.  569;  Van  Brunt  v. 
Mather,  48  Iowa  503;  Bissell  v. 
Warde,  129  Mo.  439,  31  S.  W.  928. 
For  cases  in  which  defendants  have 
been  held  to  be  partners  see  Shackle- 
ford  V.  Williams,  182  Ala.  87.  62  So. 
54;  Letson  v.  Hall,  1  Ala.  App.  619, 


55  So.  944;  Behrenfeld  v.  Breedlove 
(Cal.  App.),  150  Pac.  71;  Irvine  & 
Muir  Lumber  Co.  v.  Holmes,  26  Cal. 
App.  453,  147  Pac.  229;  Friese  v. 
Simpson  (Ga.),  84  S.  E.  219;  Swy- 
gert  V.  Bank  of  Haralson,  13  Ga.  App.. 
640,  79  S.  E.  759;  Bredhoff  v.  Lep- 
man,  181  111.  App.  247;  First  Nat. 
Bank  of  Anna  v.  Rusk,  179  111.  App. 
574;  Smith  v.  Hart,  179  111.  App.  98; 
Elliot  V.  Swannell,  154  III.  App.  570 ; 
Nichols  V.  Burcham,  177  Mich.  601, 
143  N.  W.  647;  Wright  v.  Brooks, 
47  Mont.  99,  130  Pac.  968 ;  Taylor  v. 
Steinman,  95  Nebr.  217,  145  N.  W. 
358;  Clarke  v.  North,  135  N.  Y.  S. 
422 ;  Filers  Music  House  v.  Reine,  65 
Ore.  598,  133  Pac.  788 ;  Mayer  v.  Wil- 
son, 242  Pa.  473,  89  Atl.  685 ;  Miller 
V.  Laughlin  (Tex.  Civ.  App.),  147 
S.  W.  711.  For  cases  in  which  the 
evidence  was  insufficient  to  show 
partnership,  see  Kent  v.  Cobb,  24 
Colo.  App.  264,  133  Pac.  424 ;  Miller 
v.  Mitcham.  21  Idaho  741,  123  Pac. 
941 ;  Huger  v.  Ransom,  134  La.  696,  64 
So.  682 ;  Ellis  v.  Brand,  176  Mo.  App. 
383,  158  S.  W.  705;  Hurst  v.  Hay- 
den,  94  Nebr.  704,  144  N.  W.  162; 
First  State  Bank  of  Oldham  v. 
Thompson,  32  S.  Dak.  169,  142  N. 
W.  248. 


1259  EVIDENCE  §    901 

of  a  business  partnership  between  a  husband  and  wife  where  they 
deny  its  existence  than  between  persons  not  married  to  each 
other.*''  But  it  seems  to  be  the  rule  that  partnership  as  to  third 
persons  may  sometimes  arise  by  operation  of  the  law  and  even 
against  the  intention  or  consent  of  the  parties.  This  may  happen 
in  either  of  two  events :  ( 1 )  Where  the  contract  which  the  par- 
ties have  entered  into  in  law  makes  each  the  principal  and  agent 
of  the  other;  (2)  or  by  a  course  of  dealing  they  have  shown  that 
such  was  the  real  relation  between  the  parties.*'^  There  are  two 
ways  in  which  a  person  may  become  liable  to  third  parties : 
(1)  As  an  actual  partner  by  express  agreement;  (2)  by  permit- 
ting himself  to  be  held  out  to  the  public  as  a  partner,  by  the  use 
of  his  name  as  a  member  of  the  firm.*'*^  In  the  first  case  he  is 
liable  on  all  contracts  made  by  any  member  of  the  firm  in  the 
partnership  name  and  coming  within  the  partnership  business. ^^^ 
In  the  class  of  cases  coming  within  the  latter  condition  he  is 
liable  for  all  debts  contracted  within  the  scope  of  the  partner- 
ship business  by  persons  who  deal  with  the  firm  in  the  faith  of 
this  fact,  and  in  reasonable  reliance  upon  the  honest  belief  of  the 
authority  of  the  contract  of  the  partner  to  bind  the  firm.'^^  A 
partnership  which  will  render  the  partners  liable  to  third  persons 
may  be  proved  by  circumstantial  evidence."^    A  person  who  is 

^'^  Sartori    v.    Pozzi,    20    Cal.    App.  <''°  Alabama  &c.  Co.  v.  Reynolds,  85 

252,  128  Pac.  755 ;  Kent  v.  Cobb,  24  Ala.  19,  4  So.  639. 

Colo.  App.  264,  133  Pac.  424 ;  B.  A.  ' »  Alabama  &c.  Co.  v.  Reynolds,  79 

Railton    Co.   v.    Huntington,    169    111.  Ala.   497;    Clark  v.   Taylor,   68   Ala. 

App.  616;   Ramsey  v.   Carr,    168   111.  453. 

App.  379;   In   re   McDonald's   Estate  '^^  Owensboro  &c.  Co.  v.  Bliss,   132 

(Iowa),    149    N.    W.    897;    Ratke    v.  Ala.  253,  31  So.  81,  90  Am.  St.  907; 

Rinker,    117    Md.    289,    83    Atl.    251;  Tanner  &c.  Co.  v.  Hall,  86  Ala.  305, 

Swift  V.  Scott,  181  Mo.  App.  1,  163  S.  5  So.  584;  Alabama  &c.  Co.  v.  Rey- 

W.  538 ;  A.  Graf  Distilling  Co.  v.  Wil-  nolds,  85  Ala.  19,  4  So.  639 ;  Humes  v. 

son,  172  Mo.  App.  612,  156  S.  W.  23;  O'Bryan,    74   Ala.   64;    Nicholson    v. 

Blodgett  V.  Inglis,  63  Wash.  513,  115  Moog,  65   Ala.  471;   Webb  v.  John- 

Pac.  1043,  Ann.  Cas.  1912  D,  622n.  son,  95  Mich.  325,  54  N.  W.  947;  Hin- 

f'S  Morgan  v.  Parrel,  58  Conn.  413,  man   v.   Littell,   23    Mich.   484;    Mer- 

20  Atl.  614,  18  Am.  St.  282;  Citizens'  shon  v.  Hobensack,  22  N.  J.  L.  372. 

Nat.    Bank   v.    Hine,    49    Conn.   236;  '-Humphries   v.    McCraw,    5    Ark. 

Parker  v.   Canfield,  37  Conn.  250,  9  61 ;    Miller    v.    Laughlin    (Tex.    Civ. 

Am.  Rep.  317.  App.),  147  S.  W.  711. 


§    902  LAW    GF    PARTNERSHIP  1260 

not  a  partner  in  fact  may  become  so  by  operation  of  law  at  the 
suit  of  a  creditor  when  he  is  benefited  by  the  profits  of  the  part- 
nership and  takes  from  the  creditors  a  part  of  the  fund  on 
which  they  place  reliance  for  the  payment  of  their  debts/^  Evi- 
dence that  a  plaintiff,  who  assisted  at  an  operation  on  defendant, 
and  another  doctor  who  performed  it,  occupied  the  same  house, 
is  not  sufficient  to  establish  partnership  between  them,  and  make 
out  the  defense  that  they  were  partners,  and  that  the  other  doc- 
tor having  been  paid,  the  plaintiff  could  not  recover  for  his 
services.'^*  Very  little  evidence  is  necessary  to  bind  persons  as 
partners  in  their  relations  to  creditors/^  Evidence  that  two 
persons  engaged  in  business  under  a  firm  name  composed  of 
their  names  and  the  word  company,  and  that  the  profits  were  to 
be  divided  between  them  in  certain  proportions,  although  one  of 
them  furnished  the  whole  capital,  warranted  the  jury  in  finding 
a  trading  partnership/"  In  an  action  to  charge  stockholders  of 
a  de  facto  corporation  as  partners  there  must  be  shown  knowledge 
of  defects  in  incorporation  or  intention  to  act  as  partners, '^^  and 
stockholders  who  contracted  believing  they  were  binding  their 
corporation  must  be  shown  to  have  represented  themselves  as 
partners  before  being  held  liable  as  such/®  It  may  be  shown  in 
attachment  proceedings  that  prior  attaching  creditors  were  secret 
partners  in  the  debtor  firm/^  But  in  an  action  against  members 
of  a  "Farmers'  Co-operative  League"  they  were  not  held  part- 
ners where  neither  the  sharing  of  profits,  nor  an  intention  to 
become  partners  was  shown/*^ 

§  902.     Suits  between  partners — Proof. — As   nas   hereto- 
fore been  shown,  a  different  rule  applies  in  determining  partner- 
's Pitkin    V.    Pitkin,    7    Conn.    307,        77  Magnolia  Shingle  Co.  v.  J.  Zim- 
18   Am.    Dec.    Ill;    New    Orleans   v.     mern's  Co.,  3  Ala.  App.  578,  58  So.  90. 
Gauthreaux,  32  La.  Ann.  1126.  's  United   States  Wood   Preserving 

74  Epstein  v.  Hugel,   138  N.  Y.   S.     Co.  v.  Lawrence    (Conn.),  95  Atl.  8. 
1072.  79josselson  v.  Butler,  162  Ky.  229, 

"  Swygert  v.  Bank  of  Haralson,  13     172  S.  W.  503. 
Ga.  App.  640,  79  S.  E.  759.  so  Willoughby  v.  Hildreth,  182  Mo. 

76  Phipps  V.   Little,  100  N.  E.  615,     App.  80,  167  S.  W.  639. 
213  Mass.  414. 


1261 


EVIDENCE 


§  902 


ship  relations  between  partners  and  third  persons,  and  between 
the  partners  themselves.  As  between  the  partners,  or  alleged 
partners,  and  the  third  persons,  actual  partnership  need  not  nec- 
essarily be  shown  in  order  to  hold  the  alleged  partner  to  partner- 
ship liability.  As  between  the  alleged  partners  themselves,  how- 
ever, the  actual  existence  of  the  partnership  must  be  shown  by 
clear  proof  thereof.*^  The  existence  of  a  partnership  need  not 
however  be  proven  by  direct  evidence,  but  may  be  implied  from 
circumstances.®^  As  in  other  cases,  partnership  can  not  be  estab- 
lished by  the  declarations  of  one  of  the  alleged  partners,  except  as 
to  himself.®*  The  courts  will  not  proceed  on  conjecture,  but  strict 
proof  will  be  required  as  to  the  existence  of  the  partnership.®^  The 
statements  and  acts  of  an  alleged  partner  may  be  introduced  to 
prove  the  existence  of  the  partnership,  in  a  proper  case,  and  a 
Michigan  case  holds  that  evidence  of  statements  of  a  decedent 


81  Black  V.  Henry  G.  Allen  Co.,  56 
Fed.  764;  Watson  v.  Hamilton,  180 
Ala.  3,  60  So.  63 ;  Denison  v.  Keiser, 
104  Ark.  94,  148  S.  W.  1023;  Rey- 
nolds V.  Jackson,  25  Cal.  490,  144  Pac. 
305 ;  Jones  v.  Purnell,  62  Pennew. 
(Del.)  444,  62  Atl.  149;  Davis  v.  Sa- 
vannah Lumber  Co.,  11  Ga.  App.  610, 
75  S.  E.  986;  Olson  v.  Michener,  158 
Iowa  338,  138  N.  W.  826;  Crawford 
V.  Wiedemann,  159  Ky.  18,  166  S. 
W.  595;  Graham  v.  Swann,  148  Ky. 
608,  147  S.  W.  11 ;  Busbey  v.  Ham- 
iter,  131  La.  118,  59  So.  35;  Abadie 
V.  Frechede,  22  La.  Ann.  423 ;  Cover 
V.  Hall,  3  Harr.  &  J.  (Md.)  43; 
Miller  V.  Casey,  176  Mich.  221,  142 
N.  W.  589;  Groth  v.  Payment,  79 
Mich.  290;  Smith  v.  Shotlifif,  169  Mo. 
App.  66,  154  S.  W.  177;  Boon  v. 
Turner,  96  Mo.  App.  635,  70  S.  W. 
916;  Lenahan  v.  Casey,  46  Mont.  367, 
128  Pac.  601;  Arnold  v.  Sinclair,  12 
Mont.  248,  29  Pac.  1124;  Donahue 
V.  Hanighen,  96  Nebr.  180,  147  N. 
W.  464;  Osborne  v.  Fitzgerald,  26 
Nebr.    514,   42    N.   W.   418;    Sargent 


V.  Collins,  3  Nev.  260 ;  Gordon  v. 
Farrell,  157  App.  Div.  409,  142  N. 
Y.  S.  491;  Burkardt  v.  Walsh,  49 
App.  Div.  634,  64  N.  Y.  S.  779 ;  Nich- 
olson V.  Kilbury,  83  Wash.  196,  145 
Pac.  189;  McDonald  v.  Edgcomb,  68 
Wash.  393,  123  Pac.  525;  Lantz  v. 
Tumlin,  74  W.  Va.  196,  81  S.  E. 
820;  Goss  v.  Lanin  (Iowa),  152  N. 
W.  43;  Bettinger  v.  Bettinger 
(Iowa),  150  N.  W.  1025;  Stillman 
V.  Lefferts  (Iowa),  82  N.  W.  491; 
Brown  v.  Brown,  175  Mich.  442,  141 
N.  W.  553 ;  Kruse  v.  Tripp,  129  Minn. 
252,  152  N.  W.  538 ;  Chapin  v.  Cherry. 
243  Mo.  375,  147  S.  W.  1084 ;  Simpson 
V.  Gernandt  (Nebr.),  152  N.  W.  549; 
Richardson  v.  Wilson  (Tex.  Civ. 
App.),  178  S.  W.  566;  Radcliffe  v. 
Rushworth,  33  Beav.  484.  See  ante 
§  877  et  seq. 

S3  Nicholson  v.  Kilbury,  83  Wash. 
196,  145  Pac.  189. 

8*  Akers  v.  Lord,  67  Wash.  179,  121 
Pac.  51. 

85  Baker  v.  Baker,  161  111.  App. 
430. 


§    902  LAW    OF    PARTNERSHIP  1262 

as  to  what  he  had  already  done  with  his  business  is  admissible 
in  a  suit  concerning  the  right  of  another  to  carry  it  on  as  a 
partner,^"  In  a  suit  between  plaintiff  and  defendant,  as  to  whether 
or  not  they  were  partners,  the  fact  that  defendant,  after  sever- 
ance of  his  business  relations  with  plaintiff,  on  being  sued  as  an 
individual  by  a  third  person  made  an  affidavit  of  defense  individ- 
ually, is  no  evidence  thereof. ^^  That  plaintiff  gave  notes  to  de- 
fendant, secured  by  trust  deed,  on  certain  property,  does  not  pre- 
clude plaintiff  from  showing  that  the  property  belonged  to  them 
as  partners,  and  that  the  notes  and  trust  deed  were  but  part  of 
the  agreed  plan  between  them  to  put  the  ostensible  title  in  plain- 
tiff, while  defendant  was  to  be  a  dormant  partner.^^  In  an  action 
for  an  accounting  between  partners,  the  court,  in  case  of  doubt 
as  to  the  existence  of  the  partnership,  may  consider  the  acts  and 
conduct  of  the  parties  at  the  time  of  and  subsequent  to  the  date 
of  the  contract.^®  It  has  been  held,  however,  that  general  re- 
marks occurring  in  a  conversation  between  two  or  more  parties 
regarding  a  business  proposition  are  not  sufficient  evidence  of  a 
partnership  agreement.®"  It  has  been  held  that  under  certain  con- 
ditions, statements  by  defendant  that  the  complainant  had  an 
interest  in  an  enterprise  and  was  entitled  to  share  in  the  profits, 
are  not  necessarily  conclusive  of  such  cjuestion.®^  In  short, 
a  prima  facie  case  of  partnership  is  made  out  by  evidence  that 
persons  are  sharing  profits,  pursuant  to  agreement;  that  they 
have  described  themselves  as  partners,  or  that  they  are  the  com- 
mon proprietors  of  a  business  conducted  for  mutual  profit."" 
This  rule  applies  in  all  classes  of  partnership  actions  as  well  as 
between  the  partners  themselves,  but,  being  only  presumptive, 
may  be  rebutted  by  proper  evidence.  It  probably  applies  most 
strongl}^  in  cases  where  the  partners  are  sued  by  a  third  person, 

^'■o  Howard     v.     Patrick,     43     Mich.  »» Chapin   v.   Cherry,  243    Mo.  375, 

121,  5  N.  W.  84.  147  S.  W.  1084. 

87  Ryder    V.    Jacobs,    196    Pa,.     Si  ''i  AIcDonald  v.  Edgcomb,  68  Wash. 

386,  49  Atl.  667.  393,   123  Pac.  525. 

8s  Short    V.    Taylor,    137    AIo.    517,  ^'- Cobb    v.    Martin,    32    Okla.    588, 

38  S.  W.  952,  59  Am.  Rep.  508.  123  Pac.  422. 

snVright  V.  Amann,  192  Fed.  649. 


1263  EVIDENCE  §   903 

and  least  strongly  as  between  the  partners  themselves.  Uncontro- 
verted  evidence  that  the  defendant  held  the  plaintiff  out  as  a 
partner,  and  received  from  him  cash  and  credits  used  in  the  busi- 
,ness,  has  been  held  to  sustain  a  finding  of  a  partnership.®^  Where 
it  was  proved  that  the  defendant  had  paid  all  the  expenses  of 
the  business,  and  there  was  no  proof  as  to  a  certificate  of  part- 
nership, or  that  any  account  of  inventory  had  been  taken,  the 
defendant's  positive  testimony  that  no  partnership  agreement 
existed  was  sufficiently  supported."'*  In  an  action  for  accounting, 
it  was  held  that  a  book  of  entry  and  admissions  by  the  defendant 
were  sufficient  to  corroborate  plaintiff's  testimony  as  to  the  exist- 
ence of  a  partnership."^  It  has  been  held  that  uncontradicted 
declarations  by  a  defendant  that  the  plaintiff  had  an  interest  in 
an  enterprise,  and  a  right  to  share  in  the  profits,  was  not  con- 
clusive on  such  question."® 

§  903.  Suits  against  third  persons — Proof. — In  a  suit  by 
partners,  or  where  a  defense  is  set  up  that  an  obligation  is  that 
of  a  partnership  and  not  of  an  individual,  the  evidence  of  part- 
nership need  only  be  sufficient  to  prove  material  allegations  in 
ordinary  civil  actions."^  It  has  been  said,  however,  evidence 
must  be  exceptionally  clear  to  support  allegations  of  a  general 
partnership."^  In  an  action  by  partners  to  recover  a  partnership 
demand,  the  partnership  may  be  proved  by  oral  testimony  of 
clerks  or  other  persons  who  knew  that  the  alleged  partners  ac- 
tually carried  on  the  business  in  partnership.""     A  partnership 

"sShadburne  v.    Sbarbaro,    182    111.  v.   Omaha  Nat.   Bank,  69  Nebr.  654, 

App.  54.  96   N.   W.   189;    North   v.    Bloss,   30 

94  Simpson    v.    Gernanclt     (Nebr.),  N.    Y.    374;    Adler    v.    Cloud,    42    S. 

152  N.  W.  549.  Car.    272,    20    S.    E.    393;    Gregg   v. 

osTrainor  v.  Robyn,  164  Iowa  508,  Willis,  71  Vt.  313,  45  Atl.  299;  Wil- 

146  N.  W.  450.  ley  v.  Crocker-Woolworth  Nat.  Bank, 

96  McDonald  V.  Edgcomb,  68  Wash.  (Cal.)    72    Pac.   832    (revd.    141    Cal. 
393,  123  Pac.  525.  508.  75  Pac.  106)  ;  Ex  parte  Benefield, 

97  Mullins     V.     Gilligan,     12     Colo.  5  Ves.  Jr.  424. 

App.     13,    54    Pac.     1106;     Davis    v.         ^^  Gray  v.  Palmer,  9  Cal.  616. 
White,   1  Houst.    (Del.)   228;  Agnew         « » Lockridge  v.  Wilson,  7  Mo.  560. 


'§    904  LAW    OF    PARTNERSHIP  1264 

may  be  proved  in  an  action  against  third  persons  by  evidence  that 
each  partner  admitted  its  existence.* 

§  904.  Intention. — Intention  has,  as  we  have  seen  hereto- 
fore, been  held  to  be  a  leading  test  of  partnership.  It  has  been 
held  that  testimony  of  one  partner  that  he  did  not  intend  to  be- 
come a  partner,  or  as  to  what  his  purpose  was  in  the  business 
relation  he  had  with  his  codefendant  is  not  material,  except  as 
it  relates  to  specific  acts  or  conduct,  and  then  only  so  far  as  such 
acts  or  conduct,  as  qualified  by  the  motive  or  intent,  affect  the 
credibility  of  his  denial  that  he  was  interested  with  his  codefend- 
ant.^ This  should  not  be  taken  too  literally.  The  true  reason  for 
the  holding  in  the  above  case  was  that  partnership  liability  could 
there  be  shown  by  holding  out.  There  are  many  cases  holding 
that  the  intention  of  the  parties  is  the  true  test,^  and  that  such 
intent  may  be  inferred  from  the  acts,  words  and  conduct  of  the 
parties  sought  to  be  charged  as  partners."*  It  is  held  that  in  deter- 
mining the  existence  of  a  partnership,  if  the  agreement  is  partly 
in  writing,  partly  oral,  and  partly  evidenced  by  conduct  only,  all 
the  things  done  by  the  parties  in  connection  with  the  common 
purpose  should  be  considered.^  In  case  the  question  arises  be- 
tween the  partners  themselves,  the  intention  of  all  parties,  if  the 
same,  should  govern.  Moreover,  if  the  intention  of  the  various 
partners  differed,  and  there  was  some  ambiguity  in  the  contract 
as  to  the  relations  created,  certain  conditions  might  arise  where 
the  contract  would  be  of  no  effect,  for  want  of  mutuality.  As  said 
in  one  case,*'  ''for  whether  the  existence  of  certain  facts  shall 
constitute  a  partnership  depends  upon  the  intention  of  the  parties 
interested,  as  between  themselves."  Two  persons  being  sued  as 
partners  in  a  certain  transaction,  and  one  alleging  no  partner- 

1  Swygert    v.    Bank    of    Haralson,  142  Pac.  167 ;  Smith  v.  Hart,  179  111. 
13  Ga.  App.  640,  79  S.  E.  759.  App.  98.    See  ante  §  887. 

2  Griffin  v.  Carr,  165  N.  Y.  62\  59  ^Irvine    &    Muir    Lumber    Co.    v. 
N.  E.  1123.  Holmes,  26  Gal.   App.   453,    147   Pac. 

3  See  ante  §§  87,  88,  89.  229. 

4  Richardson  v.  Keely,  58  Colo.  47,  e  Macy  v.   Combs,    15    Ind.   469,   77 

Am.   Dec.   103. 


1265  i:v:d;--\ce  §  905 

ship,  it  is  not  competent  to  introduce  an  agreement  between  the 
parties,  showing  their  relations  in  another  matter.^ 

§  905.  Proof  by  holding  out. — Under  the  rule  stated  in 
the  preceding  section  persons  may  be  held  liable  as  partners  to 
third  persons  when  they  are  not  in  fact  partners  as  among  them- 
selves. A  very  common  method  by  which  a  person  is  held  liable 
as  a  member  of  a  firm  is  by  evidence  showing  that  the  firm  has 
held  him  out  to  the  public  as  a  partner.  It  is  very  clear  that  one 
who  holds  himself,  or  permits  himself  to  be  held  by  the  firm, 
out  to  the  public  as  a  partner,  and  thereby  obtains  credit  him- 
self or  gives  credit  to  the  firm,  will  be  held  liable  as  a  partner 
though  he  is  not  in  fact.*  The  rule  was  stated  by  the  Supreme 
Court  of  Illinois  thus:  "Parties  may  so  conduct  themselves  as 
to  be  liable  to  third  persons  as  partners,  when,  in  fact,  no  partner- 
ship exists  as  between  themselves.  The  public  are  authorized  to 
judge  from  appearances  and  professions,  and  are  not  absolutely 
bound  to  know  the  real  facts,  while  the  certain  truth  is  positively 
known  to  the  alleged  parties  to  a  firm."^  This  rule  was  thus 
stated  by  the  Minnesota  Supreme  Court:  "Parties  will  be  held 
prima  facie  to  be  partners  as  to  creditors  upon  slighter  proof 
than  is  necessary  to  establish  that  relation  among  themselves. 
In  such  cases,  representations,  conduct,  and  circumstances  natu- 
rally calculated  and  likely  to  induce  the  belief  that  the  parties 

■^Kimball  v.  Longstreet,  174  Mass.  Haas,  9  La.  Ann.  528;  Rice  v.  Bar- 

487,  55  N.  E.  177.  rett,  116  Mass.  312;  McCarthy  v.  Nash, 

8  Buckingham  v.  Burgess,  3  Mc-  14  Minn.  127;  Wood  v.  Cullen,  13 
Lean  (U.  S.)  364,  Fed.  Cas.  No.  Minn.  394;  Gates  v.  Watson,  54  Mo. 
2087;  Benedict  v.  Davis,  2  McLean  585;  Young  v.  Smith,  25  Mo.  341; 
(U.  S.)  347,  Fed.  Cas.  No.  1293;  Shafer  v.  Randolph,  99  Pa.  St.  250; 
Shackleford  v.  Williams,  182  Ala.  87,  Downie  v.  Savage,  72  Wash.  164,  129 
62  So.  54;  Vittitow  v.  McKinney,  99  Pac.  1096;  Wagner  v.  Buttles,  151 
Ark.  602,  139  S.  W.  544 ;  Campbell  v.  Wis.  658,  139  N.  W.  425 ;  In  re  Mc- 
Hastings,  29  Ark.  512;  Ellison  v.  Donald  (Iowa),  149  N.  W.  897;  Shu- 
Stuart,  2  Pennew.  (Del.)  179,  43  Atl.  maker  Partnership,  §§  35-37.  See  also 
836;  Carmichael  v.  Greer,  55  Ga.  116;  United  States  Wood  Preserving  Co. 
Dailey  v.  Coons,  64  Ind.  545;  Han-  v.  Lawrence  (Conn.),  95  Atl.  8. 
cock  v.  Hintrager,  60  Iowa  374,  14  ^  Daugherty  v.  Heckard,  189  III. 
N.  W.  725;  Woodward  v.  Clark,  30  239,  59  N.  E.  569;  Phillips  v.  Phil- 
Kans.    78,    2    Pac.    106 ;    Burbank    v.  lips,  49  111.  437. 


§    906  LAW    OF    rARTXERSIIIP  1266 

were  partners  are  competent.    Of  necessity,  this  evidence  must 
be  largely  circumstantial. "^° 

§  906.  Proof  by  holding  out — Nature  and  degree. — No 
absolute  rule  can  be  given  as  to  the  quantity  or  degree  of  proof 
necessary  in  such  cases.  But  in  such  cases  it  is  not  necessary  to 
prove  an  actual  existing  partnership  between  the  persons  sought 
to  be  charged.  An  apology  for  a  general  rule  may  be  found  in 
the  statement  that  the  proof  is  sufficient  to  render  a  party  liable 
as  a  partner  when  it  shows  that  he  so  acted  and  conducted  him- 
self toward  the  public  as  to  induce  a  reasonable  person  to  deal 
with  him  in  the  honest  belief  that  the  partnership  really  existed." 
In  such  cases  it  is  not  necessary  to  prove  that  the  party  holding 
himself  out  as  a  partner  shares  in  the  profits  or  losses,  as  this  can 
in  no  way  affect  the  person  acting  on  the  belief  that  he  is  in  fact 
a  member  of  the  firm.^-  Mr.  Lindley  states  that  in  order  to 
render  a  person  liable  on  the  ground  that  he  has  been  held  out 
as  a  partner  two  things  must  appear:  (1)  The  act  of  holding  out 
must  have  been  done  either  by  him  or  with  his  consent;  (2)  it 
must  have  been  known  to  the  person  seeking  to  hold  him  liable. 
The  reasons  for  this  are  stated  thus :  "In  the  absence  of  the  first 
of  these  requisites,  whatever  may  have  been  done,  can  not  be 
imputed  to  the  person  sought  to  be  made  liable.  And  in  the  ab- 
sence of  the  second,  the  person  seeking  to  make  him  liable  has 
not  in  any  way  been  misled. "^^ 

§  907.  Proof  by  holding  out — Estoppel. — The  liability  of 
a  person  thus  held  out  is  on  the  doctrine  of  estoppel  and  the 
proof  must  show  all  the  elements  sufficient  to  constitute  the  estop- 
pel.^'   So,  the  proof  must  show  that  the  acts,  conduct  or  admis- 

lORosenbaum  v.  Howard,  69  Minn.  C.  803,  32  L.  J.  Ex.  105,  9  Jur.    (N. 

41,  71  N.  W.  823.  S.)   81,  7  L.  T.  638,   11  Wkly.   Rep. 

11  Rimel    v.    Hayes,    83    Mo.    200 ;  239 ;  Ex  parte  Watson,  19  Ves.  459. 
Fletcher   v.    PuIIen,    70    Md.    205,    16        ^^  1     Lindley     Partnership,     p.     43 
Atl.  887,   14  Am.  St.  355.  (57). 

12  Brown  v.  Leonard.  2  Chitty  120,  i-*  Marble  v.  Lypes,  82  Ala.  322,  2 
23  Rev.  Rep.  744 ;  Kirkwood  v.  Cheet-  So.  701 ;  Wise  v.  Williams,  72  Cal. 
ham,  2  Post.  &  F.  798,  10  Wkly.  Rep.  544.  14  Pac.  204;  Bowie  v.  Maddox, 
670 ;  Hardman  v.  Booth,  1  Hurlst.  &  29  Ga.  285,  74  Am.  Dec.  61 ;  Poole  v. 


1267 


EVIDENCE 


§    908 


sions  relied  upon  to  constitute  the  holding  out  must  have  been 
before  credit  was  given  or  the  contract  entered  into.^^  The  lia- 
bility of  the  person  claimed  to  have  been  held  out  can  only  extend 
to  such  persons  as  are  thereby  led  to  believe  that  he  is  in  fact  a 
partner  and  who  gave  credit  to  the  firm  upon  such  belief.^''' 

§  908.  Proof  by  holding  out — Acts  constituting  an  estop- 
pel.— The  holding  out  of  a  person  as  a  partner  may  be  suf- 
ficiently shown  by  proof  of  his  conduct,  conversation,  admissions 
or  use  of  his  name,  or  any  and  all  facts  and  circumstances  either 
showing  or  tending  to  show  that  the  contract  was  executed  or 
credit  extended  to  the  firm  under  the  reasonable  belief  that  the 
party  sought  to  be  charged  was  in  fact  a  member  of  the  firm/" 
The  same  rules  apply  where  a  person  permits  one  or  more  other 


Fisher,  62  111.  181;  Uhl  v.  Harvey, 
78  Ind.  26;  Sherrod  v.  Langdon,  21 
Iowa  518;  Fletcher  v.  Pullen,  70  Md. 
205,  16  Atl.  887,  14  Am.  St.  355; 
Cirkel  v.  Croswell,  36  Minn.  323,  31 
N.  W.  513;  Bissell  v.  Warde,  129  Mo. 
439,  31  S.  \\^  928 ;  Eastman  v.  Clark, 
53  N.  H.  276,  16  Am.  Rep.  192 ;  Poil- 
lon  V.  Secor,  61  N.  Y.  456;  Reber  v. 
Columbus  &c.  Co.,  12  Ohio  St.  175 ; 
Lancaster  &c.  Bank  v.  Boffenmyer, 
162  Pa.  St.  559,  29  Atl.  855 ;  Drennen 
V.  House,  41  Pa.  30 ;  French  v.  Bar- 
ron, 49  Vt.  471 ;  Moore  v.  Harper, 
42  W.  Va.  39,  24  S.  E.  633. 

isKnard  v.  Hill,  102  Alji.  570,  15 
So.  345 ;  Morgan  v.  Farrel,  58  Conn. 
413,  20  Atl.  614,  18  Am.  St.  282; 
Webster  v.  Clark,  34  Fla.  637,  16  So. 
601,  27  L.  R.  A.  126,  43  Am.  St.  217; 
Palmer  v.  Pinkham,  Zl  Maine  252 ; 
Fletcher  v.  Pullen,  70  Aid.  205,  16 
Atl.  887,  14  Am.  St.  355  ;  Van  Kleeck 
V.  McCabe,  87  Mich.  599,  49  N.  W. 
872,  24  Am.  St.  182 ;  Hahlo  v.  Mayer, 
102  Mo.  93,  13  S.  W.  804,  15  S.  W. 
750.  22  Am.  Rep.  753;  Howes  v. 
Fiske,   67   N.    H.   289,    30   Atl.    351; 


Cornhauser  v.  Roberts,  75  Wis.  554, 
44  N.  W.  744;  Baird  v.  Planque,  1 
Post.  &  Fin.  344. 

'^^  Thompson  v.  First  Nat.  Bank, 
111  U.  S.  529,  28  L.  ed.  507,  4  Sup. 
Ct.  689;  Benedict  v.  Davis,  2  Mc- 
Lean (U.  S.)  347,  Fed.  Cas.  No. 
1293;  Bowie  v.  Maddox,  29  Ga.  285. 
74  Am,  Dec.  61 ;  Wood  v.  Pennell, 
51  Maine  52;  Fitch  v.  Harrington, 
13  Gray  (Mass.)  468,  74  Am.  Dec. 
641;  Willoughby  v.  Hildreth,  182 
Mo.  App.  80,  167  S.  W.  639. 

"McCaskey  v.  Pollock,  82  Ala. 
174,  2  So.  674;  Campbell,  v.  Hast- 
ings, 29  Ark.  512;  Carmichael  v. 
Greer,  55  Ga.  116;  Dailey  v.  Coons. 
64  Ind.  545;  Fletcher  v.  Pullen,  70 
Md.  205,  16  Atl.  887,  14  Am.  St.  355 ; 
Rice  V.  Barrett.  116  Alass.  312;  Cir- 
kel v.  Croswell,  36  Alinn.  323,  31  N. 
W.  513 ;  Miles  v.  Wann,  27  Minn.  56, 
6  N.  W.  417;  Pringle  v.  Leverich,  48 
N.  Y.  Super.  90;  Reber  v.  Columbus 
&c.  Mfg.  Co.,  12  Ohio  St.  175 ;  Harris 
V.  Sessler,  67  Tex.  383,  3  S.  W.  316; 
Moore  v.  Harper,  42  W.  Va.  39,  24 
S.  E.  dlZ. 


§    908  LAW    OF    PARTNERSHIP  1268 

persons  to  hold  him  out  as  a  partner,  and  credit  is  thereby  pro- 
cured on  the  strength  of  his  supposed  relation.  He  may  be  held 
liable  as  a  partner  by  any  one  who  thus  lends  credit  to  the  firm. 
But  in  this  class  of  cases  the  proof  must  generally  show  that  the 
person  sought  to  be  charged  had  knowledge  that  he  was  in  fact 
held  out,  but  this  may  be  shown  either  by  facts  or  circumstances 
from  which  notice  to  him  can  be  imputed.^'*  So  where  a  partner- 
ship becomes  incorporated  but  continues  the  use  of  the  firm  books 
and  the  various  running  accounts  are  continued  without  break, 
it  was  held  in  an  action  by  a  creditor  who  had  sold  goods  and 
charged  them  to  the  firm  that  the  partners  were  estopped  to  set 
up  the  incorporation  as  a  defense  to  the  action."  Though  letter- 
heads used  with  knowledge  of  one  whom  it  is  sought  to  hold  as 
a  partner  may  be  evidence  of  the  existence  of  the  partnership, 
yet  unless  such  person  was  held  out  by  them  as  a  partner,  and 
another  acts  on  the  faith  of  them,  they  do  not  create  an  estoppel."" 
Where  one  sold  goods  for  a  corporation  under  a  contract  by 
which  he  received  half  the  profits  for  his  services,  and  he  also 
bought  goods  from  the  plaintiff  in  the  name  of  S  &  Co.,  in  which 
he  was  doing  business,  and  sold  goods,  taking  notes  in  payment, 
and  also  took  title  notes  on  sales  of  some  of  the  goods  of  the 
corporation,  and  some  of  the  goods  bought  from  plaintiff,  payable 
to  the  corporation,  from  which  he  received  credit  from  the  corpo- 
ration, but  there  was  no  evidence  that  the  plaintiff  knew  of  the 
contract  with  the  corporation,  or  that  the  corporation  held  itself 
out  to  the  plaintiff  as  a  partner,  it  was  held  that  the  evidence  was 
not  sufficient  to  charge  the  corporation  as  a  partner  on  a  note 
executed  by  S  for  goods  purchased  from  the  plaintiff.^'- 

isSwann  v.  Sanborn,  4  Woods  (U.  i^Reid  v.  Kreling,  125  Cal.  117,  57 

S.)  625,  Fed.  Cas.  No.  13675;  Jewett,  Pac.  IIZ. 

In  re,  7  Biss.   (U.  S.)   328,  Fed.  Cas.  20  American  Cotton  College  v.  At- 

No.    7306;    Hess    v.    Ferris,    57    111.  lanta  Newspaper  Union,  138  Ga.  147, 

App.  Zl;  Hinman  v.  Littell,  23  Mich.  74  S.  E.  1084. 

484 ;    Crook    v.    Davis,    28    Mo.    94 ;  21  American   Seeding  Mach.   Co.  v. 

Hicks  V.  Cram,  17  Vt.  449.  John    Conklin's    Sons    Co.,    64    Misc. 

652,  120  N.  Y.  S.  592. 


1269  EVIDENCE  §    910 

§  909.  Partnership  liability  by  estoppel — Uniform  Part- 
nership Act. — The  Uniform  Partnership  Act  lays  down  cer- 
tain rules  as  to  partnership  liability  by  estoppel,  which  will  largely 
govern  the  admission  of  evidence  to  show  such  liability  under 
that  act.  Section  16  provides:  "(1)  When  a  person,  by  words 
spoken  or  written  or  by  conduct,  represents  himself,  or  consents 
to  another  representing  him  to  any  one,  as  a  partner  in  an  exist- 
ing partnership  or  with  one  or  more  persons  not  actual  partners, 
he  is  liable  to  any  such  person  to  whom  such  representation  has 
been  made,  who  has,  on  the  faith  of  such  representation,  given 
credit  to  the  actual  or  apparent  partnership,  and  if  he  has  made 
such  representation  or  consented  to  its  being  made  in  a  public  man- 
ner, he  is  liable  to  such  person,  whether  the  representation  has 
or  has  not  been  made  or  communicated  to  such  person  so  giving 
credit  by  or  with  the  knowledge  of  the  apparent  partner  making 
the  representation  or  consenting  to  its  being  made:  (a)  When 
a  partnership  liability  results,  he  is  liable  as  though  he  were  an 
actual  member  of  the  partnership;  (b)  when  no  partnership  lia- 
bility results,  he  is  liable  jointly  with  the  other  persons,  if  any, 
so  consenting  to  the  contract  or  representation  as  to  incur  liabil- 
ity, otherwise  separately.  (2)  When  a  person  has  been  thus  rep- 
resented to  be  a  partner  in  an  existing  partnership,  or  with  one 
or  more  persons  not  actual  partners,  he  is  an  agent  of  the  per- 
sons consenting  to  such  representation  to  bind  them  to  the  same  ex- 
tent and  in  the  same  manner  as  though  he  were  a  partner  in  fact, 
with  respect  to  persons  who  rely  upon  the  representation.  Where 
all  the  members  of  the  existing  partnership  consent  to  the  repre- 
sentation, a  partnership  act  or  obligation  results ;  but  in  all  other 
cases  it  is  the  joint  act  or  obligation  of  the  person  acting  and  the 
persons  consenting  to  the  representation." 

§  910.  Proof  by  reputation. — The  authorities  are  prac- 
tically unanimous  in  holding  that  proof  of  general  reputation  is 
not,  ordinarily,  admissible  for  the  purpose  of  establishing  part- 


§  910 


LAW    OF    PARTNERSHIP 


1270 


nership.""  The  reason  usually  given  for  excluding  such  evidence 
is  that  it  is  hearsay,^^  and  does  not  fall  v^ithin  any  exception  to 
the  rule  excluding  hearsay  evidence.  An  Arkansas  case  holds 
that,  on  the  issue  as  to  whether  a  business  was  carried  on  by 
defendants  as  partners,  evidence  of  what  is  universally  under- 
stood as  to  the  business  relations  of  defendants  is  incompetent."* 
Delaware  has  some  apparently  conflicting  decisions  upon  the 
question. ^^  One  case  decided  in  1893,  holds  that  general  reputa- 
tion that  two  persons  are  partners  can  not  be  rebutted  by  spe- 
cific acts,  hut  only  by  general  reputation  in  reply.  This  would 
indicate  that  the  testimony  showing  general  reputation  was  ad- 
missible. Another  Delaware  case,  decided  the  following  year, 
held  very  clearly  that  testimony  of  general  reputation  is  not  ad- 
missible to  charge  a  person  as  a  partner  of  a  firm.^"  Nor  is  proof 


22  Wilson  V.  Codman,  3  Cranch 
(U.  S.)  193,  2  L.  ed.  408;  Owens- 
boro  Wagon  Co.  v.  Bliss,  132  Ala. 
253,  31  So.  81,  90  Am.  St.  907 ;  Mar- 
ble V.  Lypes,  82  Ala.  322,  2  So.  701 ; 
Carter  v.  Douglass,  2  Ala.  499;  Stie- 
wel  V.  Borman,  63  Ark.  30,  37  S.  W. 
404;  Campbell  v.  Hastings,  29  Ark. 
512;  Sinclair  v.  Wood,  3  Cal.  98; 
Butte  &c.  Co.  V.  Wallace,  59  Conn. 
336,  22  Atl.  330;  Brown  v.  Crandall, 
11  Conn.  92;  Tumlin  v.  Goldsmith, 
40  Ga.  221 ;  Bowen  v.  Rutherford,  60 
111.  41,  14  Am.  Rep.  25;  Joseph  v. 
Fisher,  4  111.  137;  Macy  v.  Combs, 
15  Ind.  469,  77  Am.  Dec.  103;  Earl 
V.  Hurd,  S  Blackf.  (Ind.)  248;  Brown 
V.  Rains,  S3  Iowa  81,  4  N.  W.  867; 
Southwick  V.  McGovern,  28  Iowa 
533;  Graham  v.  Swann,  148  Ky.  608, 
147  S.  W.  11;  Marks  v.  Hardy,  117 
Ky.  663,  4  Ann.  Cas.  815;  Scott  v. 
Blood,  16  Maine  192 ;  Bryden  v.  Tay- 
lor, 2  Har.  &  J.  (Md.)  396,  3  Am. 
Dec.  554;  Goddard  v.  Pratt,  16  Pick. 
(Mass.)  412;  Sager  v.  Tupper,  38 
Mich.  258;  Lockridge  v.  Wilson,  7 
Mo.  560 ;  Hersom  v.  Henderson,  23 
N.  H.  498;  Grafton  Bank  v.  Moore, 


13  N.  H.  99,  38  Am.  Dec.  478 ;  Adams 
V.  Morrison,  113  N.  Y.  152,  20  N.  E. 
829;  Halliday  v.  McDougall,  20 
Wend.  (N.  Y.)  81 ;  Smith  v.  Griffith, 
3  Hill  (N.  Y.)  333,  38  Am.  Dec.  639; 
Inglebright  v.  Hammond,  19  Ohio 
337,  53  Am.  Dec.  430 ;  Farmers'  Bank 
V.  Saling,  33  Ore.  394,  54  Pac.  190; 
Carlton  v.  Coffin,  27  Vt.  496;  Hicks 
V.  Cram,  17  Vt.  449;  Gay  v.  Fret- 
well,  9  Wis.  186;  Emberson  v.  Mc- 
Kenna,  4  Willson  Tex.  App.  Civ. 
Cas.,  §  94,  16  S.  W.  419;  Holman  v. 
Herscher  (Tex.),  16  S.  W.  984;  Buz- 
zard V.  Jolly  (Tex.),  6  S.  W.  422. 

23  Marble  v.  Lypes,  82  Ala.  323, 
2  So.  701;  Hicks  v.  Cram,  17  Vt. 
449;  Wallis  v.  Wood  (Tex.),  7  S.  W. 
852 ;  Central  R.  Co.  v.  Smith,  76  Ala. 
572,  52  Am.  Rep.  353;  Brown  v. 
Crandall,  11  Conn.  92;  Earl  v.  Hurd, 
5  Blackf.  (Ind.)  248;  Bowen  v.  Ruth- 
erford, 60  III.  41,  14  Am.  Rep.  25. 

2*Stiewel  v.  Borman,  63  Ark.  30, 
37  S.  W.  404. 

25  Deputy  V.  Harris,  1  Marv.  (Del.) 
100,  40  Atl.  714. 

20  Grier  v.  Deputy,  1  Marv.  (Del.) 
19.  40  Atl.  716. 


1271  EVIDENCE  §    910 

of  such  general  reputation  sufficient  to  shift  the  burden  of  proof."' 
It  seems  to  have  been  held  that  such  reputation  is  admissible 
where  it  is  made  to  appear  by  the  proof  that  the  debt  sued  for 
was  contracted  because  of  the  notoriety  acquired  by  the  firm  and 
that  the  contract  or  debt  related  to  the  particular  business."^  And 
it  has  been  held  admissible  in  corroboration  or  to  show  knowl- 
edge, on  the  theory  that  if  the  community  generally  understands 
and  believes  one  to  be  a  partner  it  tends  to  prove  that  his  acts 
and  conduct  have  been  such  as  naturally,  fairly,  and  reasonably 
support  such  a  belief.^'*  But  some  cases  deny  its  admissibility  in 
corroboration,  on  the  ground  that  if  the  other  evidence  is  insuffi- 
cient to  establish  a  partnership  then  the  party  bound  to  establish 
it  must  fail,  and  can  not  supply  the  defect  by  proof  of  general 
reputation.^^  So  it  has  been  held  admissible  if  it  appears  to  arise 
from  the  acts  of  the  partner  sought  to  be  charged,^"  or  if  he 
knowingly  permitted  it  to  be  reputed  he  was  a  partner,'^  and  a 
general  reputation  as  to  the  continuance  of  a  partnership  after 
dissolution  has  been  admitted.^*  It  was  also  held  admissible  in 
connection  with  evidence  that  such  report  or  reputation  was 
known  to  the  parties  sought  to  be  charged,  as  showing  that  they 
knew  they  were  held  out  as  partners. ^^  So,  evidence  of  persons 
residing  near  the  place  where  the  partnership  business  was  trans- 

27  Taylor  v.  Webster,  39  N.  J.   L.  ^i  Adams   v.    Morrison,    113    N.    Y. 

102.  152,  20  N.  E.  829. 

2s  Tanner   v.    Hall,   86   Ala.    305,    5  32  Gilpin  v.  Temple,  4  Harr.   (Del.) 

So.  584.  190. 

30  Turner  v.  Mcllhany,  6  Cal.  287;  33  Benjamin  v.  Covert,  47  Wis.  375, 

Gilpin    V.    Temple,    4    Harr.     (Del.)  2  N.  W.  625. 

190;   Rizer  v.   James,  26   Kans.   221;  34  Coggswell  v.  Davis,  65  Wis.  191, 

Cross   V.    Burlington    Nat.    Bank,    17  26  N.  W.  557. 

Kans.    336;    Bernard   v.    Torrance,   5  35  Campbell    v.    Hastings,    29    Ark 

Gill    &    J.     (Md.)    383;    Parshall    v.  512;    Gafifney  v.   Hoyt,  2   Idaho   199, 

Fisher,  43  Mich.  529,  5  N.  W.  1049;  10   Pac.   34.     See   also    Southwick  v. 

Gulick   V.    Gulick,    14    N.    J.    L.    578;  McGovern,   28   Iowa   533,   and    Butte 

Allen  V.  Restrain,  11   S.  &  R.    (Pa.)  Hardware  Co.  v.  Wallace,  59  Conn. 

362 ;  Gay  v.  Fretwell,  9  Wis.  186.  336,  22  Atl.  330. 


30 — Row.  ON  Partn. — Vol.  2 


§911  LAW    OF    PARTNERSHIP  1272 

acted  as  to  their  understanding  as  to  the  persons  who  composed 
the  firm  has  been  held  admissible.^® 

§  911.  Partnership  in  individual  name. — The  business  of  a 
partnership  is  sometimes  conducted  in  the  name  of  a  single  indi- 
vidual. In  such  case  the  same  rules  of  proof  apply  in  order  to 
bind  the  other  partner  as  in  cases  to  prove  the  members  of  a  part- 
iK?rship  generally.  Evidence  of  participation  in  profits,  manage- 
ment of  the  business,  dealings  in  other  instances,  declarations  or 
admissions,  together  with  circumstances  which  would  reasonably 
raise  the  inference  of  partnership  is  sufficient.^^  And  where  the 
particular  business  is  carried  on  in  the  name  of  an  individual 
partner,  and  a  note  is  given  in  such  name  for  borrowed  money, 
it  is  held  that  in  order  to  recover  against  the  partners  the  plain- 
tiff must  prove  that  the  money  for  which  the  note  was  given  was 
borrowed  on  the  credit  of  the  partnership,  or  that  it  was  used 
in  the  business  or  for  the  benefit  of  the  partnership.  The  pre- 
sumption in  such  case  is  that  the  debt  is  the  debt  of  the  indi- 
vidual who  executed  the  note.^^ 

§  912.     Admissibility  of  partnership  books — Generally. — 

The  admissibility  of  partnership  books  is  very  seldom  determined 
by  the  doctrine  or  rule  of  entries  in  regular  course  of  business. 
But  such  books  are  usually  kept  in  the  course  of  business  and  are 
therefore  similar  to  most  of  those  considered  as  coming  within 
the  rule  that  entries  made  in  due  course  of  business  are  admissi- 
ble after  the  death  of  the  party  making  them.  Entries  in  partner- 
ship books  in  the  usual  course  of  business  are  generally  admissi- 
ble in  favor  of  third  persons  in  actions  against  the  partners  as 
admissions  of  such  partners,^^  and  this  is  true  even  as  against 

36  Parshall  v.  Fisher,  43  Mich.  529,  State  Ins.  Co.,  8  La.  285 ;  Fosdick  v. 
5  N.  W.  1049.  Van  Horn,  40  Ohio  459. 

37  Palmer  v.  Stephens,  1  Den.  (N.  39  Kahn  v.  Boltz,  39  Ala.  (£;  New 
Y.)  471;  Bank  of  Rochester  v.  Mon-  Haven  &c.  Co.  v.  Goodwinn,  42  Conn. 
teath,  1  Den.  (N.  Y.)  402;  Burnley  230;  Agricultural  Ins.  Co.  v.  Keeler, 
V.  Rice,  18  Tex.  481.  44  Conn.  161 ;  Perry  v.  Butt,  14  Ga. 

38Horton  v.  Miller,  84  Ala.  537,  4  699;  Eden  v.  Lingenfelter,  39  Ind. 
So.  370;  Snead  v.  Barringer,  1  Stew.  19;  succession  of  Magi,  107  La.  Ann. 
(Ala.)    134;    Hermann    v.    Louisiana    208,  31  So.  660;  Calder  v.  Creditors, 


1273 


EVIDENCE 


special  or  dormant  partners  who  had  access  to  the  books.^"  So, 
as  a  general  rule,  partnership  books  are  admissible  for  and  against 
each  partner  as  between  themselves  to  show  the  state  of  the  part- 
nership affairs,  and  the  like;*^  but  if  a  partner  had  no  access  to 
the  books  and  was  deprived  of  an  opportunity  to  examine  them, 
the  rule  does  not  apply  and  this  not  infrequently  happens  in  the 
case  of  a  special  or  dormant  partner  or  in  the  case  of  entries  by 
a  liquidating  or  surviving  partner;'*"  nor  are  alleged  partnership 
books,  ordinarily,  admissible  of  themselves  to  prove  or  disprove 
the  partnership/^  The  rules  as  to  the  admissibility  of  entries 
made  in  regular  course  of  business  are  substantially  the  same,  no 
matter  whether  the  books  are  books  kept  by  a  partnership  or  an 
individual  merchant  or  dealer,  and  no  matter  whether  the  entries 
were  made  by  a  partner  or  a  bookneeper.**    In  Georgia  it  has 


47  La.  Ann.  346.  16  So.  852 ;  Grant  v. 
Masterton,  55  Mich.  161,  20  N.  W. 
885;  Daniels  v.  Fowler,  123  N.  Car. 
25,  31  S.  E.  598;  Hartley  v.  Weide- 
man,  175  Pa.  St.  309,  34  Atl.  625. 

40  Chick  V.  Robinson,  95  Fed.  619, 
Zl  C.  C.  A.  205,  52  L.  R.  A.  833,  and 
note ;  First  Nat.  Bank  v.  Huber,  75 
Hun  80,  58  N.  Y.  St.  160,  26  N.  Y. 
S.  961. 

41  Glover  v.  Hembree,  82  Ala.  324, 
8  So.  251;  Haller  v.  Willamowicz, 
23  Ark.  566;  Peden  v.  Mail,  118  Ind. 
560,  20  N.  E.  446;  Reno  v.  Crane,  2 
Blackf.  (Ind.)  217;  Hunter  v.  Al- 
drich,  52  Iowa  442,  3  N.  W.  574; 
Meguiar  v.  Helm,  91  Ky.  19,  14  S. 
W.  949,  12  Ky.  L.  751;  Carpenter 
V.  Camp,  39  La.  Ann.  1024,  3  So. 
269;  Sangston  v.  Hack,  52  Md.  173; 
Toplifif  V.  Jackson.  12  Gray  (Mass.) 
565 ;  Bunnell  v.  Henderson,  23  N.  J. 
Eq.  174;  Godfrey  v.  Templeton,  86 
Tenn.  161,  6  S.  W.  47;  Faver  v.  Bow- 
ers  (Tex.  Civ.  App.),  ZZ  S.  W.  131. 

42  Pratt  V.  McHatton,  11  La.  Ann. 
260;  Robins  v.  Warde,  111  Mass. 
244;  Kohler  v.  Lindenmeyer,  129  N. 


Y.  498,  29  N.  E.  957;  Bank  of  Brit- 
ish North  America  v.  Delafield,  80 
Hun  (N.  Y.)  564;  Saunders  v.  Duval, 
19  Tex.  467. 

43  Abbott  V.  Pearson,  130  Mass. 
191 ;  Rosenbaum  v.  Howard,  69  Minn. 
41,  71  N.  W.  823;  Brackett  v.  Cun- 
ningham, 44  Minn.  498,  47  N.  W. 
157;  Lindsay  v.  Guy,  57  Wis.  200,  15 
N.  W.  181.  But  see  note  in  52  L.  R. 
A.  834  et  seq.,  for  instances  in  which 
books  are  and  are  not  admissible  for 
this  purpose  under  particular  and 
different  circumstances. 

44  In  the  following  cases  partner- 
ship account  books  were  admitted  in 
favor  of  the  partnership  when  prop- 
erly authenticated,  and  in  some  in- 
stances one  partner  was  permitted  to 
prove  delivery  of  goods  and  another 
to  prove  the  entry  of  the  charge,  and 
in  others  the  authentication  was  by 
proving  the  nature  of  the  books  by 
one  partner  and  the  handwriting  of 
the  other,  who  kept  the  books  and 
was  absent.  Webb  v.  Michner,  32 
Minn.  48,  19  N.  W.  82 ;  Ford  v.  Cun- 
ningham,  87   Cal.  209,   25    Pac.   403: 


§    912  ,AW    OF    TARTNERSHIP  1274 

been  held  that  books  of  account  are  not  rendered  inadmissible  by 
the  fact  that  they  are  partnership  books,  or  that  they  were  kept 
by  one  partner  and  offered  in  a  proceeding  against  the  otlier  after 
his  death  as  a  surviving  partner.*^  In  an  interesting  case  in  Indi- 
ana the  plaintiff  sought  to  replevy  a  boat  from  the  defendant  and 
the  latter  pleaded  property  in  himself.  The  plaintiff  claimed  the 
property  by  purchase  from  a  former  partner  of  the  defendant 
soon  after  the  partnership  had  ended,  and  it  appeared  that  the 
boat  was  built  upon  the  partnership  premises  by  the  defendant 
and  left  there  by  him  in  care  of  an  agent,  when  defendant  re- 
moved from  the  premises  at  the  expiration  of  the  partnership. 
The  defendant  offered  an  entry  in  the  partnership  account  book 
in  evidence,  charging  himself  in  his  own  handwriting  with  the 
boat  at  a  certain  valuation,  and  the  court  held  that  it  was  admis- 
sible to  show  that  the  boat  was  his  property.*^  So,  on  an  issue 
as  to  whether  a  note  executed  by  partners  to  a  third  person  was 
signed  by  one  of  them  as  surety,  the  property  for  which  it  was 
given  having  been  turned  over  to  the  firm,  the  partnership  books 
were  held  admissible  for  him  to  show  that  the  other  partner  was 
credited  with  the  property.*^ 

New  Haven  &c.  Co.  v.  Goodwin,  42  to  an  individual  account  between  one 

Conn.  230;   Butler  v.   Cornwall  Iron  partner  and  a  third  person,  it  having 

Co.,  22  Conn.  335 ;  White  v.  Tucker,  been   kept   in    such   book   by    agree- 

9  Iowa  100;  Mitchell  v.  Belknap,  23  ment. 

Maine    475;    Harwood    v.    Mulry,    8        ^^  Reno  v.  Crane,  2  Blackf.   (Ind.) 

Gray  (Mass.)  250;  Krom  v.  Levy,  47  217.    The  book  was  authenticated  by 

How.  Prac.    (N.  Y.)   97,  1  Hun    (N.  showing  by  one  witness  that  it  was 

Y.)   171,  3  Thomp.  &  C.  704;  Moore  the   account   book   of    the   firm,    and 

V.    Knott,    14    Ore.    35,    12    Pac.    59;  contained    a    correct    charge    against 

Alter    V.    Berghaus,    8    Watts    (Pa.)  himself  and  by  another,  that  he  made 

n ;  Thomson  v.  Porter,  4  Strob.  Eq.  up  part  of  the  book  and  that  it  was 

(S.    Car.)     58,    53    Am.    Dec.    653;  a  copy  from  day  books,  blotters  and 

Wheeler'  v.  Smith,  18  Wis.  651.     But  documents,    some   of   which   were   in 

see  Romer  v.  Jaecksch,  39  Md.  585 ;  the  other  partner's  handwriting,  and 

Burr  V.  Byers,   10  Ark.  398,  52  Am.  that  it  was  a  correct  "exposition  of 

Dec.  239;  Walker  v.  Parkham,  3  Mc-  the  whole  concern."     But  see  Farner 

Cord  L.   (S.  Car.)  295.  v.  Turner,  1  Iowa  53. 

45Ganahl  v.  Shore,  24  Ga.  17.     In         ^7  strong  v.    Baker,  25   Minn.   442. 

White  V.  Tucker,  9  Iowa  100,  a  part-  See  First  Nat.  Bank  v.  Conway,  67 

nership  book  was  held  admissible  as  Wis.  210,  30  N.  W.  215. 


1275  EVIDENCE  §    914 

§  913.     Compelling  production  of  partnership  books. — The 

rule  requiring  the  production  of  books  and  papers  is  especially 
applicable  to  such  instruments  and  documents  of  a  partnership. 
The  partnership  books  are  the  property  of  the  firm,  and  each 
member  is  equally  entitled  to  their  possession  and  to  an  examina- 
tion and  inspection  thereof  for  any  action  he  might  wish  to 
institute.  In  all  such  cases  it  is  the  uniform  practice  of  courts 
at  any  stage  of  the  action  and  upon  the  application  of  either 
party,  to  order  the  adverse  party  to  produce  or  deposit  any  of 
the  partnership  books  and  papers  belonging  equally  to  both  with 
some  designated  person  or  officer  of  the  court,  for  the  examina- 
tion and  inspection  of  the  party  making  the  application,  and  per- 
mitting copies  to  be  taken  by  any  of  the  partners.  "In  a  court  of 
law,  it  is  a  matter  of  course,  to  compel  one  party,  who  has  the 
possession  of  a  document  which  belongs  equally  to  both,  to  pro- 
duce same  for  the  inspection  of  his  adversary,  for  the  purpose 
of  the  suit."*^  The  general  rule  is  that  in  action  against  an  indi- 
vidual member  of  a  partnership,  the  production  of  the  firm  books, 
papers  and  documents  will  not  be  ordered. ^°  But  it  has  been  held 
that  in  certain  cases  under  peculiar  circumstances  in  an  action 
against  an  individual  member  of  a  firm,  the  nroduction  of  the 
partnership  books  would  be  required.^^ 

§  914.  Partnership  books  and  papers  as  evidence — Be- 
tween partners. — In  actions  between  partners  the  general 
rule  is  that  the  partnership  books  and  accounts  are  admissible  in 
evidence.  The  reason  of  this  is  that  it  is  the  duty  of  each  partner 
to  avail  himself  of  the  opportunity  of  inspection  and  to  see  that 

49Rigdon   V.    Conley,    141    111.   565,  Y.)  559,  2  Civ.  Proc.  R.  70,  62,  How. 

30  N.   E.   1060;   Kelly  v.  Eckford,   5  Prac.  215;  Reid  v.  Langlois,   1   Mac. 

Paige  Ch.    (N.  Y.)   548;   Stebbins  v.  N.  &  G.  627,  2  Hall  &  Tw.  59,  19  L. 

Harmon,    24    N.    Y.    Sup.    Ct.    445;  J.    Ch.   3Z7,    14   Jur.    467;    Taylor   v. 

Beams  v.  Barras,  86  Hun  258,  66  N.  Rundell,  Craig  &  Ph.  104 ;  Murray  v. 

Y.  St.  854,  Z?,  N.  Y.  S.  262;  Alickle-  Walter,  Craig  &  Ph.  114,  3  Jur.  719; 

thwait  V.  Moore,  3  Meriv.  296 ;  Pick-  Lopez  v.  Deacon,  6  Beav.  254. 

ering  v.  Rigby,  18  Ves.  484;  Reid  v.  ^i  ;M;ai-tine   v.    Albro,    26   Hun    (N. 

Coleman,  2  Cromp.  &  M.  456.  Y.)  559,  2  Civ.  Proc.  R.  70,  63  How. 

soMartine   v.    Albro,    26   Hun    (N.  Pr.  215. 


914 


LAW    OF    PARTNERSHIP 


1276 


the  books  are  correctly  kept.  Hence  as  a  corollary  of  this  duty 
the  entries  in  such  books  are  prima  facie  correct  and  the  pre- 
sumption is  that  they  were  made  with  the  consent  of  all  the 
partners.^"  Entries  in  the  partnership  books  are  evidence  for  or 
against  each  of  the  partners/'"  And  it  has  been  held  that  entries 
on  the  firm  books  as  to  the  sharing  of  profits  and  losses,  when 
acquiesced  in,  are  as  conclusive  on  the  rights  of  the  partners  as 
if  incorporated  in  the  articles  of  partnership/*  Where  the  ac- 
counts of  a  new  firm  were  kept  in  the  same  book  as  those  of  the 
old  firm  it  was  held  that  in  the  absence  of  proof  of  the  knowl- 
edge of  prior  entries  by  the  new  member,  the  new  member  could 
only  be  charged  with  entries  made  after  the  new  firm  had  begun 
business/^ 


52  2  Bates  Partnership,  §§  978,  981; 
Chick  V.  Robinson,  95  Fed.  619,  TH 
C.  C.  A.  205,  52  L.  R.  A.  833  and 
note;  Glover  v.  Hembree,  82  Ala. 
324,  8  So.  251;  Routen  v.  Bostwick, 
59  Ala.  360;  Powers  v.  Dickie,  49 
Ala.  81;  Desha  v.  Smith,  20  Ala. 
747;  Moore  v.  Trieber,  31  Ark.  113; 
Hale  V.  Brennan,  23  Cal.  511 ;  Champ- 
lin  V.  Tillej%  3  Day  (Conn.)  303; 
Cody  V.  First  Natl.  Bank.  103  Ga. 
789,  30  S.  E.  281 ;  Stuart  v.  McKich- 
an,  74  111.  122;  Hunter  v.  Aldrich, 
52  Iowa  442,  3  N.  W.  574;  Wilson 
V.  Potter,  19  Ky.  L.  988,  42  S.  W. 
836;  Bannon  v.  Hawkins,  18  Ky.  L. 
150,  35  S.  W.  (^^(i ;  Meguiar  v.  Helm, 
91  Ky.  19,  14  S.  W.  949,  12  Ky.  L. 
751 ;  Simms  v.  Kirtley,  1  T.  B.  Mon. 
(Ky.)  79,  82;  Strout  v.  Hopkins,  11 
Ky.  L.  63 ;  Carpenter  v.  Camp,  39 
La.  Ann.  1024,  3  So.  269;  Murrell 
V.  Murrell,  ZZ  La.  Ann.  1233 ;  Jordan 
V.  White,  4  Mart.  (N.  S.)  (La.) 
335 ;  Armistead  v.  Spring,  1  Rob. 
(La.)  567;  Safe  Deposit  &c.  Co.  v. 
Turner,  98  Md.  22,  55  Atl.  1023 ;  Top- 
liff  V.  Jackson,  12  Gray  (Mass.)  565; 
Lambert  v.   Griffith,   44   Mich.   65,   6 


N.  W.  106;  Howard  v.  Patrick,  38 
Mich.  795 ;  Kohler  v.  Lindenmeyr, 
129  N.  Y.  498,  29  N.  E.  957;  Fair- 
child  V.  Fairchild,  64  N.  Y.  471; 
Cheever  v.  Lamar,  19  Hun  (N.  Y.) 
130;  Taylor  v.  Herring,  10  Bosw.  (N. 
Y.)  447;  Caldwell  v.  Leiber,  7  Paige 
(N.  Y.)  483;  Heartt  v.  Corning,  3 
Paige  (N.  Y.)  566;  Phillips  v.  Tur- 
ner, 22  N.  Car.  123;  Boire  v.  Mc- 
Ginn, 8  Ore.  466;  Frick  v.  Barbour, 
64  Pa.  120;  Budeke  v.  Ratterman,  2 
Tenn.    Ch.   459;    Hicks   v.    Chadwell, 

1  Tenn.  Ch.  251;  Kyle  v.  Kyle,  1 
Gratt.  (Va.)  526;  Brickhouse  v. 
Hunter,  4  Hen.  &  Mun.  (Va.)  363, 
4  Am.  Dec.  528 ;  Fletcher  v.  Pollard, 

2  Hen.  &  Mun.  (Va.)  544;  Willa- 
mette &c.  Co.  V.  McGoldrick,  10 
Wash.  St.  229,  38  Pac.  1021;  Lodge 
V.  Pritchard,  3  DeG.,  M.  &  G.  906. 

53  Haller  v,  Willamowicz,  23  Ark. 
566. 

5-*  Safe  Deposit  &c.  Co.  v.  Turner, 
98  Md.  22,  55  Atl.  1023. 

55  Kohler  v.  Lindenmeyr,  129  N. 
Y.  498,  29  N.  E.  957,  58  Hun  (N. 
Y.)  513. 


1277  EVIDENCE  §    916 

§  915.  Presumption  of  access  to  books — Denying  correct- 
ness.— The  presumption  is  that  all  the  partners  have  access 
to  the  firm  books  and  that  they  are  familiar  with  the  contents; 
but  this  presumption  may  be  overcome  by  proof  of  any  facts  or 
circumstances  which  tend  to  rebut  it.^°  But  a  partner  may  be 
estopped  from  denying  to  the  prejudice  of  his  copartner,  any  of 
the  entries  in  the  firm's  books  unless  he  charged  and  proved  errors 
in  such  entries. ^^  Yet  where  it  appeared  that  the  firm's  business 
had  been  conducted  almost  exclusively  and  the  books  kept 
by  one  member,  in  an  action  between  the  partners,  it  was  held 
competent  for  the  other  to  introduce  evidence  showing  the  in- 
correctness of  the  entry,  and  also  to  show  that  other  entries  not 
made  should  have  been  made.'^^  So  the  rule  that  the  firm's  books 
are  evidence  for  or  against  a  partner  does  not  apply  where  one 
partner  has  been  denied  access  to  them.^^  And  it  may  be  shown 
that  the  books  do  not  contain  a  full  statement  of  the  partnership 
business.*'" 

§  916.  Partnership  books  and  papers  as  evidence — Against 
partners. — As  it  is  the  duty  of  the  partners  to  avail  them- 
selves of  the  opportunity  of  inspecting  the  books,  and  as  they  are 
presumed  to  know  the  contents  and  the  entries  in  their  books,  it 
is  the  established  rule  that  their  books  of  accounts  and  papers 
are  admissible  against  them  in  the  nature  of  admissions  against 
interest.  And  the  rule  is  that  the  books  of  the  firm  are  prima 
facie  evidence  against  the  partners  as  to  all  matters  entered 
therein  at  the  time  of  or  prior  to  the  transaction  in  question.®^ 
The  entries  are  admissible  against  the  partner  making  them,  and 

reunited  States  Bank  v.  Binney,  5  ^o  Glover  v.  Hembree,  82  Ala.  324, 

Mason    (U.  S.)    176;   Shoemaker  &c.  8  So.  251. 

Co.  V.  Bernard,  2  Lea   (Tenn.)   358.  ^i  Kahn  v.  Boltz,  39  Ala.  66;  Ford 

"  Murrell  v.  Murrell,  33  La.  Ann.  v.  Cunningham,  87  Cal.  209,  25  Pac. 

1233.     See   Safe  Deposit  &c.    Co.   v.  403 ;  Agricultural  Ins.  Co.  v.  Keeler, 

Turner,  98  Md.  22,  55  Atl.  1023.  44  Conn.  161 ;  Perry  v.  Butt,  14  Ga. 

58  Carpenter  v.  Camp,  39  La.  Ann.  699;  Kitner  v.  Whitlock,  88  111.  513; 

1024,  3  So.  269.  Eden    v.    Lingenfelter,    39    Ind.    19; 

s^Haller  v.   Willamowicz,   23   Ark.  Grant  v.  Masterton,  55  Mich.  161,  20 
566. 


§917  LAW    OF    PARTNERSHIP  1278 

if  proved  to  have  been  made  during  the  existence  of  the  partner- 
ship they  are  admissible  in  evidence  against  all  the  partners.*'" 
And  the  firm  books  are  admissible  in  evidence  to  show  the  credits 
on  the  plaintiff's  account. ^^  Where  payments  upon  the  private 
debts  of  one  of  the  partners  was  entered  in  the  firm  book,  the 
books  were  held  to  be  admissible  in  evidence  to  prove  knowledge 
of  the  other  partner  of  such  payments.*'* 

§  917.  Partnership  books  and  papers  as  evidence — Against 
third  persons. — The  admissibility  of  books  of  accounts  of  a 
firm  in  actions  against  third  persons  is  governed  principally  by 
the  rules  controlling  the  admissibility  of  books  and  accounts  gen- 
erally. In  some  jurisdictions  they  are  admitted  on  the  theory 
that  they  are  part  of  the  res  gestae.  The  rule  as  established 
by  many  cases  is  that  in  an  action  by  the  partners  on  an  account 
for  goods  sold  by  the  firm  to  third  persons  the  firm  books  are 
admissible  as  original  entries  where  the  books  and  entries  are 
properly  identified  by  a  witness  who  assumes  to  know  of  his  own 
knowledge,  or  who  can  testify  to  the  handwriting  as  that  of  a 
member  of  the  firm.*'^  In  some  jurisdictions  it  is  held  that  in 
order  to  make  the  entries  admissible  proof  must  be  given  that 
they  were  made  contemporaneously  with  the  facts  narrated,  and 
in  the  usual  routine  of  business  by  a  person  whose  duty  it  was 
to  make  them,  who  was  himself  personally  acquainted  with  the 
facts,  was  disinterested  and  has  since  died.^®  But  it  has  been 
held  that  the  books  of  account  of  the  firm  are  not  admissible  as 
against  a  person  having  no  knowledge  of  such  books. ''^     Such  an 

N.  W.  885 ;  Tucker  v.  Peaslee,  36  N.  Towie  v.  Blake,  38  Maine  95 ;  Dwinel 

H.   167;    Kohler  v.    Lindenmeyr,    129  v.  Pottle,  31   Maine  167;   Mitchell  v. 

N.  Y.  498,  29  N.  E.  957 ;  Walden  v.  Belknap,  23  Maine  475 ;  Harwood  v. 

Sherburne,    IS   Johns.    (N.    Y.)    409;  Mulry,   8   Gray    (Mass.)    250;   Webb 

Shackelford  v.  Shackelford,  32  Grat.  v.  Michener,  32  Minn.  48.  19  N.  W. 

(Va.)   481.  82;   Strong  v.   Baker,  25   Minn.  442; 

62Kahn  v.  Boltz,  39  Ala.  66.  Hartley    v.    Weideman,    175    Pa.    St. 

63  Grant    v.     Masterton,    55    Mich.  309.   34  Atl.  625;   Graff  v.   Callahan, 
161,  20  N.  W.  885.  158  Pa.  St.  380,  27  Atl.  1009. 

64  Foster  v.   Fifield,  29  Maine  136.  gg  Romer  v.  Jaecksch,  39  Md.  585. 

65  White    V.    Tucker.    9   Iowa    100;  67  pirst  Natl.  Bank  v.   Conway,  67 
Silver  v.  Worcester,   72   Maine  322 ;  Wis.  210,  30  N.  W.  215. 


1279  EVIDENCE  §    918 

entry  was  held  proper  to  show  that  an  agreement  of  the  firm  had 
been  performed.*'® 

§  918.  Partnership  books  and  papers  as  evidence — In 
lavor  of  third  persons. — In  an  action  by  a  third  person  to  hold 
another  liable  as  a  member  of  the  firm  as  a  general  rule  the  books 
and  papers  of  the  alleged  firm  are  not  admissible.  They  are  not 
usually  competent  for  the  purpose  of  proving  that  the  defendant, 
sought  to  be  charged  as  a  partner,  was  in  fact  a  partner.  But 
when  there  is  some  proof  offered  showing  or  tending  to  show 
that  such  person  w^as  in  fact  a  member  of  the  firm  or  when  a 
prima  facie  case  of  partnership  is  made  then  the  books  and  papers 
of  the  firm  are  properly  admitted.*'^  This  rule  will  be  strength- 
ened where  it  is  made  to  appear  that  the  person  sought  to  be 
charged  had  access  to  the  books  during  the  period  covered  by 
the  transaction,  and  that  he  did  in  fact  examine  the  books  and 
caused  balance  sheets  to  be  taken  and  rendered  to  him.^°  Where 
the  evidence  shows  or  fairly  tends  to  show  that  the  person  sought 
to  be  charged  as  a  partner  had  knowledge  of  the  entries  and  that 
he  assented  either  expressly  or  impliedly  to  the  entries  in  the 
books,  it  is  a  sufficient  showing  to  render  the  entries  in  the  books 
competent  evidence. ^^  So  where  it  was  shown  that  the  entries 
were  made  in  the  books  of  the  firm  in  the  presence  of  the  defend- 
ant sought  to  be  charged  as  a  partner,  it  was  held  sufficient  to 
render  such  entries  competent  evidence.'^ ^  Where  one  member 
of  a  partnership  testifies  that  another  person  was  a  partner,  and 
that  the  defendant  sought  to  be  charged  had  stated  that  he  had 

f's  Griesheimer    v.    Tanenbaum,    55  244 ;  Rosenbaum  v.  Howard,  69  Minn. 

Hun  604,  8  N.  Y.  S.  582,  28  N.  Y.  St.  41,  71  N.  W.  823 ;  Ganzer  v.  Fricke. 

653;  Moore  v.  Knott,  14  Ore.  35,  12  57  Pa.  St.  316;  Chidsey  v.  Porter.  21 

Pac.  59.  Pa.  St.  390;.  Lindsay  v.  Guy,  57  Wis. 

69  McNeill     V.     Reynolds,     9     Ala.  200,  15  N.  W.  181. 

313;  Bryce  v.  Joynt,  63  Cal.  375,  49  ^o  Bryce  v.  Joynt,   63   Gal.   375,   49 

Am.    Rep.   94;    Hale   v.    Brennan,   23  Am.  Rep.  94. 

Cal.    511;    New    Haven    &c.    Go.    v.  '''^Rosenbaum  v.  Howard,  69  Minn. 

Goodwin,   42    Conn.   230;    Cleland   v.  41,  71   N.  W.  823. 

Applegate,  8  Ind.  App.  499,  35  N.  E.  "Howard    v.     Patrick,     38     Mich. 

1108;   Abbott  v.   Pearson,    130  Mass.  795. 
191;    Robins    v.    Warde,    111    Mass. 


§    919  LAW    OF    PARTNERSHIP  1280 

as  much  interest  in  the  books  as  the  other  partner,  it  was  held  a 
sufficient  proof  of  partnership  to  admit  the  books  in  evidence. ^^ 

§  919.  Authority  of  partner — Presumption. — A  partner- 
ship business  is  conducted  on  the  theory  of  principal  and  agent; 
that  the  firm  is  the  principal  and  each  partner  is  the  agent.  The 
law  therefore  implies  authority  on  the  part  of  each  partner  to 
bind  the  firm,  or  his  copartners  by  the  use  of  the  firm  name  in 
any  and  all  transactions  falling  properly  within  the  scope  of  the 
partnership.  The  rule  as  stated  by  one  writer  is :  *^In  the  absence 
of  any  express  contract  provision  upon  the  subject,  it  will  be 
presumed  that  it  was  intended  that  a  partner  should  have  author- 
ity to  bind  the  firm  by  all  acts  necessary  for  carrying  on  the 
business  in  the  way  such  a  business  is  usually  conducted,  and  a 
partner  has  actual  and  rightful  authority  to  that  extent."^*  An- 
other writer  states  the  rule  as  follows :  "Prima  facie,  a  partner 
has  implied  authority  to  bind  the  firm  by  any  act  necessary  for 
carrying  on  the  business  in  the  ordinary  manner.  Unless  limited 
by  agreement  between  the  partners,  this  implied  authority  is 
actual ;  when  it  is  so  limited,  such  authority  is  only  apparent.  A 
partner  has  power  to  bind  the  firm  by  any  act  within  his  express 
or  implied  authority,  either  actual  or  only  apparent,  provided 
the  person  with  whom  he  deals  acts  bona  fide,  and  without  notice 
of  the  limitation  of  his  authority."^^     Where  the  partnership 

73Frick  V.   Barbour,  64  Pa.   120.  Am.   Dec.   789;   Eastman   v.   Cooper, 

'•iShumaker  Partnership,  p.  279.  IS   Pick.    (Mass.)    276,   26  Am.   Dec. 

"5  George  Partnership,  §§  92, 93.    See  600;    Banner   &c.   Co.   v.  Jenison,  48 

also  Bank  of  Ft.  Madison  v.  Alden,  Mich.  459,   12  N.  W.  655;  Taylor  v. 

129  U.  S.  372,  32  L.  ed.  725 ;  Wheeler  Webster,  39  N.  J.  L.  102 ;  Livingston 

V.  Sage,  1  Wall.   (U.  S.)   518,  17  L.  v.  Roosevelt,  4  Johns.   (N.  Y.)   251, 

ed.  646;  Kimbro  v.  Bullitt,  22  How.  4  Am.  Dec.  273;  Mercein  v.  Andrus, 

(U.  S.)  256,  16  L.  ed.  313;  Winship  10  Wend.  (N.  Y.)  461;  Rice  v.  Jack- 

V.  Bank  of  U.  S.,  5  Pet.  (U.  S.)  528,  son,  171  Pa.  St.  89,  32  Atl.  1036;  Hos- 

529,  8  L.  ed.  216;  National  &c.  Bank  kinson  v.  Eliot,  62  Pa.  St.  393;  Ed- 

V.    White,    30    Fed.    412;    ElHson    v.  wards    v.    Tracy,    62    Pa.    St.    374; 

Stuart,  2  Pennew.  (Del.)  179,  43  Atl.  Pooley     v.     Whitmore,      10     Heisk. 

836;  Summerlot  v.  Hamilton,  121  Ind.  (Tenn.)  629,  27  Am.  Rep.  7Z3;  Gar- 

87,  22  N.  E.  973 ;  First  Nat.  Bank  v.  land  v.   Hickey,   75   Wis.   178,  43   N. 

Carpenter,    41     Iowa    518;     Western  W.  832 ;  Smith  v.  Sloan,  37  Wis.  285, 

Stage  Co.  V.  Walker,  2  Iowa  504.  65  19  Am.  Rep.  757;  Beardsley  v.  Tut- 


1281  EVIDENCE  §    919 

agreement  limits  the  authority  of  any  partner  he  has  no  right  to 
exceed  the  power  therein  given;  but,  if  acting  within  the  scope 
of  the  business  he  deals  with  a  person  who  has  no  notice  of  the 
limitation,  the  firm  is  bound  on  the  theory  of  the  apparent  au- 
thority/'' Three  classes  of  cases  are  sometimes  enumerated  in 
which  each  partner  may  bind  the  firm :  ( 1 )  In  case  of  express 
authority;  (2)  as  to  matters  necessary  in  order  to  carry  on  the 
business  of  the  partnership;  (3)  where  it  is  the  usage  or  custom 
incident  to  partnerships  of  Hke  nature.  But  in  each  case  the  bur- 
den is  usually  on  the  plaintiff  to  prove  facts  suf^cient  to  estab- 
lish the  authority  or  from  which  it  may  be  implied. ^^  Express 
authority  must  be  shown  in  cases  where  it  is  desired  to  prove  that 
acts  done  by  one  partner,  such  as  the  following,  were  binding  on 
the  firm :  the  execution  of  a  contract  of  guaranty  in  the  firm 
name;^®  the  payment  of  individual  debts  with  firm  money  ;^^  the 
discharge  of  a  firm  debt  by  an  individual  note;^°  the  modification 
of  a  contract  for  another  partner's  individual  benefit.*^  But  a 
partner's  testimony  is  competent  to  show  he  had  authority  to  use 
partnership  funds  to  pay  his  individual  debts. ^"  Evidence  affect- 
ing one  or  more  partners  is  not  inadmissible  in  an  action  against 
a  firm  and  the  individual  partners,  merely  because  it  is  not 
applicable  to  another  partner.^^  Knowledge  and  assent  of  a 
partner  to  a  contract  made  by  a  copartner  without  the  scope 

tie,    11    Wis.   74;    Bates    Partnership,  311;  Blake  v.  Atlantic  Nat.  Bank,  33 

ch.  6;  Parsons  Partnership,  §  114  et  R.  I.  464,  82  Atl.  225. 

seq. ;  Story  Partnership,  §  111  et  seq.  '^^  Carson  v.  J.  L.  Mott  Iron  Works 

76  Irwin  V.  Williar,   110  U.  S.  499.  (Va.),  84  S.  E.  12. 

28  L.  ed.  225,  4  Sup.  Ct.  160 ;  Crane  79  Munday   Trading    Co.    v.    J.    M. 

Co.  V.  Tierney,  175  111.  79,  51  N.  E.  Radford     Grocery     Co.     (Tex.     Civ. 

715;  Morse  v.  Richmond,  97  111.  303;  App.),  178  S.  W.  49. 

Wagnon    v.    Clay,    1    A.    K.    Marsh.  ^o  Payette  Liquor  Co.  v.  Jcnes  (W. 

(Ky.)  257;  Conely  v.  Wood,  IZ  Mich.  Va.),  83  S.  E.  726. 

203,  41  N.  W.  259;  Hotchin  v.  Kent,  si  Youtsey  v.   Lemley    (Iowa),    151 

8  Mich.  526;  Schenk  v.  Fetzer,  54  Pa.  N.  W.  491. 

Super.  Ct.  573 ;  Brooke  v.  Washing-  S2  Munday    Trading    Co.    v.    J.    M. 

ton,  8  Grat.  (Va.)  248.  Radford     Grocery     Co.     (Tex.     Civ. 

77  Vinegar    Bend    Lumber    Co.    v.  App.),  178  S.  W.  49. 

Howard,  186  Ala.  451,  65  So.  172;  §3  Priese  v.  Simpson  (Ga.),  84  S. 
Woodrufif  v.  Scaife,  83  Ala.  152,  3  So.    E.  219. 


§    920  LAW    OF    PARTNERSHIP  1282 

of  the  firm  business  must  be  affirmatively  shown.^*  Evi- 
dence of  common  usage  in  the  same  locaHty  and  same  busi- 
ness has  been  held  competent  to  show  the  scope  of  a  part- 
nership business.®^  It  will  be  presumed  that  a  partner  in  a 
plumbing  firm  who  individually  signed  a  contractor's  bond  did  so 
in  his  individual  capacity,^*^  and  that  an  indorsement  of  a  note  in 
the  firm  name  of  a  trading  partnership  was  made  in  the  course  of 
business  until  the  contrary  is  proved. *^^  If  a  partnership  or  part- 
ner seeks  to  escape  liability  for  an  act  of  a  partner  within  the 
scope  of  the  business,  they  must  bear  the  burden  of  showing  his 
lack  of  authority  and  that  the  party  with  whom  he  dealt  knew  it.^^ 

§  920.  Liability  of  nominal  partners — First  rule. — A  nom- 
inal partner  is  defined  as  one  who  simply  permits  the  use  of  his 
name  in  connection  with  the  name  of  the  firm  for  the  purpose  of 
giving  the  partnership  additional  credit  or  who  by  reason  of  his 
reputation  and  standing  in  the  community  adds  strength  and  sta- 
bility to  the  character  of  the  firm  and  thereby  attracts  customers. 
A  nominal  partner  really  derives  no  benefit  from  the  association 
but  does  incur  the  liabilities  of  the  firm.  The  courts  and  law 
writers  are  not  agreed  on  the  liability  of  a  nominal  partner.  The 
first  rule,  as  established  by  some  writers  and  many  adjudicated 
cases,  is  that  such  nominal  partner  is  liable  to  any  and  all  persons 
or  creditors  dealing  with  the  firm  in  the  same  manner  and  to  the 
same  extent  as  if  he  enjoyed  all  the  advantages  and  privileges  of 
the  firm.  The  Supreme  Court  of  New  York  has  given  the  fullest 
expression  to  this  rule,  and  held,  in  common  with  other  courts, 
that  a  nominal  partner  is  liable  to  subsequent  creditors,  even 
though  the  creditor  was  ignorant  of  the  arrangement,  or  it  ap- 
pears that  the  firm  name  did  not  represent  such  a  nominal  partner 
or  that  credit  was  not  given  on  the  faith  of  his  being  a  member 
of  the  firm.*^ 

s*  Brown    v.    First    Nat.    Bank.    35  ^~  Garden  City  Nat.  Bank  v.  Schul- 

Okla.  726,  130  Pac.  140.  man,  89  Kans.  182,  131  Pac.  559. 

®^  Shackleford     v.     Williams,     182  ^"  Lichenstein  v.   Murphree,  9  Ala. 

Ala.  87,  62  So.  54.  App.  108,  62  So.  444. 

sGSchade    v.    Muller     (Ore.),     146  s^  Poillon  v.   Secor,  61   N.  Y.  456; 

Pac.   144.  Chicago    &c.    Bank   v.    Kinnare,    174 


1283  EVIDENCE  §    922 

§  921.  Liability  of  nominal  partners — Second  rule. — Other 
courts  and  law  writers  adopt  the  rule  that  a  nominal  partner 
occupies  the  same  relation  to  creditors  as  a  person  who  with  his 
consent  is  held  out  as  a  partner  by  the  other  members  of  the  firm. 
One  writer  states  this  rule  thus:  "It  follows,  therefore,  that  if 
a  person  suffers  himself  to  be  regarded  as  a  partner  by  any  cus- 
tomer of  the  firm,  to  him  he  is  liable  as  if  he  were  one,  although 
he  is  in  fact  no  partner  and  not  generally  supposed  to  be.'""^  The 
rule  as  stated  by  Mr.  George  is  as  follows :  "In  no  case  can  lia- 
bility attach  to  the  nominal  partner  in  favor  of  any  one  who  has 
not  given  credit  in  full  faith  in  his  being  a  member  of  the  firm, 
for  it  is  there  that  the  element  of  estoppel  comes  in,  which  is  the 
vital  element  in  the  situation. "°^  Under  this  rule  proof  is  suf- 
ficient to  render  a  nominal  partner  liable  when  it  shows  that  such 
party  represented  himself  to  be  a  partner  in  the  firm  and  his  lia- 
bility is  fixed  if  the  credit  was  given  the  firm  under  the  expecta- 
tion or  belief  that  such  nominal  partner  was  a  member  at  the 
time  the  credit  was  given. ^- 

§  922.  Liability  of  dormant  partner.— A  dormant  partner 
has  been  defined  as  one  who  combines  in  himself  the  characters 
of  both  the  secret  and  silent  partner  while  he  is  not  published  as 
a  partner  either  through  the  firm  name  or  otherwise,  and  does 
not  transact  any  of  the  business,  he  is  nevertheless  a  partner  and 
maintains  the  relation  of  principal  to  the  agent  or  the  active  part- 
ners who  transact  the  firm  business ;  in  this  respect  he  is  distin- 
guished from  the  person  who  shares  profits  of  the  business  not 
as  agent  of  the  other  partners  but  on  their  own  account  as  prin- 
cipals.^^   A  dormant  partner  is  generally  liable  for  the  debts  of 

Til.    358,    51    N.    E.    607;    Fisher    v.  ^i  George  Partnership,  §  25.  p.  84; 

Bowles,  20  111.  396;  Nichols  v.  James,  Alderson  v.  Pope,   1   Campb.  404n. 

130  Mass.  589;   Rice  v.   Barrett,    116  »2  George  Partnership,  §  26;  Hicks 

Mass.   312;   Rimel  v.   Hayes.  83   Mo.  v.  Cram,  17  Vt.  449;  Waugh  v.  Car- 

200 ;    Young  v.    Smith,   25    Mo.   341 ;  ver,  2  H.  Bl.  235,  1  Smith  Lead.  Cas. 

Brown    v.    Higginbotham,     5     Leigh  1337 ;  Watson,  Ex  parte,  19  Ves.  459. 

(Va.)  583,  127  Am.  Dec.  618;  1  Bates  ^s  Winship    v.    Bank    of    U.    S.,    5 

Partnership,  §  109.  Pet.   (U.  S.)   528,  529,  8  L.  ed.  216; 

^0  1   Parsons  Partnership,   §  29,  Bank  of   St.   Marys  v.  St.  John,  25 


922 


LAW    OF    PARTNERSHIP 


1284 


the  firm  to  the  same  extent  as  an  active  or  ostensible  partner.  To 
render  him  thus  liable  it  is  only  necessary  that  the  proof  disclose 
the  fact  that  he  is  a  partner  and  he  is  liable  as  such  to  persons 
dealing  with  the  firm  though  they  have  no  knowledge  of  the  fact 
that  he  was  a  member.  The  reason  of  this  liability  is  the  fact 
that  such  dormant  partner  shares  in  the  benefits  of  the  business 
whatever  that  may  be.''*  Judge  Clifford  states  the  rule  as  to  the 
liability  of  a  dormant  partner  as  follows :  "Persons  who  jointly 
participate  in  the  profits  of  trade  or  business,  ostensibly  carried 
on  by  another  for  his  sole  use  and  benefit  within  the  principles 
already  explained,  are  equally  liable,  when  discovered,  with  the 
ostensible  and  active  owner,  to  all  creditors  of  the  concern  whose 
debts  were  contracted  during  the  time  of  such  participation,  with- 
out knowledge  of  the  same,  or  of  the  actual  relation  between  the 
parties  at  the  time  the  credit  was  given,  and  that  liability  exists, 
notwithstanding  the  parties  may  have  privately  stipulated  that 
they  shall  not  be  partners,  and  in  contemplation  of  law  really  are 
not  such  as  between  themselves.    Secrecy  on  the  part  of  the  dor- 


Ala.  566;  Podrasnik  v.  Martin  Co., 
25  111.  App.  300;  Elmira  &c.  R.  Co. 
V.  Harris,  124  N.  Y.  280,  26  N.  E. 
541,  3  Silv.  Ct.  App.  351;  National 
Bank  &c.  v.  Thomas,  47  N.  Y.  15; 
North  V.  Bloss,  30  N.  Y.  374;  Clark 
V.  Fletcher,  96  Pa.  St.  416;  Harris 
V.  Crary,  67  Tex.  383.  3  S.  W.  316; 
George  Partnership,  p.  95 ;  Parsons 
Partnership,  §  31. 

9*Meehan  v.  Valentine,  145  U.  S. 
611,  36  L.  ed.  835,  12  Sup.  Ct.  972; 
Winship  V.  United  States  Bank,  5  Pet. 
(U.  S.)  529,  8  L.  ed.  216;  Phillips  v. 
Nash,  47  Ga.  218;  Lindsey  v.  Ed- 
miston,  25  111.  317;  Strecker  v.  Conn, 
90  Ind.  469;  Gilmore  v.  Merritt,  62 
Ind.  525;  Kennedy  v.  Bohannon,  11 
B.  Mon.  (Ky.)  118;  Scott  v.  Colmes- 
nil,  7  J.  J.  Marsh.  (Ky.)  416; 
Boudreaux  v.  Martinez,  25  La.  Ann. 
167;    Etheredge   v.    Binney,    9    Pick. 


(Mass.)  272;  Pitts  v.  Waugh,  4 
Mass.  424;  Lea  v.  Guice,  13  Sm.  & 
M.  (Miss.)  656;  Richardson  v. 
Farmer,  Z6  Mo.  35,  88  Am.  Dec. 
129;  Eastman  v.  Clark,  53  N.  H. 
276,  16  Am.  Rep.  192;  Elliot  v.  Ste- 
vens, 38  N.  H.  311 ;  Bromley  v. 
Elliot,  38  N.  H.  287,  75  Am.  Dec. 
182;  North  v.  Bloss,  30  N.  Y.  374; 
Fosdick  V.  Van  Horn,  40  Ohio  459; 
Johnston  v.  Warden,  3  Watts.  (Pa.) 
101;  Reab  v.  Pool,  30  S.  Car.  140, 
8  S.  E.  703 ;  Gavin  v.  Walker,  14  Lea 
(Tenn.)  643;  Griffith  v.  Buffum,  22 
Vt.  181,  54  Am.  Dec.  64;  Boardman 
V.  Keeler,  2  Vt.  65 ;  Coope  v.  Eyre, 
1  H.  Bl.  Z7;  Loyd  v.  Ashby,  2  Car. 
&  P.  138;  Robinson  v.  Wilkinson, 
3  Price  538,  18  Rev.  Rep.  659;  Lloyd 
V.  Archbowle,  2  Taunt.  324;  Parsons 
Partnership,  §  81. 


1285  EVIDENCE  §    923 

mant  partner  and  want  of  knowledge  of  the  circumstances  of  the 
case,  and  of  the  actual  relations  of  the  parties,  on  the  part  of  the 
creditor,  are  therefore  essential  elements  of  the  liability,'"'^ 

§  923.  Liability  of  dormant  partner — Limitation. — This 
liability  of  a  dormant  partner  does  not  continue  after  his  retire- 
ment from  the  firm ;  and  it  is  not  necessary  for  him  to  give  notice 
of  such  retirement  in  order  to  relieve  him  of  such  liability.  The 
reason  of  this  is  that  credit  is  not  given  the  firm  on  account  of 
his  name  and  the  liability  is  on  the  basis  that  he  is  either  an 
undisclosed  principal  or  that  he  received  part  of  the  profits,  and 
when  he  ceases  to  be  a  principal  or  to  receive  the  profits  his  lia- 
bility ceases.®^  So,  in  an  action  on  a  note  or  contract  executed 
in  the  partnership  name,  in  order  to  establish  the  liability  of  a 
dormant  partner,  the  plaintiff  must  prove  that  the  money  was 
borrowed  or  the  contract  executed  on  the  credit  of  the  firm,  or 
that  the  money  was  used  in  the  business  or  for  the  benefit  of  the 
partnership;  but  the  fact  that  it  was  borrowed  on  the  credit  of 
the  firm  or  used  in  its  business  may  be  proved  by  the  statements 
and  representations  of  the  partner  executing  the  note  or  contract 
at  the  time  of  the  transaction,  or  it  may  be  proved  by  circum- 
stances.'^''  But  the  dormant  partner  is  only  liable  for  the  debts  of 
the  firm  contracted  within  the  scope  of  the  partnership  business. ^^ 

95Bigelow    V.    Elliot,    1    Cliff.    (U.  (Tenn.)    643;    Commercial    Bank    v. 

S.)    28,    Fed.    Cas.    No.    1399.      See  Miller,  96  Va.  357,  31  S.  E.  812;  Grif- 

also.  First  Nat.  Bank  v.  Newton,  10  fith  v.   Buffum,   22   Vt.    181,   54   Am. 

Colo.    161,    14    Pac.   428;    Fosdick   v.  Dec.  64;  Benjamin  v.  Covert,  47  Wis. 

Van  Horn,  40  Ohio  St.  459.  375,  2  N.  W.  625. 

96  Austin  V.  Appling,  88  Ga.  54,  13  9^  United    States    Bank    v.    Binney, 

S.  E.  955;   Phillips  v.  Nash,  47  Ga.  5  Mason    (U.  S.)    176;  Etheredge  v. 

218;    Kennedy    v.    Bohannon,    11    B.  Binney,  9  Pick   (Mass.)   272;  Manu- 

Mon.    (Ky.)    118;   Lieb  v.   Craddock,  facturers'    &c.    Bank    v.    Winship,    5 

87  Ky.  525,  9  S.  W.  838,  10  Ky.  L.  Pick.    (Mass.)    11,   16  Am.  Dec.  369; 

570 ;    Grosvenor    v.    Lloyd,    1    Mete.  National   Bank  &c.   v.    Ingraham,    58 

(Mass.)    19;  Elmira  &c.  Co.  v.  Har-  Barb.     (N.     Y.)     290;     Oliphant     v. 

ris,   124  N.  Y.  280,  26  N.  E.  541,  3  Mathews,  16  Barb.  (N.  Y.)  608;  Fos- 

Silv.  Ct.  App.  351;  Cook  v.  Penrhyn  dick  v.  Van  Horn,  40  Ohio  St.  459; 

Slate   Co.,   36  Ohio   St.    135,  38  Am.  Yorkshire    Banking    Co.    v.    Beatson, 

Rep.   568;   Clark  v.   Fletcher,  96  Pa.  L.  R.  5  C.  P.  109. 

St.   416;    Gavin   v.   Walker,    14    Lea  ^s  Munn,  Ex  parte,  3  Biss.  (U.  S.) 


§    924  LAW    OF    PARTNERSHIP  1286 

So  where  the  ostensible  partner  had  executed  notes  in  the  firm 
name  as  the  evidence  of  a  debt,  and  the  note  was  afterward 
reduced  to  judgment,  it  was  held  that  a  dormant  partner  when 
discovered  was  not  liable  on  the  note.°^  Though  it  is  prima  facie 
evidence  of  ownership  that  a  partner  in  charge  of  a  manufactur- 
ing plant  deals  with  it  as  his  own,  this  presumption  is  rebuttable 
by  proof/ 

§  924.  Authority  of  partner — Particular  cases. — Evidence 
may  be  given  to  show  that  acts  of  an  individual  part- 
ner without  the  scope  of  his  authority  were  ratified  by  his  copart- 
ners.^ Evidence  of  statements  made  to  the  other  partners  by  the 
one  who  is  sought  to  be  charged  with  ratification  are  admissible." 
Partnership  liability  may  be  defeated  by  showing  that  a  note 
was  executed  in  consummating  an  individual  deal  of  one  partner 
with  plaintiff;*  by  showing  that  the  partners  had  agreed  not  to 
buy  stock,  where  one  partner  had  contracted  in  the  firm  name 
to  buy  stock  in  a  butter  factory  f  or  that  a  loan  was  originally  an 
individual  transaction.*'  It  may  be  shown  that  the  firm  was  liable 
on  contracts  in  the  individual  name  of  a  partner,  as  for  renting 
horses.'^  In  many  cases  a  partnership  has  been  held  liable  on  a 
contract  made  by  one  partner  through  evidence  of  participation 
in  benefits  or  that  the  consideration  inured  to  its  use.^  The  plain- 
tiff alleging  fraud  in  a  conveyance  by  his  debtor  to  a  copartner 
in  settlement  of  a  partnership,  must  prove  it;^  also  one  who 
charges  a  partner  with  an  absconded  copartner's  fraud,  must 
prove  his  connection  with  the  fraud  if  without  the  scope  of  the 

442,    Fed.    Cas.    No.    9925 ;    Bromley  *  Schee  v.   Hendrickson,   162   Iowa 

V.  Elliot,  38  N.  H.  287,  75  Am.  Dec.  219,   144  N.  W.  29. 

182;    Bank    of    Pennsylvania    &c.    v.  ^Chicago   Bldg.  &c.   Co.  v.   Butler, 

Hadfeg,  3  Yeates  (Pa.)  560.  139  Ga.  816,  78  S.  E.  244. 

99Moale   V.    Hollins,    11    Gill   &   J.  ^  Smith  v.  Sheridan,  175  Mich.  391, 

(Md.)   11,  33  Am.  Dec.  684.  141  N.  W.  684. 

1  Day  V.  Weyant,  72  Ore.  215,  143  ^  Crable  v.  O'Connor,  21  Wyo.  460, 
Pac.  891.  133  Pac.  376. 

2  Wile  V.  Denison  Clothing  Co.,  158  ^  Jacks  v.  Greenhaw,  105  Ark.  615, 
Iowa  109,  138  N.  W.  1098.  152  S.  W.  160. 

3  Fischer  v.  Eyre,  151  N.  Y.  S.  692.  ^  Ball  v.   Danton,  64  Ore.   184,   129 

Pac.  1032. 


1287  EVIDENCE  §   924 

copartner's  authority;***  and  where  it  is  pleaded  that  the  part- 
nership had  assumed  the  debts  of  one  partner  it  must  be 
proved/"^  But  the  burden  is  on  the  defendant  who  asserts 
a  release  as  a  partner  from  a  firm  contract  on  withdrawal 
from  the  partnership;**  or  asserts  that  a  bank  did  not  act  in 
good  faith  in  making  a  loan  to  a  member  of  a  trading  part- 
nership ;*-  or  that  a  corporation  has  taken  over  the  firm  debts.*" 
In  an  action  against  the  firm  on  notes  executed  by  one  partner, 
testimony  of  the  copartner  that  he  directed  the  partner  not  to 
borrow  any  more  money  of  the  plaintiff  is  inadmissible  without 
showing  notice  to  plaintiff  of  such  dissent.**  A  note  signed  in 
the  firm  name  and  by  a  partner  individually  is  admissible  against 
another  partner,  if  there  is  nothing  to  show  he  is  not  a  member 
of  the  firm.*^  A  plaintiff"  who  sued  alone  to  recover  for  boating 
cattle,  by  means  of  using  a  steamboat  which  was  the  property  of 
a  firm  in  which  he  was  a  partner,  must  fail  where  the  evidence 
shows  the  other  partner  was  interested  in  the  contract.*"  In  an 
action  by  a  firm  for  trespass  on  leased  land,  the  lease  was  admis- 
sible, and  evidence  that  the  firm  was  in  possession  and  the  lease 
was  executed  for  its  benefit,  though  others  than  those  named 
therein  were  interested  in  the  firm,  also  evidence  of  one  partner 
that  he  leased  the  land  and  paid  the  rent  for  the  firm.*''  In  an 
action  in  the  firm  name  by  one  member  of  a  firm  to  recover  a 
sum  claimed  as  a  balance  due  from  defendant  for  excavating 
under  a  written  contract,  in  which  plaintiff  claimed  that  defend- 
ant conspired  with  two  other  members  of  the  firm  to  settle  in 
full  for  a  less  amount  than  was  due,  the  evidence  of  defendant's 
general  manager  that  one  of  the  other  partners  had  never  claimed 

^^  Monmouth    College    v.    Dockery,  i3  Leckie  v.  Bennett,  160  Mo.  App. 

241  Mo.  522,  145  S.  W.  785.  145,  141  S.  W.  706. 

loa  Stover  V.  Stevens,  21  Cal.  App.  i*  Phipps   v.   Little,  213   Mass.  414, 

261,    131    Pac.   332.  100  N.   E.  615. 

1^  Western   Lumber  &  Pole  Co.  v.  ^^  Tennessee  Valley  Bank  v.  Averj-, 

Joslyn,  66  Wash.  524,  120  Pac.  69.  9  Ala.  App.  363,  63  So.  813. 

12  First  Nat.   Bank  of   St.   Paul  v.  i"  Bryant  v.  Phillips,  189  Mo.  App. 

Webster,   130 'Minn.  277,   153  N.  W.  278,  176  S.  W.  294. 

736.  1' Noble  v.  Hudson,  20  Wyo.  227, 

122  Pac.  901. 

31 — Row.  ON  Partx. — Vol.  2 


§    925  LAW    OF    PARTNERSHIP  1288 

more  money  was  due  than  was  paid  him  under  the  contract  with 
the  firm,  was  admissible  on  the  question  of  good  faith  in  making 
the  settlement,  and  to  show  that  the  other  partners  construed  the 
contract  as  did  the  defendant.  His  evidence  was  also  admissible 
to  show  that  a  payment  made  to  another  company  for  dirt  used  in 
a  fill  was  charged  to  plaintiff's  firm.  The  receipt  given  in  full 
by  the  other  partner  was  also  evidence  to  show  a  partial  payment 
under  the  contract.^^  Where  the  plaintiff's  bookkeeper,  the  owner 
of  the  business,  and  two  others  signed  a  bill  of  sale  to  a  new  cor- 
poration of  a  business  formerly  carried  on  under  a  partnership 
name,  this  was  not  conclusive  evidence  that  the  bookkeeper  was 
a  partner  who  had  authority  to  waive  the  rights  of  the  person 
who  had  previously  conducted  the  business.^^ 

§  925.  Authority  of  partner  after  dissolution. — The  pre- 
sumption that  each  member  of  a  firm  has  the  authority  to  bind 
his  partners  ceases  on  the  dissolution  of  the  firm.  There  is  no 
longer  either  the  community  of  interest  or  relation  of  principal 
and  agent  that  authorizes  one  partner  to  act  for  the  other.  And 
if  one  member  of  the  firm  continues  in  the  business  he  has  no 
power  to  execute  contracts  in  the  firm  name  after  the  dissolu- 
tion where  the  person  with  whom  he  dealt  had  notice  of  such 
dissolution.^"  Nor  has  one  partner  the  power  to  renew  a  note 
in  the  firm  name  after  dissolution.-^  But  after  dissolution  in  the 
absence  of  any  agreement  to  the  contrary  each  partner  has  been 
held  authorized  to  collect  and  receipt  for  debts  due  the  firm," 
and  it  has  been  held  that  all  the  partners  are  liable  for  money 
collected  by  one  of  them  after  the  dissolution  of  the  firm  where 
the  firm  had  engaged  to  collect  the  money."^  Where  there  is  no 
agreement  as  to  the  method  of  winding  up  partnership  business 
after  dissolution  each  partner  has  the  same  authority  to  adjust 

1^  Storrie  v.  Ft.  Worth  Stockyards  ^i  Lange  v.  Kennedy,  20  Wis.  279. 

Co.   (Tex.),  143  S.  W.  286.  22  Major  v.   Hawkes,    121    111.  298; 

1!^  Gerli  V.  Mistletoe  Silk  Mills   (N.  Heartt  v.   Walsh,  75   111.  200. 

J.),  93  Atl.  571.  23Smyt!i   v.   Harvie,  31   111.  62,   83 

20  Hayden  v.  Cretcher,  75  Ind.  108 ;  Am.   Dec.  202. 
Floyd  V.  Miller,  61   Ind.  224. 


1289  EVIDENCE  §    926 

its  affairs  by  collecting  its  debts  and  disposing  of  its  property 
as  before  the  dissolution ;  in  other  words,  the  partnership  con- 
tinues for  the  purposes  of  settlement  and  liquidation."*  But  where 
the  partners  on  dissolution  appoint  an  agent  to  settle  their  affairs 
it  has  been  held  that  a  person  with  notice  of  such  fact  deals  with 
one  of  the  former  partners  at  his  peril. -^ 

§  926.  Dissolution — Notice  of  dissolution. — It  is  some- 
times necessary  to  prove  whether  or  not  a  partnership  has  been 
dissolved."*'  Evidence  that  one  defendant  in  an  action  for  a  part- 
nership accounting  had  told  the  plaintiff  by  telephone  that  a 
former  partner  had  withdrawn,  was  not  sufficient  to  establish 
such  withdrawal.""  Evidence  that  there  were  no  outstanding 
debts  and  there  had  been  no  final  settlement  was  held  to  sustain 
a  finding  that  a  partnership  between  plaintiffs  had  not  been  dis- 
solved before  commencing  a  suit  in  the  firm  name.^^  Where  the 
proof  showed  that  after  the  date  when  it  was  alleged  a  partner- 
ship was  dissolved,  a  retiring  partner  remained,  doing  the  same 
work,  signing  the  firm  name  to  checks,  and  orders  for  goods,  and 
shared  in  the  profits,  this  was  sufficient  to  show  him  a  member 
of  the  firm,  and  a  verdict  finding  the  other  member  the  sole 
owner  of  the  stock  and  fixtures  was  unsupported  by  the  evidence.^^ 
The  mere  dissolution  of  a  firm  will  not  of  itself  absolve  the  indi- 
vidual partners  from  future  liability,  especially  where  the  business 

24  Barnes    v.    Northern    Trust    Co.,  25  Hilton    v.    Vanderbilt,   82    N.    Y. 

169  111.  112,  48  N.  E.  31;   Needham  591. 

V.    Wright,    140    Ind.    190,    39    N.    E.  26  Grant  v.  Bannister,  160  Cal.  774, 

510;  Hogendobler  v.  Lyon,  12  Kans.  118  Pac.  253;  Breyfogle  v.  Bowman, 

276;    Milliken    v.    Loring,    2,7    Maine  157  Ky.  62,  162  S.  W.  787;  Spurlock 

408 ;  Gordon  v.  Albert,  168  Mass.  150,  v.  Wilson,   160  Mo.  App.   14,   142  S. 

46   N.    E.   423;    Bass    v.    Taylor,    34  W.   363;   Hutchinson  v.   Sperry,    158 

Miss.  342;  Gray  v.  Green,  142  N.  Y.  App.  Div.  704,  143  N.  Y.  S.  876;  In 

316,  2,7  N.  E.  124;  Robbins  v.  Fuller,  re  Burdick,  79  Misc.  167,  140  N.  Y. 

24  N.  Y.  570;  Murray  v.  Mumford,  S.  582,  4  N.  Y.  Civ.  Proc.  R.  21. 

6    Cow.     (N.    Y.)     441;     Miller    v.  27  Heck  v.  Collins,  231  Pa.  357,  80 

Florer,    15   Ohio   St.    148;   Riddle   v.  Atl.  535. 

Etting,  32  Pa.  St.  412 ;  2  Bates  Part-  28  Georgia    Northern     Ry.     Co.    v. 

nership,  §  679  et  seq. ;  Parsons  Part-  Snellgrove  (Ga.  App.),  85  S.  E.  790. 

nership,  §  287  et  seq.  29  Higgenbotham     v.     Stanley,     36 

Okla.  302,   128  Pac.  238. 


§    926  LAW    OF    rARTNERSIIIP  1290 

is  continued  in  the  same  name.  In  order  to  avoid  liability  the  per- 
sons retiring  from  the  firm  must  give  notice  of  the  dissolution 
and  that  they  are  no  longer  members  of  the  firm.  Where  the  busi- 
ness is  continued  the  former  members  are  liable  to  persons  who 
have  previously  dealt  with  the  firm  and  who  have  received  no 
notice  of  the  dissolution.^"  A  notice  generally  is  not  of  itself 
sufiicient  to  relieve  from  liability  in  such  cases;  the  proof  must 
show  that  the  notice  was  brought  home  to  all  persons  who  had  for- 
merly dealt  with  the  firm.  This  rule  was  not  carried  to  the  extent 
of  holding  that  the  old  firm  was  liable  to  a  creditor  that  had  not 
previously  dealt  with  the  firm ;  but  generally  speaking  there  must 
be  actual  notice  to  those  who  have  dealt  with  the  firm  in  order 
to  protect  a  partner  after  dissolution.'^  In  such  cases  it  is  suffi- 
cient to  prove  that  the  creditor  had  knowledge  of  the  dissolution 
of  the  firm  or  withdrawal  of  the  partner.""  But  receipt  of  a  no- 
tice must  be  proved  and  it  has  been  held  insufficient  to  prove 
that  a  written  notice  was  mailed  to  the  creditor.^^  Notice  given 
to  the  agent  with  whom  the  contract  was  made  was  held  suffi- 
cient.^* And  a  general  notice  by  publication  to  the  world  of  the 
dissolution  or  retirement  of  the  partner  has  been  held  sufficient 
to  all  persons  except  former  customers.^^ 

30  Duff  V.  Baker,  78  Iowa  642,  43  913;  National  Shoe  &c.  Co.  v.  Herz, 
N.  W.  463 ;  Stimson  v.  Wliitney,  130  89  N.  Y.  629 ;  Speer  v.  Bishop,  24 
Mass.  591 ;  Hixon  v.  Pixley,  15  Nev.  Ohio  598 ;  Long  v.  Garnett,  59  Tex. 
475;  Palmer  v.  Dodge,  4  Ohio  21,  62  229;  Thompson  v.  Harmon  (Tex. 
Am.  Dec.  271;  Thompson  v.  Har-  Civ.  App.),  152  S.  W.  1161;  Gil- 
mon  (Tex.  Civ.  App.),  152  S.  W.  christ  v.  Brande,  58  Wis.  184,  15  N. 
1161 ;    Clement  v.    Clement,   69   Wis.  W.  817. 

599,  35  N.  W.  17,  2  Am.  St.  760.  32  Backus  v.   Taylor,   84   Ind.   503 ; 

31  Joseph  v.  Southwark  &c.  Co.,  99  Uhl  v.  Bingaman,  78  Ind.  365 ;  Kehoe 
Ala.  47,  10  So.  327;  Nicholson  v.  v.  Carville,  84  Iowa  415,  51  N.  W. 
Moog,  65  Ala.  471 ;  Richards  v.  Hunt,  166 ;  Martin  v.  Walton,  1  McCord 
65  Ga.  342;  Meyer  v.  Krohn,  114  111.  (S.  Car.)  16;  Prentiss  v.  Sinclair,  5 
574,  2  N.  E.  495 ;  Iddings  v.  Pierson,  Vt.  149,  26  Am.  Dec.  288. 

100   Ind.   418;    Strecker   v.    Conn,   90  ss  Meyer  v.  Krohn,   114  111.   574,  2 

Ind.  469 ;  Rose  v.  Coffield,  53  Md.  18,  N.  E.  495. 

36  Am.  Rep.  389 ;  Sibley  v.  Parsons,  ^4  Hunt    v.    Colorado    &c.    Co.,     1 

93  Mich.  538.  53  N.  W.  786:  Martin  Colo.  App.  120,  27  Pac.  873. 

v.  Fewell.  79  Mo.  401;  Stoddard  Mfg.  3s  joggph  v.  Southwark  &c.  Co.,  90 

Co.  v.  Krause,  27  Nebr.  82,  42  N.  W.  Ala.   47,    10   So.   327 ;    Rocky   Moun- 


1291  EVIDENCE  §    927 

§  927.  Admissions  after  dissolution. — As  the  communit)- 
of  interest  as  well  as  the  agency  of  the  partner  terminates  on 
the  dissolution  and  the  authority  of  each  to  bind  the  firm  ceases, 
it  follows  as  a  rule  that  one  of  the  partners  after  dissolution  can 
not  bind  the  others  by  an  admission  of  liability.^"  Where  partners 
terminated  their  relations,  and  executed  mutual  releases,  and 
then  the  plaintiff  transferred  to  his  former  partner  all  interest 
in  certain  property,  it  was  held  that  subsequent  admissions  that 
plaintiff  was  still  interested  therein  v;ere  insufficient  to  establish 
such  interest  as  against  the  former  partner's  widow.  But  a  con- 
tract between  the  plaintiff  and  a  continuing  partner  two  years 
after  dissolution  of  a  firm,  is  admissible  to  show  whether  a  de- 
fendant was  released  from  obligation  on  a  contract  between  plain- 
tiff and  the  firm.^^  And  it  is  generally  held  that  a  partner  after 
dissolution  can  not  take  a  case  out  of  the  operation  of  the  statute 
of  limitations  by  an  admission  of  liability,  new  promise,  or  par- 
tial payment.^^  The  rule  on  this  subject  is  stated  as  follows : 
"After  dissolution,  a  partner's  authority  to  bind  his  copartner 
is  limited  to  acts  necessary  or  proper  for  the  winding  up  of  the 
partnership  affairs. "^^ 

tain  &c.  Bank  v.  McCaskill,  16  Colo.  "  Holbert  v.  Keller.   161  Iowa  723. 

408,  26  Pac.  821;  Richardson  v.  Sni-  142  N.  W.  962. 

der,   12   Ind.  425,   Zl  Am.   Rep.    168;  3s  Bell  v.  Morrison,  1  Pet.   (U.  S.) 

Rose  V.   Coffield,  SZ  Md.  18,  36  Am,  351,  7  L.  ed.  174;  Tate  v.   Clements, 

Rep.   389;    Polk   v.   Oliver,   56   Miss.  16  Fla.  339,  26  Am.  Rep.   709:   Van 

566;   Stoddard   Mfg.   Co.  v.   Krause,  Keuren  v.  Parmelee,  2  N.  Y.  523,  51 

27  Nebr.  83,  42  N.  W.  913.  Am.  Dec.  322 ;  Forbes  v.  Garfield.  iZ 

36  Barnes    v.    Northern    Trust    Co.,  Hun   (N.  Y.)   389;  Jack  v.  McLana- 

169  111.  112,  48  N.  E.  31;  Walden  v.  ban,    191    Pa.    St.    631,   43   Atl.   356; 

Sherburne,    15   Johns.    (N.   Y.)    409;  Bush   v.    Stowell,   71    Pa.   St.  20$,    10 

Smith  V.  Ludlow,  6  Johns.    (.N.  Y.)  Am..    Rep.    694;    Reppert    v.    Colvin, 

267 ;  Hackley  V.  Patrick,  3  Johns.  (N.  48    Pa.    St.    248;    Levy   v.    Cadet,    17 

Y.)    536;  Hopkins  v.  Banks,  7  Cow.  Serg.  &  R.    (Pa.)    126,   17  Am.   Dec. 

(N.  Y.)    650;   Hart  v.  Woodruff,  24  650;    Davis    v.    Poland,    92    Va.    225, 

Hun    (N.  Y.)    510;  Brisban  v.  Boyd,  23    S.    E.   292;    Clement   v.    Clement, 

4    Paige    Ch.    (N.    Y.)     17;    Feigley  69  Wis.  599,  35  N.  W.  17.  2  Am.  St. 

V.    Whitaker,    22    Ohio    St.    606,    10  760.   See  ante  §§  468,  600. 

Am.    Rep.    778 ;    Myers    v.    Standart,  '"-^  Shumaker  Partnership,  §   148. 
11  Ohio  St.  29;  Lehman  v.  Heuston, 
11  Wash.  154,  131  Pac.  825. 


§    928  LAW    OF    PARTNERSHIP  1292 

§  928.  Admissions  by  surviving  partner. — As  already 
stated,  the  dissolution  of  a  partnership  operates  as  a  revocation 
of  all  authority  for  making  new  contracts  or  creating  new  part- 
nership obligations.  This  rule  applies  where  the  partnership  is 
dissolved  by  death  as  well  as  where  there  is  a  voluntary  dissolu- 
tion.*" A  surviving  partner,  however,  because  of  his  personal 
obligation  to  pay  the  debt,  and  his  right  to  obtain  his  own  equity 
in  the  residue,  usually  succeeds  to  the  entire  legal  title  to  the 
partnership  property  and  has  the  right  to  wind  up  its  affairs.*^ 
This  does  not  ordinarily  give  him  the  right  to  create  new  obliga- 
tions or  make  admissions  that  would  do  so  as  against  the  old 
partnership,  or  the  heirs  of  the  deceased  partners,  but,  at  least 
in  jurisdictions  where  judgments  against  the  survivor  are  treated 
as  res  inter  alios  acts,  and  not  merely  as  prima  facie  evidence 
against  the  representatives  of  the  deceased  partner,  the  admis- 
sions of  the  survivor  subsequent  to  the  dissolution,  within  his 
authority  as  a  liquidating  partner,  would  clearly  seem  to  be  com- 
petent in  a  suit  in  which  he  is  defendant.^- 

§  929.  Accounting — Burden  of  proof. — In  an  action  for 
an  accounting  where  a  partner  claims  a  balance  due  him  from  the 
firm,  and  where  no  entries  have  been  made  of  the  account  at  the 
time  of  the  alleged  settlement,  the  burden  is  upon  the  plaintiff  to 
prove  the  indebtedness."  This  rule  also  applies  to  proof  of  a 
contract  to  pay  for  a  partner's  services;**  to  show  the  amount 
of  his  personal  expenses  ;*^  or  to  show  an  agreement  to  com- 
pound interest  on  sums  advanced  by  the  other  partner.    In  such 

40.  See  ante  §§  593,  597.  86  Am.  Dec.  600;  65  Am.  Dec.  295 

"Russell    V.    McCall,    141    N.    Y.  51   Am.   Dec.  330. 

437,  36  N.  E.  498,  38  Am.   St.  807 ;  «  AlcCabe  v.  Franks,  44  Iowa  208 

Bates   Partnership,    §§   718,   722.     As  McMichael    v.    Raoul,    14    La.    Ann 

to  entries  in  the  books  by  a  surviv-  307;  Camblat  v.  Tupery,  2  La.  Ann 

ing   or   liquidating  partner,    see   note  10 ;    Maupin   v.   Daniel,   3   Tenn.   Ch 

in  52  L.  R.  A.  846.  223. 

42  Gillett     Indirect    and     Collateral  **  Mondamin    Bank   v.    Burke,    165 

Ev.,   §   42.     See   also   Kirk  v.   Hiatt,  Iowa  711,  147  N.  W.  148. 

2  Ind.  322;  Gilmore  v.  Ham,  142  N.  «  Boeing  v.  Fordney   (Mich.),   150 

Y.   1.  36  N.  E.  826,  40  Am.   St.  554  N.  W.  852 ;  Sandberg  v.  Scougale,  75 

and  note;  notes  in  11  Am.  Dec.  114;  Wash.  313,  134  Pac.  1051. 


1293  EVIDENCE  §   929 

an  action  it  is  held  that  the  plaintiff  must  produce  the  evidence 
necessary  to  fix  the  rights  of  the  partners,  or  there  can  be  no  re- 
covery,*" and  generally,  the  partner  seeking  a  credit  must  prove  his 
right  to  it/''  Letters  written  by  one  partner  to  another,  show- 
ing what  property  he  owned  in  another  state,  were  held  irrelevant 
on  a  partnership  accounting  and  calculated  to  prejudice  the  jury.'*^ 
In  an  action  for  loss  of  profits  on  sale  of  cattle  purchased  in 
partnership,  evidence  as  to  the  cost  of  handling  the  cattle  on 
delivery  and  as  to  the  loss  on  cut-backs,  was  competent/*^  Where 
a  partner  claimed  land  as  his  individual  property,  which  he  had 
paid  for  out  of  a  bank  deposit,  it  was  error  to  exclude  a  bank 
account  offered  to  show  he  had  no  such  deposit.'"''^  So  where  the 
partnership  affairs  have  been  adjusted  and  the  settlement  of  the 
account  signed  by  the  partners,  the  burden  is  on  the  partner  com- 
plaining to  show  an  error  in  the  settlement  or  that  the  firm  h 
indebted  to  him;'^^  or  to  show  fraud, ^"  or  misconduct  of  a  part- 
ner."'*" This  rule  as  to  the  burden  has  been  carried  to  the  extent 
of  holding  that  the  evidence  must  be  most  satisfactory  for  the 
ascertainment  of  the  true  balance  between  the  partners.^*  And 
in  an  action  for  a  settlement  and  an  accounting  the  burden  has 
been  held  to  be  on  the  plaintiff  to  prove  a  dissolution  of  the 
firm.^^  In  an  action  for  an  accounting  where  a  partner  fails  to 
produce  the  books  of  accounts  in  his  possession,  an  account  may 

4"  Camblat  v.   Tupery,   2   La.  Ann.  Commission    Co.     (Tex.    Civ.    App.), 

10;   Mclntyre  v.  Johnston,  63  Wash.  174  S.  W.  930. 

323,   115  Pac.  509.  s»Hengy     v.     Hengy     (Tex.     Civ. 

47  Grant  v.  Bannister,  160  Cal.  774,  App.),   151   S.  W.   1127. 

118    Pac.    253;    Bruner    v.    Jacobson,  ^i  gj-y   v.    Cook,    15   La.    Ann.   493, 

115  Minn.  425,  132  N.  W.  995;  Wise  ^2  Summerill   v.    SummeriU    (N.    J. 

V.   Wise,   244   Pa.  611,   90   Atl.   925;  Ch.),  93  Atl.  726. 

Shrader  v.   Downing,  79  Wash.  476,  "-s  Phillips   v.    Crownfield,    124    Md. 

140  Pac.  558.  App.  443,  92  Atl.  1030. 

*s  Hengy     v.     Hengy     (Tex.     Civ.  ^*  Davidson  v.  Wilson,   3   Del.   Ch. 

App.),  151  S.  W.  1127.  307. 

*9  Fuller    V.    El    Paso    Live    Stock  ^^  Gossett    v.    Weatherly,    5    Jones 

Eq.   (N.  Car.)   46. 


§    929  LAW    OF    PARTNERSHIP  1294 

be  stated  by  presuming  everything  against  him,^®  but  the  absence 
of  the  firm  books  may  prevent  the  stating  of  an  account  where 
the  bill  and  answer  are  conflicting." 

s"  Walmsley  v.   Walmsley,  3  Jones         ^''  Davidson  v.  Wilson,   3  Del.   Ch. 
&  Lat.  556.  307. 


CHAPTER  XXVIII 


TAXATION    OF    PARTNERSHIP    PROPERTY 


SECTION 

935.  Taxation    of    partnership    prop- 

erty, in  firm  name. 

936.  Taxation  of  good   will  of  part- 

nership. 

937.  Place    of    taxation    of    partner's 

interest. 

938.  Place  of  taxation  of  partnership 

property — Generally. 


SECTION 

939.  Place  of  taxation  under  statutes 

of  different  states. 

940.  Massachusetts  cases. 

941.  Michigan  cases. 

942.  Taxation  after  dissolution. 

943.  Taxation    of    property    of    joint 

stock  company. 

944.  Notice  to  redeem  from  tax  sale. 


§  935.     Taxation  of  partnership  property  in  firm  name. — 

Under  the  tax  laws  of  many  of  the  states  a  partnership  is  prac- 
tically considered  an  entity  for  purposes  of  taxation  and  instead 
of  taxing  partnership  property  to  the  partners  as  individuals,  the 
property  of  a  partnership  is  listed  and  assessed  to  the  firm  in  the 
firm  name,  as  corporate  property  is  assessed  to  a  corporation  in 
its  corporate  name,  usually  at  the  place  of  location  of  the  property 
or  the  business.^  The  rule  that  partnership  property  is  to  be  as- 
sessed to  the  firm  has  been  applied  in  the  absence  of  statute.^ 


^  Commonwealth  v.  Schmelz,  114 
Va.  364,  76  S.  E.  905.  See  also  Ala- 
bama 1  Code,  §  2108;  Arizona  Rev. 
Stat.,  §  4860;  Arkansas  Kirby  Dig. 
1904,  §  6903;  California  Pol.  Code, 
§  3629,  (2)  (6)  ;  Colo.  2  Mills  Ann. 
Code,  §  6231 ;  Idaho  1  Rev.  Codes, 
§  1673;  111.  5  Ann.  Stat,  §  9219;  4 
Burns  Ind.  Ann.  Stat.  1914,  §  10162; 
Iowa  Code  1897,  §§  1313,  1317; 
Massachusetts  Acts  1909,  ch.  490,  §§ 
27,  41,  43 ;  Michigan  1  Howells  Stats., 
§  1780;  Minnesota  Gen.  Stat.  1913, 
§  1994;  Montana  1  Rev.  Codes,  § 
2521;  Nevada  1  Rev.  Laws,  §§  3626, 


3629;  Nebraska  Rev.  Stat.,  §§  6298, 
6313;  Oklahoma  2  Rev.  Laws,  §  7311 ; 
Ohio  3  P.  &  A.  Gen.  Code,  §§  5320, 
5370;  Pennsylvania  5  Purdon's  Dig., 
§  6060;  Texas  3  Civ.  Stat.,  §  7509; 
West  Virginia  Code  1906,  §  744 ;  Vir- 
.ginia  Code  1904,  §§  492,  494,  Tax 
Bill,  §  143.     See  ante  §  306. 

2  Stockwell  v.  Brewer,  59  Maine 
286;  Hopkins  v.  Baker  Bros.,  78  Md. 
363,  28  Atl.  284,  22  L.  -R.  A.  477 ;  Sage 
v.  Burlingame,  74  Mich.  120,  41  N. 
W.  878;  Hubbard  v.  Winsor,  15 
Mich.  146. 


1295 


§    936  LAW    OF    PARTNERSHIP  1296 

While  these  statutes  permit  the  taxing  of  partnership  property 
in  the  firm  name,  this  fact  would  not,  it  seems,  and  it  is  so  pro- 
vided in  some  of  the  statutes,  change  the  liability  of  each  part- 
ner for  the  entire  amount  of  the  tax.^  A  slight  discrepancy  from 
the  correct  firm  name  in  the  name  in  which  partnership  property 
is  assessed  to  the  firm,  will  not  invalidate  the  tax  if  no  one  is 
misled  ;■*  as  where  the  firm  name  was  reversed  f  or  the  assess- 
ment was  in  one  of  several  names  in  which  the  firm  did  busi- 
ness/' However,  in  Louisiana  it  was  held  that  a  purchaser  of 
property  belonging  to  Keller  &  Co.  which  was  sold  for  taxes  of 
J.  N.  Keller  as  his  property,  got  no  title/  Under  some  statutes 
it  is  not  invalid  to  assess  partnership  property  in  the  name  of  one 
of  the  members  of  the  firm.^  The  fact  that  lands  owned  by  part- 
ners as  joint  tenants  are  assessed  to  the  partnership,  is  not  an 
error  of  which  they  can  complain.^ 

§  936.  Taxation  of  good-will  of  partnership. — The  ques- 
tion as  to  the  right  to  tax  the  good  will  of  a  partnership  and  as 
to  its  assessment  in  condemnation  proceedings  was  discussed 
in  the  chapter  on  good  will/" 

§  937.  Place  of  taxation  of  partner's  interest. — ^The  gen- 
eral holding  seems  to  be  that  the  situs  for  taxation  of  a  deceased 
partner's  interest  is  the  place  where  the  business  was  carried 
on  when  he  died,  the  leading  case  holding  that  where  two  brothers 
residing  in  England  were  carrying  on  business  in  partnership  as 
graziers  and  sheep  farmers  through  their  agent  in  New  South 
Wales,  the  interest  of  one  of  them  in  the  partnership  property  at 
the  time  of  his  death  was  liable  to  pay  stamp  and  probate  duties 
imposed  by  New  South  Wales/^     This  rule  is  generally  fol- 

3  Burns'  Ind.  Rev.  Stat.  1914,  7  Thibodaux  v.  Keller,  29  La.  Ann. 
§  10162.  508. 

4  (So  provided  by  statute),  Hill  v,  «  p]etcher  v.  Post,  104  Mich.  424, 
Graham,  72  Mich.  659,  40  N.  W.  62  N.  W.  574;  Welles  v.  Battelle,  11 
779.  Mass.  477. 

5  Van  Dyke  v.  Carleton,  61  N.  H.  »  Hubbard  v.  Winsor,  IS  Mich.  146. 
574.  10  See  ante  §  324. 

*^  Lyle  V.  Jacques,   101   111.  644.  ^i  Commissioner    of    Stamp    Duties 


1297 


TAXATION 


938 


lowed  in  levying  probate,  succession,  or  inheritance  taxes/-  So 
it  has  been  held  in  a  good  many  instances  that  the  situs  for  pur- 
poses of  taxation,  of  a  nonresident  partner's  interest  in  partner- 
ship property,  is  the  place  where  the  property  is  located/"  It  has 
been  held  that  the  interest  in  a  California  farm  of  a  partner  liv- 
ing in  New  York,  is  not  assessable  against  his  executors  in  New 
York  at  his  death,  since  there  is  nothing  owing  the  executors 
until  the  firm  debts  are  liquidated."  Where  a  partner  is  assessed 
individually  for  his  interest  in  firm  property,  he  is  not  entitled 
to  deduct  firm  debts  due  in  the  state,  but  may  have  his  propor- 
tionate share  in  such  debts  deducted,  upon  making  a  proper  show- 
ing/^ But  if  some  of  the  members  are  nonresidents,  it  is  held 
the  firm  is  not  entitled  to  deductions  for  debts/^ 


§  938.  Place  of  taxation  of  partnership  property — Gen- 
erally.— If  the  situs  of  partnership  personal  property  for  the 
purpose  of  taxation  is  not  fixed  by  statute  the  general  rule  is 
that  it  should  be  taxed  at  the  place  where  the  business  is  carried 
on,  even  though  the  partners  may  reside  elsewhere/^   As  said  in 


V.  Salting  [1907],  Ann.  Cas.  449.  See 
also  Re  Ewing,  6  Prob.  Div.  19; 
Laidlay  v.  Lord  Advocate  (1890),  15 
App.  Cas.  468.     See  ante  §  306. 

12  Beaver  v.  Master  of  Equity 
[1895],  Ann.  Cas.  251;  Bridgeport 
Trust  Co.'s  Appeal,  11  Conn.  657,  60 
Atl.  662 ;  Gallup's  Appeal,  Id  Conn. 
617,  57  Atl.  699;  Small's  Appeal  151 
Pa.  1,  25  Atl.  23,  28.  See  also  Re  King, 
Z^  Misc.  575,  tZ  N.  Y.  S.  1100.  Com- 
pare Forbes  v.  Steven,  L.  R.  10  Eq. 
178  and  Stokes  v.  Ducroz,  62  L.  T. 
(N.  S.)  176. 

13  Duer  V.  Small,  Fed.  Cas.  No. 
4116,  4  Blatchf.  263,  17  How.  Prac. 
201;  Oliver  v.  Lynn,  130  Mass.  143; 
Hoadley  v.  Essex,  105  Mass.  519; 
Bemis  v.  Boston,  14  Allen  (Mass.) 
366 ;  Taylor  v.  Love,  43  N.  J.  L.  142 ; 


People   V.   Wells,    85    App.    Div.   440, 
83  N.  Y.  S.  387. 

1*  People  V.  Coleman,  44  Hun  ( N. 
Y.)  20. 

15  State  V.  Parker,  34  N.  J.  L.  71. 
See  also  Taylor  v.  Love,  43  N.  J.  L. 
142. 

16  State  V.  McChesney,  35  N.  J.  L. 
548. 

"Louisville  v.  Tatum,  111  Ky.  747, 
64  S.  W.  836;  School  District  v. 
Bowman,  178  AIo.  654,  11  S.  W.  880 ; 
State  ex  rel.  School  District  v.  Bow- 
man, 178  Mo.  663,  11  S.  W.  1135; 
State  Tatem  Prosecutor  v.  McChes- 
ney, 35  N.  J.  L.  548.  Compare  Tay- 
lor v.  Love,  43  N.  J.  L.  142.  See 
also  St.  John  v.  Mobile.  21  Ala.  224 ; 
In  re  Hatt,  7  L.  J.  103,  Digest  On- 
tario Case  Law,  vol.  3,  p.  5197.  See 
ante  §  306. 


§    938  LAW    OF    rARTNERSIIIP  129S 

a  leading  case :"  "Partnerships,  of  course,  are  composed  of  indi- 
viduals. The  property  belonging  to  them  is  the  result  of  contri- 
butions made  by  the  individuals  engaging  in  the  venture.  It  is 
held  and  used  for  a  common  purpose.  It  is  liable  to  the  payment 
of  partnership  demands.  It  can  be  sold  under  an  execution  against 
the  partners  to  pay  a  partnership  demand.  If  a  member  of  the 
firm  is  financially  involved,  his  interest  in  the  firm  can  not  be 
taken  for  his  individual  obligations  to  the  prejudice  of  the  firm 
creditors.  The  firm  property  is  an  aggregate  of  contributions  set 
apart  for  certain  purposes,  protected  by  law  against  an  invasion 
by  individual  members  of  the  firm  and  their  creditors.  When  a 
member  contributes  to  produce  the  whole,  he  does  not  retain 
the  thing  contributed,  but  acquires  an  interest  with  his  associates 
in  the  whole.  He  surrenders  the  individual  control  of  the  amount 
he  contributed  to  that  of  the  members  of  the  firm.  The  personal 
property  of  the  firm  has  an  actual  situs  in  Louisville,  where  the 
business  was  conducted.  It  has  a  visible  and  tangible  existence. 
Two-thirds  has  been  taken  from  the  domicile  of  the  owners,  and 
an  actual  permanent  situs  is  fixed  in  Louisville.  The  character 
of  the  ownership  in  the  property  as  well  as  its  situs  has  been 
voluntarily  changed.  In  doing  this,  the  members  of  the  firm  liv- 
ing outside  of  the  city  committed  their  property  to  the  protection 
of  the  municipal  authorities,  and  at  the  same  time  made  it  liable 
to  the  payment  of  taxes  to  support  the  municipality.  As  has  been 
said,  a  firm  for  the  purposes  of  taxation,  is  a  'distinct  entity.'  In 
many  states  the  statutes  provide  that  the  property  of  a  firm  shall 
be  assessed  in  the  firm  name.  We  do  not  think  it  necessary  to 
have  a  statute  of  that  kind  in  order  that  a  firm  may  be  required 
to  list  and  pay  taxes  on  the  property  in  the  name  of  the  firm.  It 
can  not  be  that,  simply  because  some  of  the  members  of  the  firm 
are  domiciled  outside  of  the  corporate  limits  of  the  city,  the  prop- 
erty belonging  to  it  must  be  assessed  in  the  individual  names  of 
those  comprising  it  according  to  the  value  of  the  interest  which 
each  has  therein.  *  *  *  j^  would  be  an  anomalous  condition 
that  the  law  would  authorize  the  municipal  authorities  to  assess 

18  City  of  Louisville  v.  Tatum,  111  Ky.  747,  64  S.  W.  836. 


1299  TAXATION  §    939 

the  propert}''  of  a  partnership  in  the  firm  name  when  they  all 
lived  in  the  city,  and  would  forbid  them  from  doing  so  when  a 
member  lived  in  the  city  and  two  or  more  outside  of  its  cor- 
porate limits.  *  *  *  If  a  member  of  a  firm  has  assessed  in 
his  name  his  interest  in  firm  property,  and  fails  to  pay  his  taxes, 
and  it  becomes  necessary  to  seize  and  sell  his  property  to  pay 
them,  tlie  collecting  officer  could  not  sell  the  firm  property  to 
pay  the  taxes  due  by  him,  but  only  his  interest  in  the  firm  prop- 
erty. To  thus  assess  partnership  property  would  occasion  many 
complications,  both  in  assessment  of  property  and  collection  of 
taxes."^^  It  is  said  in  Desty  on  Taxation:""  "A  partnership  firm 
is  taxable  on  its  property  at  the  place  where  the  business  of  the 
firm  is  conducted,  while  the  members  are  severally  taxable  for 
their  interests  where  they  reside,  unless  the  statute  lays  down  a 
different  rule.  The  firm  and  not  the  individual  members  of  it,  is, 
for  the  purposes  of  taxation,  considered  as  owner  of  its  property, 
and  it  is  to  be  assessed  therefor.  Even  where  the  parties  reside 
in  different  districts,  the  firm  property  is  taxable  at  the  place 
where  the  business  is  conducted." 

§  939.     Place  of  taxation  under  statutes  of  different  states. 

— The  situs  of  partnership  property  for  the  purposes  of  taxation 
is  now  prescribed  by  statute  in  most  jurisdictions.  These  stat- 
utes vary  in  different  states  and  no  general  rules  as  to  them  can 
be  laid  down.  A  Connecticut  statute"^  provides  "die  property  of 
any  trading,  mercantile,  manufacturing,  or  mechanical  business 
shall  be  assessed  in  the  name  of  the  owner  or  owners  in  the  town, 
city  or  borough  where  the  business  is  carried  on."  It  further 
provides  that  the  person  having  charge  of  the  business,  if  not 
the  owner,  shall  give  in  the  names  of  the  owners  and  the  valu- 
ation is  based  upon  the  average  amount  of  goods  kept  on  hand 
for  sale  during"  the  year.  So  the  property  of  a  partnership  en- 
gaged in  cutting  timber  and  sawing  it  should  be  taxed  in  the  town 

1^  Citing  Aleguiar  v.  Helm,  91   Ky.     Cooley  Taxation,   2nd   cd.,   p.   374 ;    1 
19,    14    S.    W.    949,    12    Ky.    L.    751 ;     Desty  Taxation,  §  62. 
Burroughs    Taxation,    p.    225,    §    98 ;         ^o  i    Desty   Taxation,    §   62. 

21  Connecticut    Gen.    Stat.,    §    2342. 


§    939  LAW    OF    PARTNERSHIP  1300 

where  lumber  was  cut,  prepared,  stored,  and  delivered  although 
it  carried  on  its  business  from  an  office  in  another  town."-  The 
Illinois  statute  provides  that  "the  personal  property  of  *  ^'  * 
merchants  and  manufacturers,  *  *  *  shall  be  listed  and  as- 
sessed in  the  county,  town,  city,  village  or  district  where  their 
business  is  carried  on,  except  such  property  which  shall  be  liable 
to  assessment  elsewhere  in  the  hands  of  agents."  So  a  firm 
which  is  engaged  in  manufacturing  goods  at  one  place,  and  sell- 
ing them  at  another  should  be  assessed  at  each  place  on  the  prop- 
erty there.^^  Another  section  of  this  act  provides  that  "the  prop- 
erty of  manufacturers  and  others,  in  the  hands  of  agents,  shall 
be  listed  and  assessed  at  the  place  where  the  business  of  such 
agent  is  carried  on."  The  property  used  in  manufacturing  by  a 
firm  which  manufactures  goods  at  one  place  through  an  agent 
and  sells  them  at  another,  should  be  taxed  where  the  goods  are 
manufactured.^^  Under  a  former  Indiana  statute  requiring  the 
assessment  and  taxation  of  steamboats  in  the  county  where  they 
belonged  or  were  enrolled  or  registered,  a  boat  owned  by  a  part- 
nership was  held  not  to  be  taxable  in  the  town  where  the  partners 
lived  when  the  boat  was  used  and  belonged  at  another  place. "^  A 
later  Indiana  statute  provides  for  the  taxing  of  steamboats  and 
other  vessels  where  the  owner  or  one  of  the  owners  resides.  Un- 
der this  statute  where  a  boat  is  owned  by  a  partnership  of  three 
members  it  is  proper  to  tax  it  at  the  place  where  two  of  the  part- 
ners live  and  it  can  not  be  taxed  again  at  the  place  where  the  third 
partner  lives.-^  A  former  Kansas  statute^^  provided  for  the  listing 
of  personal  property  in  the  township  or  city  where  the  person 
charged  with  the  tax  resided.  Partnership  property  used  in  one 
county  by  a  firm  whose  members  lived  in  another  was  held  tax- 
able only  in  the  county  where  the  members  lived.^^  Another  Kan- 

22  Jackson   v.    Town   of   Union,   82  2g  inj.    Rev.     Stat.    1881.     §    6293; 

Conn.  266,  73  Atl.  773.  Cook   v.    Port   Fulton,    106   Ind.    1/0, 

23Selz    V.    Cagwin,    104    111.    647;  6  N.  E.  321. 

Illinois  Rev.  Stat.  1893,  ch.  120,  §  13.  27  Kansas  Gen.  Stat.,  p.  1023. 

24  Selz  V.  Cagwin,  104  111.  647.  28  Griffith  v.  Carter,  8  Kans.  565. 

25  Eversole   v.    Cook,   92    Ind.  222 ; 
Act  Dec.  21,  1872. 


1301  TAXATION  §    939 

sas  statute^^  provides  for  the  listing  of  the  property  of  a  corpora- 
tion or  firm  by  the  principal  accounting  officer  or  by  an  agent 
or  partner  thereof.  Where  two  partners  owning  a  bank  resided 
in  different  counties  but  the  bank  was  located  in  the  county  where 
the  cashier  and  principal  officer  resided  the  property  was  all 
liable  to  taxation  in  the  latter  county.^"  Under  a  Maine  statute^'^ 
providing  for  the  joint  taxing  of  partners  in  business  whether 
residing  in  the  same  or  different  towns  under  their  partnership 
name  in  the  town  where  the  business  is  carried  on  for  all  personal 
property  employed  in  the  business  except  that  property  employed 
in  trade  In  the  erection  of  buildings  or  vessels  or  in  mechanic 
arts  should  be  taxed  in  the  town  where  so  employed,  it  was  held 
that  where  all  the  business  of  a  partnership  was  carried  on  in 
one  town  they  could  not  be  taxed  in  another  town  for  lumber 
which  had  been  "stuck  up"  there  to  season,  although  it  was  sawed 
there  and  was  to  stay  there  until  sold.^~  Another  statute^"  pro- 
vided for  the  taxing  of  partnership  property  in  the  town  where 
the  business  is  carried  on  and  it  was  held  that  under  it  a  partner- 
ship which  carried  on  a  lumber  business  in  one  place  could  not 
be  taxed  in  another  place,  for  lumber  piled  on  the  wharf  there 
to  season.^^  The  Maryland  Constitution^^  provides  for  the  taxing 
of  goods  at  the  owner's  residence  unless  the  goods  are  perma- 
nently located  in  a  certain  place.  It  is  held  that  the  stock  in 
trade  of  a  partnership  in  a  mercantile  business  which  remains 
there  until  sold  is  permanently  located  there  for  the  purpose 
of  taxation.^^  By  a  Minnesota  statute^''  "personal  property 
pertaining  to  the  business  of  a  merchant  or  manufacturer 
shall  be  listed  in  the  town  or  district  where  his  business  is  car- 
ried on,"  and  tmder  this  it  is  held  that  where  a  lumbering  and 
manufacturing  partnership  carries  on  its  principal  business  in 

20  Kansas  Acts  1874,   §  7.  3*  Stockwell    v.    Brewer,    59    Maine 

^°  Swallow  V.  Thomas,  15  Kans.  66.  286. 

31  Maine  Rev.  Stat.,  ch.  9,  §§  22,  13,  ss  Maryland     Constitution,     art.     3, 

32  McCann  v.  Minot,  107  Maine  393,  §  51. 

78  Atl.  465.  3G  Hopkins   v.    Baker,    78    Md.   363, 

33  Maine  Rev.  Stat.  1857,  ch.  6,  §  21.     28  Atl.  284,  22  L.  R.  A.  477. 

37  Minn.    Gen.  .Stat.    1894,    §    1516. 


§    939  LAW    OF    PARTNERSHIP  1302 

one  place,  but  keeps  a  stock  of  merchandise^  and  carries  on  a 
lumber  business  at  another  place,  it  may  be  taxed  in  the  latter 
place  for  the  personal  property  there  located.^®  It  has  also  been 
held  under  this  statute  that  nonresident  partners  engaged  in 
the  lumber  business,  which  had  its  principal  place  of  business 
and  a  sawmill  in  one  county,  and  in  another  county  some  per- 
sonal property  which  was  there  merely  for  the  cutting  and  haul- 
ing logs  to  its  sawmill,  is  not  taxable  in  the  latter  county  for  the 
property  there  located.^^  Under  a  Nebraska  statute,^"  which  pro- 
vides among  other  things  for  the  taxing  of  the  capital  stock  and 
franchises  of  corporations  and  persons  at  the  principal  office  or 
place  of  business  in  the  state,  and  that  personal  property  includes 
every  tangible  and  intangible  thing  which  is  the  subject  of  own- 
ership and  is  not  real  property,  it  was  held  that  credits  of  a  part- 
nership whose  members  were  nonresidents,  and  which  had  its 
principal  place  of  business  in  another  state,  but  had  an  office  in 
Nebraska,  were  taxable  at  the  place  of  location  of  the  Nebraska 
office,  though  the  notes  taken  by  the  agent  in  Nebraska  for  loans 
made  in  that  state  were  made  payable  in  another  state."*^  It  has 
been  held  under  a  New  York  act^~  which  provided  for  the  taxa- 
tion in  New  York  of  all  nonresident  persons  and  associations 
doing  business  there  on  the  money  engaged  in  the  business,  that 
a  partnership  is  taxable  in  New  York  on  its  property  there,  al- 
though its  business  there  is  only  a  branch,  tributary  to  that  car- 
ried on  abroad.*^  A  more  recent  law  provides  :  "Nonresidents  of 
the  state  doing  business  in  the  state,  either  as  principals  or  part- 
ners, shall  be  taxed  on  the  capital  invested  in  such  business  as 
personal  property  at  the  place  where  such  business  is  carried  on, 
to  the  same  extent  as  if  they  were  residents  of  the  state."**    In 

38  State    ex    rel.    Twin    Lakes    v.  363,   129  N.  W.  548,   Ann.  Cas.   1912 
Hynes,  82   Minn.  34,  84  N.  W.  636.  B,  756. 

39  State   ex    rel.    St.    Louis    County         ^2  New    York  Laws    1855,    ch.    2>7 . 
V.    Dunn,    86    Minn.    301,    90    N.    W.  p.  44. 

772.  ^3  In    re    McMahon,    66    How.    Pr. 

40  Nebraska    Comp.    Stat.    1909,    ch.     (N.  Y.)    190. 

n.  4*  Laws  1896,  ch.  908,  §  7.     See  also 

41  Clay  V.  Douglas  County,  88  Nebr.     People   v.    Wells,    85    App.    Div.   440, 

83  N.  Y.  S.  387. 


1303  TAXATION  §    939 

Oklahoma,  a  statute  which  provides  that  a  person  moving  into 
the  state  between  March  1  and  September  1  is  assessable  on 
his  personal  property  which  acquires  an  actual  situs  before  Sep- 
tember 1/^  applies  to  a  partnership  with  one  nonresident  member 
which  moves  into  the  state  with  personal  property  between  March 
1  and  September  1,  although  one  partner  was  a  resident  of  the 
state  before  March  1/*'  Under  a  Vermont  statute  partners  in 
mercantile  or  other  business  might  be  assessed  jointly  in  their 
partnership  name  in  the  town  where  the  business  was  carried  on, 
for  all  personal  property  employed  in  the  business,  whether  they 
resided  in  the  same  or  different  towns,^^  and  it  was  held  that 
where  the  partners  all  resided  in  the  same  town,  but  one  resided 
in  a  school  district  different  from  the  place  of  business,  no  part 
of  the  partnership  property  could  be  taxed  in  any  other  school 
district  except  whare.  the  business  was  carried  on/^  The  Virginia 
statute  provides  for  the  assessment  to  the  firm  of  partnership 
property,'*"  and  it  is  held  that  a  partnership  is  an  entity  for  the 
purposes  of  taxation,  and  that  its  property  not  otherwise  taxed 
is  taxable  in  the  county  or  city  where  its  business  is  conducted, 
and  that  where  a  partnership  carries  on  separate  and  distinct 
businesses,  the  property  in  each  business  should  be  taxed  in  the 
county  or  city  where  it  is  conducted,  and  not  at  the  partner's 
residence.^"  The  Wisconsin  statute  provides  for  the  assessment  of 
most  kinds  of  personal  property  in  the  district  where  located,  for 
the  assessment  of  the  property  of  a  nonresident,  in  the  district  in 
which  the  agent  of  the  owner  resides,  otherwise,  in  the  district 
where  it  is  located,  and  for  the  assessment  of  merchants'  goods 
and  commodities  kept  for  sale  in  the  district  where  located.^^  It 
is  held  that  lumber  which  was  bought  by  a  nonresident  partner- 
ship and  piled  at  a  place  in  the  state  from  which  it  is  shipped  to 
persons  who  order  from  the  firm's  place  of  business  in  another 

45  Oklahoma   Act   March    10,    1909,  Vt.  650;    Fairbanks  v.   Kittredge,   24 

art.  2,  §  2.  Vt.  9. 

-*«Bivins  V.  Bird,  31  Okla.  286,  121  ^o  Virginia   Code,   §§  492,  494,    143. 

Pac.   1080.  50  Commonwealth    v.    Schmelz,    114 

•*"  Vermont  Tax  Act  1841,  §  12.  Va.  364,  76  S.  E.  905. 

■*«  School    Pistrict   v.    Kittridge,   27  si  Wisconsin    Rev.    Stat,    §    1040, 

32 — Row.  ON  Partn. — Vol.  2 


§    940  LAW    OF    PARTNERSHIP  1304 

State,  is  merchants'  goods,  and  taxable  at  the  place  where  located.^" 
The  same  rule  was  applied  to  posts,  ties  and  poles  piled  and  kept 
by  a  resident  partnership,  though  sold  at  a  place  of  business 
away  from  the  location/^ 

§  940.  Massachusetts  cases. — A  former  Massachusetts 
statute^*  provided  that  "partners  in  mercantile  or  other  business, 
whether  residing  in  the  same  or  different  towns,  may  be  jointly 
taxed  under  their  partnership  name  in  the  town  where  their 
business  is  carried  on,  for  all  the  personal  property  employed  in 
such  business,  and  if  they  have  places  of  business  in  two  or  more 
towns,  they  may  be  taxed  in  those  several  towns  for  the  propor- 
tions of  property  employed  in  such  towns  respectively."  Under 
this  statute  it  was  held  that  a  firm  which  was  engaged  in  the  law 
book  business  in  the  city  of  Boston,  was  not  taxable  in  Cambridge, 
though  it  kept  stereotyped  plates  stored,  and  where  it  had  some 
printing  and  binding  done  by  firms  which  leased  buildings  from 
it.^^  It  was  held  that  a  ship  belonging  to  a  partnership  and  used 
in  its  business  should  be  taxed  to  the  partners  jointly  at  their 
place  of  business,  and  not  taxed  to  them  separately  under  another 
statute  which  provided  for  the  taxing  of  vessels  to  the  owners 
in  the  town  where  they  reside.^*'  All  of  the  property  held  in  trust 
for  the  members  of  an  unincorporated  association  who  were  held 
to  be  partners  was  taxable  where  the  business  was  carried  on.^'^ 
Under  this  statute  "the  right  to  tax  property  as  trust  or  as  part- 
nership property  depends  upon  what  the  character  of  the  property 
taxed  really  is,"  and  if  property  is  really  trust  property  managed 
by  trustees,  it  is  taxable  as  such.^^  Under  another  statute^^  the 
property  of  a  joint  stock  concern  partnership  was  taxable  at  the 

52Sanford  v.  Spencer,  62  Wis.  230,  (Mass.)  97;  Massachusetts  Stat.  1839, 

22  N.  W.  465.  ch.  139,  §  2. 

^3  Torrey   v.    Shawano    County,   79  ^'^  Williams    v.    Boston,    208    Mass. 

Wis.  152,  48  N.  W.  246.  497,    94    N.    E.    808 ;    Massachusetts 

5*  Massachusetts   Rev.    Stat.,   ch.   7,  Rev.  Laws,  ch.  12,  §  27. 

§  13.     -  ■'■■nViniams    v.    Alilton,    215    Mass. 

55  Little    V.     Cambridge,     9     Cush.  1,  102  N.  E.  355. 

(Mass.)   298.  •'■"  Massachusetts    Public   L.  85,   ch. 

56  Peabody     v.     Essex,      10     Gray     11,  §  20,  clause  5. 


1305  TAXATION  §    940 

place  where  its  business  was  carried  on  without  regard  to  the 
residence  of  shareholders  or  to  the  fact  that  the  property  was  held 
in  trust  for  the  concern."''  Another  statute*'^  provided  that  where 
partners  have  places  of  business  in  more  than  one  town  they 
shall  be  taxed  in  each  of  such  places  for  the  proportion  of  the 
property  there  employed.  And  under  this  it  was  held  where  a 
partnership  was  engaged  in  manufacturing  and  selling  starch  in 
three  towns  in  one  of  which  goods  manufactured  there  were 
stored  and  shipped  to  purchasers  the  property  there  stored  was 
taxable  there  although  the  sales  of  such  property  were  made  at 
an  office  at  another  town.*'-  Where  the  members  of  a  partnership 
lived  in  one  town,  had  a  box  factory  there,  and  in  another  town 
owned  a  permanent  sawmill,  dam,  and  mill  privilege  where  they 
sawed  boards  which  were  used  to  manufacture  boxes  in  the 
factory,  they  could  be  taxed  in  the  town  where  the  sawmill  was 
located  for  their  property  there.^^  So  the  property  of  a  partner- 
ship situated  in  Maine  where  it  had  a  factory  was  held  to  be 
taxable  in  a  Massachusetts  city  where  it  had  an  office,  and  not 
at  the  place  wdiere  the  partners  resided.*'*  Where  the  principal 
place  of  business  of  a  firm  is  in  one  town  but  they  had  a 
contract  with  the  superintendent  of  the  State  Reformatory  at 
another  town  to  manufacture  shoes  there  and  had  some  men 
employed  there  outside  of  the  reformatory  they  could  not  be 
taxed  at  the  town  where  the  reformatory  was  located  for  the 
property  used  there. ''^  The  property  of  a  partnership  which 
dealt  in  live  stock  was  held  to  be  taxable  at  the  place  of  the 
partners'  residence  where  the  principal  place  of  business  was 
located  and  not  at  a  town  where  it  sold  stock  from  the  stock- 
yards and  had  an  office  in  common  with  other  dealers.""    If  a 

<"*  Ricker     v.     American     Loan     &  "*  Spinney  v.  Lynn,  172  Mass.  464, 

Trust  Co.,  140  Mass.  346,  5  N.  E.  284.  52  N.  E.  523. 

^'i  Massachusetts  Pub.  Stat,  ch.  11,  •'s  ^loutman  v.  Concord,  163  Mass. 

§  24.  444,  40  N.  E.  763. 

^"^  Barker  v.  Watertown,  137  Mass.  ^^  Farwell  v.  Hathaway,   151   Mass. 

227.  242,  23  N.  E.  849. 

"3  Duxbury    v.    Plymouth    County, 
172   Mass.   383,   52   N.   E.   535. 


§    941  LAW    OF    PARTNERSHIP  1306 

partnership  merely  sends  hats  to  a  mill  in  a  town  where  the 
partners  neither  live  nor  carry  on  business,  to  be  finished  under 
contract,  the  partners  can  not  be  taxed  there  on  the  hats  as  hiring 
or  occupying  a  manufactory  in  such  place,  although  the  hats  were 
sorted  and  counted  there. ^^  The  property  of  a  joint  stock  associa- 
tion is  taxable  at  the  place  where  its  business  is  carried  on  and 
not  to  each  partner  at  his  residence.''^  The  interest  of  a  resident 
of  Massachusetts  in  a  partnership  which  does  business  in  another 
state  is  taxable  in  Massachusetts  under  the  general  rule  that  all 
property  real  and  personal  of  the  inhabitants  of  a  state  shall  be 
subject  to  taxation,^^ 

§  941.  Michigan  cases. — An  early  Michigan  statute^"  pro- 
vided for  the  taxation  of  merchandise  and  stock  in  trade  tised  in 
a  township  other  than  that  of  the  residence  of  the  partners, 
if  the  owners  hired  or  occupied  a  store  there,  in  the  township 
where  the  goods  were  located,  and  that  partners  might  be  jointly 
taxed  under  the  partnership  name  in  the  township  where  their 
business  was  carried  on  for  the  personal  property  used  in  the 
business,  and  if  they  have  places  of  business  in  more  than  one 
township,  then  in  each  township  for  the  proportion  of  the  prop- 
erty used  in  each  township.  And  it  was  held  that  a  partnership 
which  had  a  general  place  of  business  in  one  township  could  not 
be  taxed  in  another  township  where  lumber  was  sawed  for  it 
under  contract,  and  piled  and  stored  under  the  supervision  of 
one  of  their  employes,"^ ^  A  later  act,'^"  provides  for  the  taxa- 
tion of  goods  where  situated,  and  that  a  partnership  shall  be 
deemed  to  reside  in  the  township  where  its  business  is  princi- 
pally carried  on,  and  under  this  act,  all  of  partnership  property 
is  taxable  in  the  township  where  the  partners  reside,  and  the 
principal  place  of  business  is  located,  and  the  partnership  can 

•'''Lee  V,  Templeton,  6  Gray  Mass.  ''o Michigan    Comp,   Laws,    §§    974, 

579;  Massachusetts  Rev.  Stat.,  ch.  7,  978. 

§   10,  clause  1.  ^i  McCoy    v.    Anderson,    47    Mich. 

GSHoadley  v.  Essex,  105  Mass.  519.  502,   11   N.   W.  290;   Putman  v.   Fife 

69  Bemis  V.  Board  of  Aldermen,  14  Lake,  45  Mich.  125,  7  N.  W.  699. 

Allen  (Mass.)  366.  ^2  Michigan   Tax   Law    1882,    §§    5, 

10,  11. 


1307  TAXATION  §   942 

not  be  taxed  in  another  township  for  logs  which  were  there  for 
sawing,"  nor  for  kimber  piled  for  transit  along  a  railroad/*  or 
still  on  the  premises  of  a  manufacturer  with  whom  the  partner- 
ship had  contracted  for  its  purchase.'^  Although  the  partners 
did  not  reside  there,  it  was  held  that  partnership  property  should 
be  taxed  at  the  place  where  it  was  located,  and  where  the  prin- 
cipal business  of  the  firm  was  carried  on.^*'  The  personal  prop- 
erty of  a  partnership  after  the  death  of  a  partner  was  held  to  be 
taxable,  where  the  business  was  still  carried  on,  at  the  place  where 
the  concern  had  its  place  of  business,  although  some  of  the  per- 
sonal property  was  elsewhere  located,  and  it  was  not  taxed  to 
the  survivor  at  another  place,  where  he  resided/^  So  it  has  been 
held  that  the  business  of  a  partnership  is  principally  carried  on 
at  the  place  where  its  books  were  kept,  and  reports  of  the  business 
in  other  places  were  daily  sent,  although  it  had  mills  and  lumber 
yards  in  other  places,  and  had  a  number  of  tugs,  vessels  and 
barges  at  different  points  in  the  freight  business/^  The  personalty 
of  a  partnership  association  formed  by  the  heirs  of  a  deceased 
person  is  held  taxable  at  the  place  where  in  the  articles  of  asso- 
ciation, its  principal  office  is  stated  to  be  located,  and  where  an 
office  was  actually  held,  although  it  had  an  office  in  another  place, 
and  did  the  bulk  of  its  business  there,  the  decision  being  influ- 
enced by  the  law  in  regard  to  the  taxation  of  corporate  property 
at  the  place  where  its  office  is  located  in  its  articles  of  incorpora- 
tion/" 

§  942.  Taxation  after  dissolution. — Dissolution  of  a  part- 
nership does  not  affect  the  right  to  enforce  a  tax  previously 
levied  on  its  taxable  property.^"   So  a  tax  assessed  after  dissolu- 

73  Torrent  v.  Yager,  52  Mich.  506,        77  Blodgett  v.  Muskegon,  60  Mich. 

18  N.  W.  239.  580,  27  N.  W.  686. 

74  Monroe    v.    Greenhoe,    54    Mich.  78  Nester  v.  Baraga,  133  Mich.  640, 
9,  19  N.  W.  569.  95  N.  W.  722. 

75  Osterhout  v.  Jones,  54  Mich.  228,  79  Detroit    v.    Lathrop    Estate    Co., 

19  N.  W.  964.  136  Mich.  265,  99  N.  W.  9;  Michigan 
7''' Williams    v.    Saginaw,    51    Mich.     Comp.  Laws,  §  3834. 

120,  16  N.  W.  260.  80  Blodgett  v.  Muskegon,  60  Mich. 


§    943  LAW    OF    PARTNERSHIP  1308 

tion  and  paid  under  protest  can  not  be  recovered,  it  is  held,  if 
the  firm  had  property,  or  its  affairs  were  not  wound  up,^^  though 
it  has  also  been  held  improper  to  assess  a  firm  after  due  notice 
of  dissolution.^^  And  a  partner  is  liable  to  a  copartner  whose 
interest  he  had  bought  for  taxes  paid  by  the  copartner  after  dis- 
solution in  order  to  avoid  seizure.®^  It  is  a  partner's  duty  to  pay 
taxes  due  prior  to  a  dissolution,  and  one  who  rented  a  copart- 
ner's share  after  dissolution  can  not  escape  payment  of  rent  by 
allowing  an  undivided  half  interest  in  firm  property  to 
be  sold  for  taxes  due  prior  to  the  sale  even  though  the 
copartner  was  unwilling  for  such  taxes  to  be  paid.^*  A  pur- 
chaser of  a  partner's  interest  who  assumes  firm  liabilities  is 
bound  to  pay  the  taxes  outstanding  against  the  retiring  mem- 
ber's share.^^  A  partner  who  disposes  of  his  interest  in  the  firm 
before  assessment  time  is  not  liable  for  taxes,^^  nor  is  a  partner 
liable  to  the  other  partners  for  taxes  paid  by  the  firm  on  capital 
borrowed  from  him,^^  It  has  been  held  that  after  death  of  a 
partner,  if  the  business  is  continued  by  the  surviving  partner,  it 
is  properly  listed  for  taxation  in  the  firm  name.^^  In  Louisiana, 
property  owned  by  one  of  the  partners  can  not  be  seized  after 
dissolution  to  pay  taxes  owed  and  assessed  to  the  partnership, 
and  after  dissolution  of  a  particular  partnership  each  partner 
owes  half  the  tax.^^ 

§  943.  Taxation  of  property  of  joint  stock  company. — The 
property  of  a  joint  stock  association  which  is  a  partnership  is 
taxable  at  its  place  of  business,  without  regard  to  the  place  of 
residence  of  the  members.'"*   Under  a  statute  applicable  to  com- 

580,  27  N.  W.  686 ;  Robinson  v.  Ward,  S7  Conn  v.   Conn,  22  Ore.  452,   30 

13  Ohio  St.  293.  Pac.  230. 

81  Oliver  v.   Lynn,   130   Mass.   143.  §8  Blodgett  v.  Muskegon,  60  Alich. 

82  Von    Phul   V.   New   Orleans,   24  580,  27  N.  W.  686. 

La.  Ann.  261.  8o  Rivers  v.    New   Orleans,   42    La. 

83  Evans  v.  Bradford,  35  Ind.  527.     Ann.  1196,  8  So.  484. 

84  Chapin  v.  Streeter,  124  U.  S.  360,        90  Ricker  v.  American  Loan  &  Trust 
8  S.  Ct.  529,  31  L.  ed.  475.  Co.,    140    Mass.    346,    5    N.    E.    284 ; 

85  Wheat  V.  Hamilton,  53  Ind.  256.     Hoadley  v.  Essex,  105  Mass.  519. 

86  Washburn     v.     Walworth,  133 
Mass.  499. 


1309  TAXATION  §   944 

panics  or  associations,  it  is  held  a  joint  stock  association  is  tax- 
able, though  a  partnership.^^  But  such  association  is  not  taxable 
under  a  statute  applying  to  corporations."-  The  cases  on  this 
question  are  not,  however,  in  uniformity,  as  it  was  held  that  un- 
der the  Pennsylvania  statutes  the  capital  stock  of  the  Adams 
Express  Company,  a  New  York  joint  stock  association,  was  not 
taxable  as  a  company  incorporated  in  another  state,°^  while  it 
was  held  in  Ohio  that  this  very  association  may  be  deemed  a 
corporation  for  the  purpose  of  taxation,  though  the  law  under 
which  it  is  organized  declares  that  it  is  not  a  corporation,^*  and 
in  New  Jersey  it  has  been  held  that  a  Pennsylvania  partnership 
association  doing  business  in  New  Jersey  is  taxable  there  under 
the  corporation  tax  act."^  Where  the  constitution  of  a  state  pro- 
vides that  taxes  must  be  imposed  on  produce  or  goods,  a  tax  on 
shares  in  a  joint  stock  company  is  unconstitutional,  since  such 
shares  are  not  commodities.^''  Where  a  partner  made  a  will  di- 
recting his  trustees  to  continue  the  business,  and  leave  all  the 
property  which  he  had  contributed  and  to  which  he  was  entitled 
in  the  firm,  and  they  did  so,  it  was  in  effect  the  creation  of  a 
new  firm  and  the  trust  property  invested  in  the  firm  for  the 
deceased  partners  estate  was  not  taxable  as  a  debt  owed  by 
a  firm  to  the  trustees,  but  as  firm  property  at  the  place  of  busi- 
ness of  the  firm."^ 

§  944.  Notice  to  redeem  from  tax  sale. — Where  a  statute 
requires  notice  to  redeem  from  tax  sale  to  every  person  in  actual 
possession  or  occupancy  of  land,  and  also  to  the  person  in  whose 
name  the  land  is  assessed,  if  he  can  be  found  in  the  county,  it 

"1  Oliver  V.  Liverpool  &c.  Ins.  Co.,  Ohio  S.  &  C.  P.  Dec.  326,  2  Ohio  X. 

100    Mass.    531;    People    v.    Wemple,  P.  98. 

117  N.  Y.   136,  22  N.  E.   1046,  6  L.  os  Tide    Water    Pipe    Co.    v.    State 

R.  A.  303.  Board  of  Assessors,  57  N.  J.  L.  516, 

92  Hoey  V.   Coleman,  46  Fed.  221 ;  31  Atl.  220,  27  L.  R.  A.  684. 

Byers  v.  Coleman,  46  Fed.  224 ;  Peo-  ^'^  Ricker     v.     American     Loan     & 

pie  V.  Coleman,  133  N.  Y.  279,  31  N.  Trust  Co.,  140  Mass.  346,  5  N.  E.  284 ; 

E.  96,  16  L.  R.  A.  183.  Gleason  v.  McKay,   134  Mass.  419. 

^^  Sanford   v.    Gregg,   58   Fed.   620.  ""  Stearns  v.   Brookline,  219  Mass. 

94  State  v.   Adams   Express   Co.,   3  238,  107  N.  E.  57. 


§    944  LAW    OF    PARTNERSHIP  1310 

has  been  held  that  where  land  was  assessed  to  a  firm  of  two  part- 
ners, and  was  in  the  occupation  of  a  third  person,  a  notice  to  one 
member  of  the  firm  of  the  sale  of  the  land  for  taxes  was  not 
good  as  to  the  rights  of  the  other  member,  and  the  tax  deed 
obtained  as  a  result  of  such  sale  is  voidable.^^  If  the  statute 
requires  notice  to  redeem  from  tax  sale  to  the  person  in  whose 
name  the  land  is  taxed  or  assessed,  notice  to  a  person  who  was 
not  conclusively  shown  to  be  a  member  of  the  firm,  of  the  sale  of 
land  assessed  in  a  firm  name,  is  insufficient,  and  a  deed  based  on 
such  sale  is  void.'''^. 

ssGage  V.  Reid,   118  111.  35,  7  N.        ^^  Hughes  v.  Carne,  135  III.  519,  26 
E.  127.  N.  E.  517. 


CHAPTER  XXIX 


CHANGE    OF    PARTNERSHIP    INTO    CORPORATION 


SECTION 

950.  Advantages     and     disadvantages 

of  corporation  and  partnership 
contrasted. 

951.  Changing    partnership    into    cor- 

poration. 

952.  Protection  of  minority  interests. 

953.  Liability  of  corporation  succeed- 

ing  partnership    for    debts    of 
partnership. 

954.  When    corporation   is    liable    for 

debts   of  partnership  which  it 
succeeds. 

955.  Corporation   liable   for   debts   of 

partnership — Illustrations. 

956.  Transfer    of    assets    of    partner- 

ship to  succeeding  corporation. 

957.  Transfer  of  partnership  assets  to 

corporation — Conveyance    nec- 
essary. 

958.  Assumption  of  debts  of  partner- 

ship by  succeeding  corporation. 

959.  Liability  of   succeeding   corpora- 

tion     for      partnership      debts 
without  express   assumption. 


SECTION 

960.  Corporation     receiving     partner- 

ship assets — Presumption  as  to 
liability  for  debts. 

961.  Statute  of  frauds  as  affecting  as- 

sumption of  debts. 

962.  Formation  of  corporation  as  dis- 

solution of  partnership. 

963.  Rights  acquired  by  a  corporation 

formed  by  members  of  a  firm. 

964.  Partnership  changed  to  corpora- 

tion— Rights  of  beneficiaries  of 
a  deceased  partner. 

965.  Liability  of  partners  after  incor- 

poration. 

966.  Rights  of  partners  among  them- 

selves after  incorporation. 

967.  Rights   of   creditors   when   part- 

nership property  is  transferred 
to  a  corporation. 

968.  Transfer  of  partnership  property 

to  corporation  made  to  hinder 
and  delay  creditors. 


§  950.  Advantages  and  disadvantages  of  corporation  and 
partnership  contrasted. — There  are  various  differences  in  the 
manner  of  management  of  partnerships  and  corporations  and  the 
Hal)ihties  of  their  members,  which  often  lead  partners  to  incorpo- 
rate their  business  and  change  it  into  a  corporation.  Among  some 
of  these  differences  may  be  enumerated  the  following:  Each 
partner  is  an  agent  of  the  firm,  and  has  the  power  to  bind  it 
within  the  scope  of  its  business,  while  a  corporation  acts  through 
its  accredited  officers  only,  and  is  bound  only  by  their  acts.    Each 

1311 


§    950  LAW    OF    PARTNERSHIP  1312 

partner  individually  is  liable  to  an  unlimited  extent  for  all  the 
debts  and  obligations  of  the  firm,  while  the  property  of  a  corpo- 
ration is  liable  primarily  for  its  debts,  and  in  the  ordinary  corpo- 
ration a  stockholder  who  has  paid  for  his  stock  is  not  liable 
individually,  and  if  he  has  not  paid  for  it  is  liable  only  to  the 
extent  of  his  subscription.  The  share  of  a  partner  is  indivisible, 
and  nontransferable,  while  the  system  of  issuing  stock  of  corpo- 
rations permits  exact  ascertainment  of  a  stockholder's  interest, 
and  its  transfer  by  assignment.  The  management  of  a  corpo- 
ration is  fixed  by  its  charter  and  by-laws,  and  the  statutes  of  the 
state  of  incorporation,  and  is  more  definite  and  certain  than  that 
of  a  partnership,  where  the  power  of  management  can  only  be 
regulated  by  agreement  of  the  partners,  and  where  each  partner 
exercises  to  a  large  extent  the  full  powers  of  the  firm.  As  a  rule 
the  expense  of  forming  a  corporation  is  greater  than  that  of  the 
formation  of  a  partnership,  since  there  are  fees  to  be  paid  the 
state  for  the  privilege  of  incorporation,  fihng  the  certificate  and 
similar  expenses,  and  certain  special  books  and  corporate  equip- 
ment must  be  purchased.  Also  in  many  states  a  corporation  is 
subject  to  a  special  franchise  tax,  or  a  tax  is  levied  on  the  stock 
from  the  books  of  the  corporation,  so  that  often  the  taxes  on 
corporate  property  may  be  higher  than  on  partnership  property. 
Usually  corporations  are  subject  to  more  strict  governmental 
regulation  than  partnerships.  The  rights  of  the  minority  mem- 
bers are  usually  greater,  and  more  easily  enforced,  in  a  partner- 
ship than  in  a  corporation,  for  the  ordinary  corporation  is  con- 
trolled by  the  holders  of  a  majority  of  the  stock,  and  their  action 
is  absolutely  binding  on  the  holders  of  the  minority  stock,  if  not 
illegal,  while  in  a  partnership  of  two  members  only,  the  dissent 
of  one  member  to  some  question  of  policy  will  ordinarily  prevent 
its  being  carried  out,  and  in  any  partnership,  the  member  who 
is  dissatisfied  is  generally  held  to  have  a  right  to  dissolve  the 
partnership  at  any  time.  In  a  corporation  the  only  relief  of  a 
minority  stockholder  is  to  sell  his  stock,  which  may  be  of  very 
little  value,  because  of  the  very  action  of  the  majority  which 
causes  him  to  wish  to  withdraw.    A  partnership  is  dissolved  by 


1313  CHANGE    INTO    CORPORATION  §    951 

the  death  or  bankruptcy  of  a  member;  these  have  no  effect  on  the 
continuance  of  a  corporation.  The  advantages  of  the  corpora- 
tion then  are  the  Hmitation  of  HabiHty,  continuous  existence,  and 
the  ease  of  transfer  of  a  member's  interest;  the  advantages  of  the 
partnership  are  greater  personal  participation  in  the  business  and 
greater  protection  for  the  rights  of  the  individual  members.  On 
the  other  hand  if  there  has  been  an  unwise  choice  of  partners,  and 
their. relations  are  inharmonious  or  if  one  of  them  is  unscrupu- 
lous or  dishonest,  in  spite  of  the  legal  requirement  that  he  exer- 
cise perfect  good  faith,  his  power  to  injuriously  affect  the  busi- 
ness is  much  greater  than  that  of  any  number  of  stockholders  of 
a  corporation  less  than  a  majority.  The  greater  rights  of  a  part- 
ner to  take  part  in  the  management  of  the  business  carry  with 
them  an  unlimited  liability ;  the  limited  rights  of  the  stockholders 
in  a  corporation  may  be  compensated  for  by  his  limited  liability. 

§  951.  Changing  partnership  into  corporation. — In  order 
to  incorporate  a  partnership  business,  the  partners  should  first 
agree  upon  the  details  of  the  change.  Among  matters  which 
should  be  considered  are  the  name  of  the  corporation,  the  capital 
stock,  the  share  of  each  partner  in  the  stock,  his  representation 
as  a  director  of  the  corporation,  or  as  one  of  its  officers,  the 
salary  each  is  to  receive,  and  arrangements  as  to  the  property  of 
the  partnership,  or  as  to  its  transfer  to  the  corporation.  Usually 
if  the  firm  name  is  of  value  it  may  be  substantially  retained  as  the 
corporate  name,  by  the  addition  of  the  words  "company,"  or 
"incorporated."  As  many  of  the  special  features  of  the  incorpo- 
ration as  possible  should  be  made  provisions  of  the  charter,  while 
other  provisions  must  appear  in  the  by-laws  of  the  corporation, 
which  are  its  working  rules,  containing  details  of  procedure  for 
the  transaction  of  corporate  business,  such  as  the  time  for  the 
annual  meeting,  times  for  directors'  meetings,  powers  and  duties 
of  officers,  powers  of  directors,  paying  of  dividends,  or  other 
special  provisions  which  either  have  not  been  placed  in  the  char- 
ter, or,  because  of  statute  are  not  proper  charter  provisions. 
Ordinarily  it  is  possible  to  provide  by  means  of  the  by-laws  for 
the  issue  of  preferred  or  special  stock.  The  by-laws  are  generally 


§    951  LAW    OF    PARTNERSHIP  1314 

subject  to  amendment  by  a  specified  vote  of  the  stockholders. 
The  usual  steps  after  securing  a  charter  are  to  hold  a  stock- 
holders' meeting,  at  which  by-laws  are  adopted,  and  directors 
elected,  in  the  states  where  the  first  directors  are  not  named  in 
the  charter,  and  to  follow  this  by  a  directors'  meeting,  at  which 
the  officers  are  elected,  and  any  action  taken  necessary  to  begin 
the  corporate  business,  such  as  to  lease  offices,  designate  a  bank 
as  a  depository,  and  to  issue  stock  in  exchange  for  partnership 
property,  in  accordance  with  a  preliminary  agreement.  As  a  gen- 
eral rule  the  better  manner  of  transferring  the  business  is  to  bring 
before  the  first  stockholders'  meeting  a  written  proposal  from 
all  the  members  of  the  partnership,  offering  the  partnership  prop- 
erty and  assets  in  return  for  corporate  stock,  which  should  be 
approved  by  the  stockholders,  and  referred  to  the  directors,  who 
accept  the  proposition  and  enter  its  acceptance  on  the  minute 
books  of  the  corporation.  Usually  after  the  acceptance  of  the 
offer,  a  formal  assignment  of  the  business  is  executed  and  deliv- 
ered to  the  officers  of  the  corporation.  The  acceptance  of  the 
written  proposal  would  pass  title,  however,  it  seems. ^  It  is  not 
necessary  to  issue  stock  certificates  to  give  the  former  partners 
the  privileges  and  rights  of  stockholders,  since  this  is  secured 
by  the  written  proposal  and  acceptance,"  but  it  is  better  to  make 
out  the  certificates  for  the  shares  of  each  partner.  It  is  also  well 
to  notify  the  persons  who  have  formerly  dealt  with  the  firm  that 
the  partnership  is  dissolved,  in  order  to  escape  further  partner- 
ship liability.^  After  these  formalities,  the  business  will  be  con- 
ducted as  a  corporate  business,  though  if  composed  of  but  a  few 
stockholders,  all  of  whom  are  active  in  the  business,  there  is  need 
in  all  ordinary  business  for  but  little  more  formality  than  in  the 
old  partnership,  and  the  business  may  be  conducted  largely  in 
the  old  manner,  although  the  corporate  machinery  is  there  for 

1  Central  Ohio  Natural  Gas  &c.  Co.  392,  25  L.  ed.  1050 ;  Shorb  v.  Beaudry. 
V.  Capital  City  Dairy  Co.,  60  Ohio  56  Cal.  446;  Garnett  v.  Richardson, 
St.  96,  53  N.  E.  711,  64  L.  R.  A.  395.  35   Ark.    144;    Goddard   v.    Pratt,    16 

2  Cook  Corp.,  §  192.  Pick.    (Mass.)    412;    Farmers'    Bank 

3  Whitney    v.    Wyman,    101    U.    S.  v.  Smith,  26  W.  Va.  541. 


1315  CHANGE    INTO    CORPORATION  §    952 

protection  in  case  of  insolvency  of  the  company  or  a  member,  or 
of  death  of  a  member,  or  transfer  of  his  interest. 

§  952.  Protection  of  minority  interests. — In  changing-  a 
partnership  into  a  corporation,  there  are  various  devices  which 
may  be  made  use  of  to  protect  minority  interests.  One  is  an 
equal  division  of  the  voting  stock,  while  the  excess  investment 
of  any  of  the  former  partners  is  cared  for  by  nonvoting  stock. 
By  this  scheme  there  is  equality  of  voting  power,  while  dividends 
are  shared  in  proportion  to  the  total  stock  of  each  member. 
Cumulative  voting  is  allowable  in  most  states.  By  this  the  minor- 
ity is  assured  of  representation.  Under  this  system,  while  each 
share  of  stock  entitles  its  holder  to  but  one  vote  for  each  director 
to  be  elected,  he  may  cumulate  these  votes  on  one  or  more  of 
the  candidates.  For  instance,  if  a  stockholder  has  one  hundred 
shares,  and  there  are  five  directors  to  be  elected,  instead  of  casting 
one  hundred  votes  for  each  five  men,  he  may  cast  five  hun- 
dred votes  for  one  man.  Voting  trusts,  under  which  a  majority 
or  all  of  the  stock  of  a  corporation  is  placed  in  the  hands  of  trus- 
tees who  hold  it  in  trust  for  the  stockholders,  and  vote  it  as 
directed  in  the  trust  agreement,  are  sometimes  resorted  to  in 
order  to  preserve  an  agreed  management  for  a  term  of  years,  but 
statute  usually  limits  the  time  for  which  these  trusts  may  be  in 
force.  Agreements  restricting  the  sale  of  stock  may  be  entered 
into  in  some  states,  so  as  to  prevent  its  coming  into  the  hands  of 
persons  who  would  be  undesirable  as  business  associates.  In  some 
of  the  means  suggested  above,  counsel  will  usually  find  it  possible 
to  provide  for  more  effective  minority  representation  and  pro- 
tection among  corporate  stockholders. 

§  953.  Liability  of  corporation  succeeding  partnership  for 
debts  of  partnership. — The  discussion  here  will  be  limited 
strictly  to  the  general  subject  of  a  corporation  that  has  been 
formed  by  partners  and  has  taken  over  the  partnership  assets. 
In  such  a  case  it  must  be  remembered  that  a  corporation  is  a  dis- 
tinct person  in  law  from  the  partnership;  and  the  promises  and 
obligations  of  such  former  partnership  are  not  the  promises  and 


953 


LAW    OF    PARTNERSHIP 


1316 


obligations  of  the  corporation.  The  general  rule  is  that  the  suc- 
ceeding corporation  is  not  liable  for  the  debts  and  obligations  of 
the  prior  partnership,  in  the  absence  of  adoption  and  ratification ; 
or  unless  there  has  been  a  fraudulent  transfer  by  the  partners  to 
the  corporation/  A  corporation  lawfully  acquiring  the  property 
of  a  partnership  does  not  necessarily  become  liable  for  the  part- 
nership debts.^  It  is  true  that  the  assets  of  the  partnership,  under 
such  circumstances  remain  pledged  in  a  certain  sense  to  the  pay- 
ment of  the  firm  debts,  and  equity  will  subject  such  assets  in  the 
possession  of  the  new  corporation  to  the  payment  of  such  debts, 
and  the  transfer  may  be  fraudulent  as  against  the  firm  creditor.*^ 
Though  a  corporation  acquires  all  the  property  of  a  partnership 
it  does  not  by  that  transaction  make  itself  responsible  for  the 
partnership  debts,^  unless  the  corporation  has  expressly  or  impli- 


*  Georgia  Co.  v.  Castleberry,  43  Ga. 
187 ;  McLellan  v.  Detroit  File  Works, 
56  Mich.  579,  23  N.  W.  321 ;  Church 
V.  Church  Cementico  Co.,  75  Minn. 
85,  n  N.  W.  548;  Hall  v.  Baker 
Furniture  Co.,  86  Nebr.  389,  125  N. 
W.  628;  Austin  v.  Tecumseh  Nat. 
Bank,  49  Nebr.  412,  68  N.  W.  628, 
35  L.  R.  A.  444,  56  Am.  St.  543n; 
Reed  Bros.  Co.  v.  First  Nat.  Bank, 
46  Nebr.  168,  64  N.  W.  701 ;  Paxton 
V.  Bacon  Mill  &  Min.  Co.,  2  Nev.  257; 
Bradley  Fertilizer  Co.  v.  South  Pub. 
Co.,  17  N.  Y.  S.  587,  44  N.  Y.  St. 
119;  Byrne  Hammer  Dry  Goods  Co. 
V.  Willis-Dunn  Co.,  23  S.  Dak.  221, 
121  N.  W.  620,  29  L.  R.  A.  (N.  S.) 
589 ;  Durlacher  v.  Frazer,  8  Wyo.  58, 
55  Pac.  306,  80  Am.  St.  918.  See 
Brufifett  V.  Great  Western  R.  Co.,  25 
111.  353;  Tawas  &c.  R.  Co.  v.  Iosco 
Circuit  Judge,  44  Mich.  479,  7  N.  W. 
65 ;  Memphis  Water  Co.  v.  Magens, 
15  Lea  (Tenn.)  Zl ;  Donnally  v. 
Hearndon,  41  W.  Va.  519,  23  S.  E. 
646. 

'  Culberson  v.  Alabama  Const.  Co., 


127  Ga.  599,  56  S.  E.  765,  9  L.  R.  A. 
(N.  S.)  411n. 

^  McVicker  v.  American  Opera  Co., 
40  Fed.  861;  Blair  v.  St.  Louis  &c. 
R.  Co.,  24  Fed.  148 ;  Blair  v.  St.  Louis 
&c.  R.  Co.,  22  Fed.  36;  Fogg  v.  St. 
Louis  &c.  R.  Co.,  17  Fed.  871,  5  Mc- 
Crary  (U.  S.)  449 ;  Brum  v.  Merchants' 
Mut.  Ins.  Co.,  16  Fed.  140,  4  Woods 
156;  Hibernia  Ins.  Co.  v.  St.  Louis  &c. 
Transp.  Co.,  13  Fed.  516,  4  McCrary 
(U.  S.)  432;  Harrison  v.  Union  Pac. 
R.  Co.,  13  Fed.  522,  4  McCrary 
(U.  S.)  264;  Heman  v.  Britton, 
88  Mo.  549;  Vance  v.  McNabb 
Coal  &c.  Co.,  92  Tenn.  47,  20  S. 
W.  424;  Thompson  v.  Abbott,  61 
Mo.  176;  National  Bank  v.  Texas 
Investment  Co.,  74  Tex.  421,  12  S. 
W.  101;  Island  City  Sav.  Bank  v. 
Sachtleben,  67  Tex.  420,  3  S.  W.  733. 

7  Smith  V.  Bowker  Torrey  Co.,  207 
Fed.  967;  Pearce  v.  Sutherland,  3 
Alaska  303;  Greenberg-Miller  Co.  v. 
Everett  Shoe  Co.,  138  Ga.  729,  75  S. 
E.  1120;  Stewart  v.  Mynatt,  135  Ga. 
637,   70   S.    E.   325    (corporation   not 


1317  CHANGE    INTO    CORPORATION  §    95t 

edly  assumed  liability  for  such  debts. ^  This  is  the  case  where  the 
corporation  has  the  same  name  as  the  partnership  it  supersedes 
and  transacts  the  same  kind  of  business.^  The  fact  that  the  mem- 
bers of  a  partnership  and  of  the  succeeding  corporation  were 
the  same,  is  not  of  itself  sufficient  to  hold  the  corporation  liable.^" 

§  954.  When  corporation  is  liable  for  debts  of  partnership 
which  it  succeeds. — It  is  not  to  be  understood  from  the  pre- 
ceding section  that  a  corporation  succeeding  a  partnership  and 
taking  the  firm  assets,  is  in  no  event  liable  for  the  partnership 
debts.  The  authorities  show  that  under  such  circumstances  the 
corporation  will  be  liable  in  certain  events:  (1)  Where  the  lia- 
bility results  from  a  contract  relation  with  the  partnership.^^ 
(2)  Where  the  transfer  of  the  property  and  franchise  amounts 
to  a  fraud  upon  the  creditors  of  the  partnership.^^  (3)  Where 
the  circumstances  attending  the  creation  of  the  new  corporation 
and  its  succession  to  the  business  and  property  of  the  firm,  are 
such  as  to  raise  the  presumption  or  warrant  the  finding  that  such 
corporation  is  a  mere  continuation  of  the  former,  the  same  cor- 
porate body  under  a  different  name;  but  the  facts  upon  which 
such  finding  or  presumption  depends  will  not  be  presumed,  buL 

liable  for  injuries  to  person  on  prem-  Ga.    187;    McLellan    v.    Detroit   File 

ises       of       partnership       afterward  Works,  56  Mich.  579,  23  N.  W.  321 ; 

changed  to  a  corporation)  ;   Culber-  Schufeldt  v.  Smith,  139  Mo.  367,  40 

son  V.  Alabama  Const.  Co.,  127  Ga.  S.  W.  887;   Campbell  v.  Farmers'  & 

599,  56  S.  E.  765,  9  L.  R.  A.  (N.  S.)  Merchants'  Bank,  49  Nebr.  143,  68  N. 

411n,    9   Ann.    Cas.    507;    Byrne    &c.  W.  344. 

Dry  Goods  Co.  v.  Willis-Dunn   Co.,        ^i  Austin  v.  Tecumseh   Nat.   Bank, 

23   S.   Dak.  221,   121   N.  W.  620,  29  49  Nebr.  412,  68  N.  W.  628,  35  L.  R. 

L.   R.  A.    (N.   S.)    589n;   Brooks  v.  A.  444,   56  Am.   St.   S43n ;    National 

Bonner  (Tex.  Civ.  App.),  149  S.  W.  Bank  v.  Hollingsworth,   135  N.   Car. 

564;   Ziemer  v.  C.   G.   Bretting  Mfg.  556,  47  S.   E.  618;    Friedenwald   Co. 

Co.,    147   Wis.   252,    133   N.   W.    139,  v.  Asheville  Tobacco  Works  &c.,  117 

Ann.   Cas.   1912  D,   1275n.  N.  Car.  544,  23  S.  E.  490. 

s  Brautigam  v.   Dean,  85  N.  J.  L.        i^Hibernia   Ins.    Co.   v.    St.    Louis 

549,  89  Atl.  760.  &c.  Transp.  Co.,  13  Fed.  516.  4  Mc- 

0  Bludwine  Bottling  Co.  v.  Crown  Crary  432 ;    Baker   Furniture   Co.   v. 

Cork   &c.   Co.,    14   Ga.   App.  285,   80  Hall,  76  Nebr.  88,  107  N.  W.  117,  111 

S.  E.  853.  N.   W.   129,   113  N.  W.  267;   Austin 

1**  Georgia    Co.    v.    Castleberry,    43  v.    Tecumseh    Nat.    Bank,    49    Nebr. 


§    954  LAW    OF    PARTNERSHIP  1318 

must  affirmatively  appear."  The  mere  knowledge  of  a  cor- 
poration taking  over  the  assets  of  an  unincorporated  association, 
that  a  third  person  was  continuing  certain  work  on  which  such 
unincorporated  association  had  agreed  to  make  payment,  has  been 
held  not  alone  sufficient  to  make  the  corporation  liable  for  such 
work."  An  assumption  of  the  partnership  debts  is  not  presumed 
from  the  fact  of  the  sale  and  transfer  of  property  by  a  partner- 
ship to  a  corporation  composed  of  stockholders,  some  of  whom  are 
members  of  the  partnership  and  others  are  not.^^  The  partner- 
ship is  not  ipso  facto  terminated  by  the  organization  of  a  corpo- 
ration and  the  transfer  to  it  of  the  partnership  assets.  It  may 
be  terminated,  however,  and  merged  in  the  corporation  by  the 
distribution  of  the  corporate  stock  and  bonds  according  to  the 
respective  interests  of  the  partners.^''  A  corporation  may  become 
liable  for  the  partnership  debts  where  it  expressly  or  impliedly 
assumes  the  debts  in  taking  over  the  partnership  assets.  ^^  So  the 
corporation  may  be  charged  with  liability  where  the  change  from 
the  partnership  to  the  corporation  amounts  to  no  more  than  a 
mere  continuation  under  a  new  name  and  the  books  of  the  part- 
nership are  continued  by  the  corporation.^^  The  former  partners 
who  continue  as  stockholders  in  the  new  corporation  may  resort 
to  equity  to  compel  the  corporation  to  perform  its  agreement  of 

412,  68  N.  W.  628,  35  L.  R.  A.  444,  Hunter,  13  Tex.  Civ.  App.  4a2,  35  S. 

56  Am.  St.  543n ;  Booth  v.  Bunce,  33  W.  399. 

N.  Y.  139,  88  Am.  Dec.  372.  i*  Dingeldein  v.  Third  Ave.  R.  Co., 

13  Baker  Furniture  Co.  v.  Hall,  76  9  Bosw.    (N.   Y.)    79.     See  Allen  v. 

Nebr.  88,  107  N.  W.  117,  111  N.  W.  Frumet  Min.  &c.  Co.,  73  Mo.  688. 

129,   113   N.   W.  267;   Austin  v.   Te-  is  Swing  v.  Taylor,  68  W.  Va.  621, 

cumseh  Nat.  Bank,  49  Nebr.  412,  68  70  S.  E.  373. 

N.  W.  628,  35  L.  R.  A.  444,  56  Am.  is  Watkins  v.  Delahunty,  133  App. 

St.  543n;   Reed  v.   First  Nat.   Bank,  Div.  422,   117   N.   Y.   S.   885. 

46    Nebr.    168,    64    N.    W.    701 ;    Na-  "  In  re  A.  G.  Crosby  Co.,  199  Fed. 

tional  Bank  v.  Hollingsworth,  135  N.  344;  Leckie  v.  Bennett,  160  Mo.  App. 

Car.  556,  47   S.   E.  618 ; .  Friedenwall  145,  141  S.  W.  706 ;  Modern  Dairy  &c. 

Co.  v.  Asheville  Tobacco  Works  &c.,  Co.  v.  Blanke  &c.  Supply  Co.    (Tex. 

117  N.  Car.  544,  23  S.  E.  490;  Andres  Civ.  App.),  116  S.  W.  153. 

v.  Morgan,  62  Ohio  St.  236,  78  Am.  is  Curtis  v.  Smelter  Nat.  Bank,  43 

St.    712;     Texas     Loan    Agency    v.  Colo.  391,  96  Pac.  172. 


1319  CHANGE    INTO    CORPORATION  §    955 

assumption/^  but  an  agreement  by  a  corporation  to  take  over  the 
business  and  pay  the  debts  of  a  copartnership  can  not  be  enforced 
by  creditors  of  the  copartnership  not  parties  to  the  transaction.-'^ 

§  955.  Corporation  liable  for  debts  of  partnership — Illus- 
trations.— A  few  cases  show  the  circumstances  under  which 
the  corporation  was  held  hable  for  the  debts  of  the  partnership 
and  sufficiently  illustrate  the  principle  of  the  preceding  section. 
Thus,  where  a  corporation  succeeded  a  partnership,  an  agree- 
ment that  it  should  take  all  the  assets  and  assume  all  the  liabili- 
ties of  the  firm,  which  was  accordingly  done,  as  shown  by  its 
books,  was  held  sufficient  to  make  such  debts  the  obligations  of 
the  corporation,  though  the  records  kept  by  the  directors  and 
stockholders  showed  only  the  purchase  of  a  part  of  the  assets  of 
the  firm  in  payment  of  stock.^^  And  where  a  merchant  heavily 
indebted,  organized  a  corporation  and  transferred  to  it  all  his 
property,  and  took  practically  all  the  stock  and  on  whom  the  by- 
laws conferred  complete  control  of  the  corporation,  was  held  not 
sufficient  to  show  that  the  corporation  had  assumed  his  debts, 
though  he  and  at  least  one  of  the  directors  so  understood  it,  and 
where  it  appeared  that  he  had  paid  some  of  his  former  debts  with 
the  money  of  the  corporation,  and  had  pledged  its  credit  to  secure 
others.^"  So  where  a  surviving  partner  organized  a  corporation 
and  transferred  to  it  the  firm  assets  and  took  stock  in  payment 
therefor,  the  corporation  was  held  liable  upon  a  note  endorsed 
in  the  firm  name  without  authority.-^  Where  a  corporation  took 
the  assets  of  a  firm  under  an  agreement  that  it  would  assume 
and  pay  the  firm  liabilities  to  the  extent  of  the  assets  received,  it 
was  held  that  the  corporation  could  not  be  made  liable  on  a  debt 
due  one  of  the  partners  until  it  was  ascertained  that  the  assets 

^9  Forbes  v.  Thorpe,  209  Mass.  570,  the     foregoing     cases     illustrate     the 

95  N.  E.  955.  English  rule. 

20  Morgan  v.  Randolph-Clowes  Co.,  2i  Schufeldt  v.  Smith,  139  Mo.  367, 

n  Conn.  396,  47  Atl.  658,  51   L.  R.  40  S.  W.  887. 

A.  653.    See,  however,  Leckie  v.  Ben-  22  Durlacher  v.  Frazer,  8  Wyo.  58, 

nett,    160  Mo.   App.   145,   141    S.   W.  55  Pac.  306,  80  Am.  St.  918. 

706.     It  must  be  borne  in  mind  that  23  National  Bank  v.  Hollingsworth, 

135  N.  Car.  556,  47  S.  E.  618. 

33 — Row.  ON  Partn. — Vol.  2 


§    956  LAW    OF    PARTNERSHIP  1320 

exceeded  the  liability."'*  "A  careful  examination  of  the  authori- 
ties," said  the  North  Carolina  court,  "fails  to  disclose  any  case 
in  which  the  principle  upon  which  a  new  corporation  becomes 
liable  by  reason  of  taking  assets  in  the  old  corporation  or  a  part- 
nership is  applied  to  the  transfer  of  property  by  an  individual 
in  payment  of  his  subscription  to  the  capital  stock  of  the  corpo- 
ration, in  the  absence  of  any  finding  that  such  transfer  was  made 
with  intent  to  defraud  his  creditors.""^  The  Supreme  Court  of 
Nebraska  has  held  that  the  rule  that  equity  will  not  permit  a 
corporation  to  receive  all  the  assets  of  an  insolvent  partnership 
in  consideration  of  the  corporate  stock  and  hold  such  assets  free 
from  claims  of  partnership  creditors  is  without  application 
where  a  corporation  is  formed  by  such  partners  and  a  third  per- 
son, who  in  good  faith  and  in  the  well-grounded  belief  that  the 
partnership  debts  are  satisfied,  invests  in  the  reorganization  and 
receives  corporate  stock  therein.  In  such  a  case  the  creditors 
may  seize  only  the  interest  of  the  partners  to  satisfy  the  partner- 
ship debts. '° 

§  956.  Transfer  of  assets  of  partnership  to  succeeding  cor- 
poration.— Not  infrequently  an  existing  partnership  is  organ- 
ized into  a  corporation,  the  members  of  the  partnership  becoming 
the  stockholders  of  the  new  company  and  the  firm  property  con- 
stituting the  capital  stock  of  the  corporation.  The  mere  fact  of 
the  organization  of  a  corporation  in  such  manner  does  not  of 
itself  effect  a  transfer  of  the  firm  property.  The  members  of  a 
firm,  by  the  mere  act  of  incorporating  themselves  by  the  same 
name,  can  not  invest  the  corporation  with  title  to  the  property 
owned  by  the  firm.  There  is  authority  to  show  that  real  estate 
of  a  firm  can  not  thus  be  transferred,  and  it  may  well  be  doubted, 
if  personal  property  of  a  firm  can  thus  become  the  property  of 
the  corporation,  as  between  such  corporation  and  third  persons.''' 

24  Adams  v.  Empire  Laundry  Mach.         26  fjall  v.  Baker  Furn.  Co.,  86  Nebr. 
Co.,  52  Hun  (N.  Y.)  610,  4  N.  Y.  S.     389,  125  N.  W.  628. 

738,  22  N.  Y.  St.  271.  27  Carothers  v.  Alexander,  74  Tex. 

25  National  Bank  v.  Hollingsworth,     309,   12  S.  W.  4. 
135  N.  Car.  556,  47  S.  E.  618. 


1321  CHANGE    INTO    CORPORATION  §    957 

A  valid  and  effective  transfer  of  the  assets  frees  the  property 
from  all  equities  as  between  the  former  partners,  and  all  part- 
nership liens  are  extinguished  by  the  transfer;  but  it  does  not 
necessarily  divest  equities  which  creditors  may  have.^^  So  an 
incorporation  by  a  special  statute  of  tenants  in  common  of  a 
wharf,  on  their  own  petition,  and  for  the  purpose  of  expediting 
the  management  and  improvement  of  the  property,  was  held 
not  to  vest  the  title  to  the  property  in  the  corporation,  where 
such  intention  did  not  clearly  appear,  but  a  conveyance  from  the 
individual  to  the  corporation  was  necessary."^  On  the  other 
hand,  where  the  owners  of  land  as  tenants  in  common  w-ere  in- 
corporated by  a  special  statute  for  the  express  purpose  of  improv- 
ing and  selling  it,  the  acceptance  of  the  charter  was  held  to  vest 
the  title  to  the  property  in  the  corporation."*'  The  conveyance 
by  a  partnership  of  all  its  property  to  a  corporation  organized  by 
the  partners  for  that  purpose,  and  a  division  between  them  of 
the  stock,  could  not  be  treated  as  a  simulated  or  sham  transfer 
in  an  action  by  the  corporation  that  would  oust  the  jurisdiction 
of  the  court. ^^ 

§  957.  Transfer  of  partnership  assets  to  corporation — 
Conveyance  necessary. — In  the  transfer  of  firm  assets  to  a 
corporation  organized  to  succeed  it  in  business,  it  is  necessary 
that  some  formal  transfer  be  made  in  order  to  effectuate  a  change 
of  title.  Usually  the  mere  organization  of  the  corporation  by 
the  members  of  the  firm  will  not  of  itself  operate  as  a  transfer. 
This  is  especially  true  where  all  the  members  of  the  firm  did  not 
become  members  of  the  corporation,  or  w^here  the  corporation 
has  members  other  than  the  members  of  the  firm.  In  such  trans- 
fers the  property  should  be  described  with  sufficient  certainty  to 
show  what  particular  property  or  item  is  transferred.^"    This  rule 

-^Francklyn  v.  Sprague,  121  U.  S.  162;    Manahan   v.   Varnum,    11    Gray 

215,  30  L.  ed.  936,   7   Sup.   Ct.  951;  (Mass.)   405. 

Hoyt    V.    Sprague,    103    U.    S.    613,  ^o  Colquitt  v.  Howard,  11  Ga.  566. 

26  L.  ed.  585.  si  Slaughter  v.  Mallet  Land  &c.  Co., 

■'^  Leffingwell    v.    Elliott,    8    Pick.  141  Fed.  282,  72  C.  C.  A.  430. 

(Mass.)     455,     19     Am.     Dec.     343;  =2  Ra^  y.  Union  Paper  Mill  Co.,  95 

Holland    V.    Cruft,    3    Gray    (Mass.)  Ga.  208,  22  S.  E.  146;  Schneider  v. 


§    958  LAW    OF    PARTNERSHIP  1322 

is  particularly  applicable  to  real  estate. ^^  Where  the  statutes 
provide  that  a  deed  is  necessary  in  such  circumstances  to  convey 
the  title,  then  a  formal  conveyance  is  necessary.^*  However,  the 
corporation  under  some  circumstances  may  acquire  an  equitable 
title  to  the  property.  Thus,  where  a  corporation  succeeding  a 
partnership  paid  the  purchase-price,  took  possession  of  the  prop- 
erty and  made  improvements,  but  no  deed  was  executed,  it  was 
held  that  the  corporation  acquired  an  equitable  title  and  had  the 
power  to  execute  a  valid  mortgage  on  such  real  estate.'^  The 
mere  formation  of  a  corporation  by  a  partnership  to  succeed  to 
its  business  is  not  sufficient  of  itself  to  give  the  corporation  the 
right  to  enforce  contracts  or  sue  upon  debts  due  the  partner- 
ship.^® In  such  a  case  a  corporation  acquires  no  better  title  to  the 
property  than  that  possessed  by  the  partnership.^^  Thus,  a  cor- 
poration receiving  a  note  from  the  firm  which  it  succeeded  was 
held  not  to  be  in  the  position  of  a  bona  fide  purchaser  of  a  note 
transferred  to  it  from  such  firm,  and  in  an  action  thereon  by  the 
corporation  the  maker  may  set  up  any  defense  available  as 
against  such  partnership.^^ 

§  958.     Assumption  of  debts  of  partnership  by  succeeding 

corporation. — Ordinarily,  in  most  jurisdictions  at  least,  to 
render  a  corporation  liable  for  the  debts  of  a  partnership, 
which  it  has  succeeded,  it  must  expressly  assume  the  debts 
of  the  prior  firm  and  agree  to  pay  them.     Still,  in  such  case. 

Sellers    (Tex.   Civ.  App.),  81    S.   W.  ^e  s^ots  Charitable  Society  v.  Shaw, 

126.  8   Mass.   532 ;   Riiettell   v.   Greenwich 

33  Rau  V.  Union  Paper  Mill  Co.,  95  Ins.  Co.,  16  N.  Dak.  546,  113  N.  W. 

Ga.   208,  22   S.    E.   146;   Manahan   v.  1029. 

Varnum,  11  Gray  (Mass.)  405;  Frank  37  Woodward  v.  San  Antonio  Trac- 

V.  Drenkhahn,  Id  Mo.  508;  Hennessy  tion  Co.   (Tex.  Civ.  App.),  95  S.  W. 

V.  Griggs,   1   N.   Dak.  52,  44  N.  W.  1(i. 

1010;  Schneider  v.  Sellers   (Tex.  Civ.  3s  ;\/[c£i-^vee     Mfg.     Co.     v.     Trow- 

App.),    81    S.    W.    126;    McLeary    v.  bride,   62    Hun    (N.   Y.)    471,    17    N. 

Dawson,  87  Tex.  524,  29  S.  W.  1044.  Y.  S.  3,  43  N.  Y.  St.  238.     See  also 

3*  Rau  v.  Union  Paper  Mill  Co.,  95  Texas    Loan    Agency   v.    Hunter,    13 

Ga.  208,  22  S.  E    146.  Te«.  Civ.  App.  402,  35  S.  W.  399. 

35  Cooke  V.  Watson,   30  N.   J.   Eq. 
345. 


1323  CHANGE    INTO    CORPORATION  §    958 

in  order  to  hold  the  corporation  hable,  the  assumption  and 
agreement  to  pay  the  debts  must  be  based  upon  a  sufficient 
consideration.  The  fact  that  the  corporation  receives,  or  is 
to  receive,  the  assets  of  the  firm,  is  a  sufficient  consideration 
to  support  the  assumption  or  the  agreement  to  pay  the  firm 
debts. ^^  To  render  the  corporation  hable  for  the  debts  of  the 
firm  it  must  have  expressly  assumed  or  ratified  or  adopted  such 
debts.*"  The  assumption  of  the  debts  for  a  sufficient  considera- 
tion must  be  shown  in  order  to  make  the  corporation  liable.*^  It 
^vas  held  to  be  sufficient  proof  of  the  assumption  of  partnership 
debts,  where  it  appeared  that  there  was  a  verbal  agreement  be- 
tween the  president  of  a  corporation  and  the  firm  which  the  cor- 
poration succeeded,  to  the  effect  that  the  corporation  should  take 
all  the  assets  of  the  partnership  and  assume  its  liabilities;  and 
pursuant  to  such  agreement,  as  shown  by  the  corporation  books, 
that  on  its  organization  the  corporation  did  take  into  its  posses- 
sion all  the  assets  of  the  partnership,  and  thereafter  disposed 
of  and  used  them  in  its  business,  and  placed  upon  its  books  as  its 
liabilities  all  the  debts  of  the  partnership,  some  of  which  it  paid 
in  full  and  settled  others  by  substituting  its  own  note  and  paid 
interest  on  still  other  of  such  debts.^"  The  assumption  of  a  con- 
tract may  be  established  by  showing  that  the  corporation  com- 
plied with  and  carried  out  such  contract.*"  So,  where  a  firm 
transferred  its  property  to  a  corporation  formed  by  its  members, 
and  the  corporation  passed  a  vote  accepting  the  property  and 
assuming  the  debts  of  the  firm,  it  was  held  that  the  corporation, 
having  the  power  to  assume,  on  a  valid  consideration,  the  debts 
of  the  firm,  did  so  by  its  votes  and  the  acceptance  of  the  prop- 
erty, and  was  accordingly  liable  to  the  creditors  of  the  firm.** 
And  where  a  corporation  assumed  the  debts  of  the  partnership 

^3  Georgia    Co,    v.    Castleberry,    43  HolIIngsworth,    135    N.    Car.    556,    47 

Ga.   187.  S.  E.  618. 

4"  Hart  Pioneer  Nurseries  v.   Cor-  ^2  Schufeldt  v.  Smith,  139  Mo,  ZQ, 

}-ell,  8  Kans.  App.  496,  55  Pac.  514.  40  S.  W,  887. 

41  London  v.   B3Tium,    136  N.   Car.  ^3  Hall   v.    Hertcr,   83   Hun    19,   64 

411,  48  S.  E.  764;  National  Bank  v.  N,  Y.  St.  378,  31  N.  Y.  S.  692. 

**  Waterman's  Appeal,  26  Conn.  96, 


§    959  LAW    OF    PARTNERSHIP  1324 

from  which  it  was  formed,  the  fact  that  the  partners  afterward 
gave  their  notes  for  certain  debts  of  the  firm,  was  held  not  to 
reheve  the  corporation  from  habihty  so  as  to  prevent  a  prefer- 
ence by  it."*^  And  where  a  corporation,  organized  by  the  mem- 
bers of  a  partnership  passed  a  resolution  authorizing  the  pur- 
chase of  the  firm  property,  and  at  the  same  time  assumed  the 
firm  debts,  it  was  held  that  the  corporation  could  not,  by  a  secret 
agreement  among  the  directors  that  certain  claims  were  not  as- 
sumed, prevent  the  firm  creditors  from  proceeding  against  the 
corporation.^''  A  corporation  may  assume  a  contract  of  the 
former  firm  by  adopting  it  through  its  general  manager/'^  But 
where  such  a  corporation  did  not  undertake  to  pay  the  firm  debts, 
it  did  not,  by  completing  all  the  work  undertaken  by  such  firm 
thereby  assume  a  contract  made  by  it  with  a  third  person  for 
the  supervision  of  such  work/'^  The  assumption  by  a  corpora- 
tion of  certain  specific  debts  of  a  partnership,  succeeded  by  a  cor- 
poration, in  consideration  of  the  transfer  of  certain  real  and 
personal  property  of  the  partnership,  was  held  to  have  the  effect 
•to  postpone  the  other  partnership  debts,  including  taxes,  to  the 
payment  of  the  particular  debts  mentioned/^  But  the  debts  of 
an  insolvent  corporation  are  not  entitled  to  preference  in  pay- 
ment over  the  debts  of  the  firm  assumed  by  the  corporation  on 
the  transfer  to  it  of  the  property  of  the  partnership.®" 

§  959.  Liability  of  succeeding  corporation  for  partnership 
debts  without  express  assurnption. — There  is  authority  for 
the  rule  that  a  corporation  succeeding  a  firm  may  become  liable 
for  its  debts  without  expressly  assuming  or  agreeing  to  pay 
them.  Thus,  it  has  been  held  that  the  fact  that  a  corpora- 
tion was  organized  by  the  members  of  a  partnership  to 
which    all    the    firm    property    was    tranf erred,    and    all    the 

«  Johnston  v.  Gumbel    (Miss.),  19  ^s  Hall  v.  Herter,  83  Hun   (N.  Y.) 

So.  100.  19,  31  N.  Y.  S.  692,  64  N.  Y.  St.  378. 

46  Williams  v.  Colby,  53   Hun  637,  ^o  Lamkin  v.  Baldwin  &c.  lUg.  Co., 

6  N.  Y.  S.  459,  24  N.  Y.  St.  793,  3  72  Conn.  57,  43  Atl.  593,  1042,  44  L. 

Silv.  337.  R.  A.  786. 

*^  Pratt  V.  Oshkosh  Match   Co.,  89  so  London   v.    Bynum,    136   N.   Car. 

Wis.  406,  62  N.  W.  84.  411,  46  S.  E.  764. 


1325  CHANGE    INTO    CORPORATION  §    960 

Stock  issued  to  such  members,  and  the  business  continued 
at  the  same  place,  was  sufficient  to  render  the  corporation 
hable  for  the  partnership  debts,  though  not  expressly  as- 
sumed.'^^  On  this  subject  the  Supreme  Court  of  Nebraska  said : 
"It  is  a  rule  of  the  common  law  that  a  corporation  which  suc- 
ceeds to  the  business  of  a  copartnership,  or  a  corporation,  organ- 
ized for  the  purpose  of  continuing  the  business,  and  takes  over 
the  assets  thereof,  by  so  doing  assumes  the  debts  and  liabilities 
of  the  partnership  or  corporation  which  it  succeeds,  to  the  extent 
of  the  property  so  received."^"  There  are  other  cases  which  hold 
that  assumption  of  liability  may  be  express  or  implied,  and  an 
"agreement  on  the  part  of  the  corporation  may  be  proven,  like 
any  other  fact,  by  any  competent  evidence  which  will  establish- 
either  an  express  or  implied  valid  agreement  to  assume  the  lia- 
bilities.'"^ 

§  960.  Corporation  receiving  partnership  assets — Pre- 
sumption as  to  liability  for  debts. — Where  it  appears  that  a 
corporation  has  been  organized  by  the  members  of  a  firm  to  con- 
tinue the  same  business,  and  where  it  is  shown  that  the  assets  of 
the  firm  have  been  transferred  to  the  corporation,  such  facts 
afford  very  strong  presumptive  evidence  that  the  corporation 
assumed  the  debts  of  the  firm.  Thus,  where  an  individual  was 
doing  business  under  a  firm  name  and  borrowed  money  on  the 
credit  of  both  the  firm  and  his  individual  name  and  then  organ- 
ized a  corporation  with  a  name  practically  the  same  as  that  of 
the  firm  name  and  transferred  all  his  assets  to  such  corporation, 
which  continued  the  same  business,  it  was  said  that  the  presump- 
tion was  strong  that  the  corporation  assumed  the  debt.^*     So, 

"Du   Vmer   v.    Gallice,    149   Fed.  S.  W.  887;  Hall  v.  Herter.  83  Hun  19, 

118,  80  C.  C.  A.  556.  90  Hun  280,  157  N.  Y.  694;  Pratt  v. 

52  Baker  Furniture  Co.  v.  Hall,  16  Oshkosh  Match  Co.,  89  Wis.  406,  62 

Nebr.  88,  107  N.  W.  117,  111  N.  W.  N.  W.  84. 

129,  113  N.  W.  267.  s*  Bremen  Sav.  Bank  v.  Branch- 
es Ziemer  v.  C.  C.  Bretting  Mfg.  Crookes  Saw  Co.,  104  Mo.  425,  16  S. 
Co.,  147  Wis.  252,  133  N.  W.  139,  W.  209 ;  Fort  Worth  Pub.  Co.  v.  Hit- 
Ann.  Cas.  1912  D,  1275n.  See  also  son,  80  Tex.  216,  14  S.  W.  843,  16 
Schufeldt  V.  Smith,  139  Mo.  367,  40  S.  W.  551. 


§    960  LAW    OF    PARTNERSHIP  1326 

where  a  partnership  in  faihng  circumstances  was  incorporated 
and  its  assets  and  business  transferred  to  the  corporation,  and 
appropriated  to  its  objects  and  purposes  and  the  business  con- 
tinued by  it,  the  corporation  was  held  presumptively  liable  for 
the  partnership  debts."  So,  where  a  corporation  succeeded  a 
firm,  acquired  all  its  assets,  and  continued  its  business  and  re- 
tained an  employe  of  the  firm  under  an  arrangement  that  he 
should  continue  the  services  according  to  the  prior  contract,  the 
court  said  that  it  should  be  inferred  that  the  corporation  assumed, 
under  such  contract,  the  firm  debts  and  obligations/*^  In  an 
action  on  a  lease  by  a  corporation  formed  from  the  members  of 
the  partnership  executing  the  lease,  it  was  said  that  the  presump- 
tion might  be  indulged  that  an  assignment  of  the  lease  had  been 
made,  where  the  members  had  treated  the  corporation  as  having 
acquired  all  the  rights  of  the  firm.^^  A  person  employed  by  a  firm 
for  a  year  was  assured  by  the  members  that  the  contract  would  be 
binding  on  the  corporation  formed  by  them;  and  after  the  incor- 
poration he  was  told  by  the  president  that  his  contract  was  "all 
right,"  and  that  nothing  further  was  necessary  to  make  it  valid. 
After  incorporation  the  employe's  salary  was  reduced  and  he 
was  compelled  to  return  amounts  which  he  had  overdrawn,  and 
he  was  thereafter  discharged.  He  was  held  entitled  to  recover 
for  a  breach  of  contract  as  the  corporation  had  adopted  the 
agreement. ^^  On  the  same  theory  a  corporation  is  not  a  bona 
fide  holder  of  a  note  transferred  to  it  by  a  firm  which  it  suc- 
ceeded. °^  But  no  such  presumption  arises  where  the  new  cor- 
poration formed  to  succeed  the  partnership  has  stockholders  other 
than  the  original  partners.''*'    And  no  conclusive  presumption  of 

s"  Reed  &c.  Co.  v.  First  Nat.  Bank,  Broughton  v.  Pensacola,  93  U.  S.  266, 

46  Nebr.  168,  64  N.  W.  701.  23  L.  ed.  896;  Wiinams  v.  Colby,  53 

s6Hall  V.  Herter,  90  Hun   (N.  Y.)  Hun    (N.   Y.)    637,  6   N.   Y.   S.   459, 

280,  35  N.  Y.  S.  769,  70  N.  Y.  St.  273.  24  N.  Y.  St.  793,  3  Silv.  337;  Haslett 

s^Roth  Tool  Co.  V.  Champ  Spring  v.    Wotherspoon,    1    Strobh.    Eq.    (S. 

Co.,  93  Mo.  App.  530,  67  S.  W.  967.  Car.)    209. 

^8  Burke  v.   Lincoln-Valentine   Co.,  ^^  McElwee     Mfg.     Co.    v.     Trow- 

28  Misc.  202,  58  N.  Y.  S.  1077,  1124.  bridge.  62  Hun    (N.  Y.)   471,   17  N. 

See  also  Lafayette  Sav.  Bank  v.  St.  Y.  S.  3,  43  N.  Y.  St.  238. 

Louis    &c.     Co.,    2   Mo.    App.    299 ;  go  Baker  Furn.  Co.  v.  Hall,  76  Nebr. 


1327  CHANGE    INTO    CORPORATION  §    960 

a  promise  to  assume  or  pay  the  debts  of  a  firm  arises  by  the  mere 
fact  of  the  purchase  of  its  assets  by  a  new  corporation  organ- 
ized by  the  members  of  the  old  firm,  even  though  they  continue 
the  business  of  the  former  partnership.''^  And  in  another  case 
where  a  corporation  was  formed  by  the  members  of  a  partner- 
ship, and  each  member  transferred  all  his  interest  in  the  firm 
property  to  the  corporation  and  received  therefor  an  aliquot 
part  of  the  capital  stock,  and  the  corporation  continued  the  busi- 
ness of  the  firm,  it  was  held  that  the  debts  of  the  partnership 
became  the  debts  of  the  corporation  and  it  was  liable  therefor. 
And  the  fact  that  a  member  of  the  firm,  for  a  valuable  considera- 
tion, assumed  and  agreed  to  pay  a  debt  of  the  firm  to  one  of 
its  creditors,  did  not  constitute  a  novation,  and  did  not  prevent 
the  creditor  from  proceeding  against  the  corporation.''"  Where 
a  corporation  and  a  firm  engaged  in  the  same  line  of  business  at 
different  places  agreed  that  each  should  buy  of  the  other  at  cost 
price  such  goods  as  it  might  desire,  and  that  each  should  pay  to 
the  other  at  the  end  of  the  year  a  sum  equal  to  a  designated  per- 
centage of  its  gross  profits,  meaning  the  proceeds  of  its  gross 
sales,  less  the  first  cost,  import  duties  and  carriage,  this  was  held 
not  sufficient  to'  raise  a  presumption  of  partnership,  and  was 
therefore  binding  on  the  corporation."^  Where  a  person  carried 
on  business  in  his  own  name  and  also  under  the  name  of  "Branch 
Crookes  and  Co."  and  borrowed  money  under  both  names  and 
afterward  transferred  the  assets  of  "Branch  Crookes  and  Co." 
to  a  corporation  entitled  "Branch  Crookes  Saw  Co.,"  it  was  held 
there  was  an  inference  that  the  latter  company  assumed  debts 
incurred  in  the  name  of  the  former."* 

88,  107  N.  W.  117,  111  N.  W.  129,  113  68  N.  W.  628,  35  L.  R.  A.  444,  59 

N.  W.  267;  Paxton  v.  Bacon  Mill  &  Am.  St.  543n. 

Mill.   Co.,  2  Nev.  257 ;   Durlacher  -v.  ^^  Andres  v.   Morgan,  62  Ohio   St. 

Frazer,   8  Wyo.  58,  55   Pac.  306,  80  236,  56  N.  E.  875,  76  Am.  St.  712. 

Am.   St.  918.  c3Fechteler  v.    Palm   Bros.   &   Co., 

61  Campbell  v.  Farmers'  &c.  Bank,  133  Fed.  462,  66  C.  C.  A.  336. 

49  Nebr.  143,  68  N.  W.  344;  Austin  c4  Bremen    Sav.    Bank    v.    Branch- 

V.  Tecumseh  Nat.  Bank,  49  Nebr.  412,  Crookes  Saw  Co.,  104  Mo.  425,  16  S. 

W.  209. 


§    961  LAW    OF    PARTNERSHIP  1328 

§  961.     Statute  of  frauds  as  affecting  assumption  of  debts. 

— The  promise  of  the  corporation  to  pay  tlie  debts  of  the  firm 
to  whicli  it  succeeds  is  a  promise  to  pay  tlie  debts  of  another.  It 
is  necessarily  a  new  contract  and  must  proceed  upon  a  new  con- 
sideration good  in  law.  To  bind  the  corporation,  in  the  absence 
of  adoption  or  ratification,  promises  to  pay  would  necessarily 
have  to  be  in  writing  to  be  good  under  the  statute  of  frauds. 
Thus-,  where  a  corporation  succeeded  a  partnership  it  was  held 
that  a  parol  promise  by  the  president  of  the  corporation  to  pay 
a  debt  of  the  former  partnership  did  not  create  a  liability  upon 
the  part  of  the  corporation.*^^  Under  a  rule  requiring  that  such 
a  contract  should  be  in  writing  it  has  been  held  that  the  vote  of 
the  directors  of  a  corporation,  duly  recorded,  was  a  sufficient 
memorandum  in  writing,  and  that  the  signature  of  the  recording 
ofBcer  was  a  sufHcient  signing  by  the  party  to  be  charged.'^''  But 
a  promise  by  a  corporation  to  pay  the  debts  of  a  firm  in  con- 
sideration of  the  transfer  of  its  assets,  was  held  not  to  be  a 
promise  to  pay  the  debt  of  another  within  the  statute  of  frauds."^ 
The  promise  of  a  corporation  in  such  case  is  original,  based 
upon  the  receipt  of  the  property.*'^  Whether  or  not  the  assump- 
tion of  the  debt  is  within  the  statute  of  frauds,  there  is  authority 
for  saying  that  the  statute  does  not  apply  where  there  is  a  com- 
plete novation  and  the  liability  of  the  original  debtor  is  extin- 
guished.*'^ 

§  962.     Formation  of  corporation  as  dissolution  of  partner- 
ship.— As  a  general  rule,  where  a  partnership  transfers  all  its 

65  Georgia    Co.    v.    Castleberry,    43  Co.,  96  Iowa  147,  64  N.  W.  782,  59 

Ga.    187.      See    Dingledein    v.    Third  Am.   St.  362.     See  McCraith  v.  Na- 

Ave.  R.  Co.,  9  Bosw.   (N.  Y.)   79.  tional  Mohawk  Val.  Bank,  104  N.  Y. 

66Lamkin  v.  Baldwin  &c.  Mfg.  Co.,  414,  10  N.  E.  862;  Wait  v.  Wait,  28 

72  Conn.  57,  43  Atl.  593,  1042,  44  L.  Vt.  350. 

R.    A.   786.      See   Lane   v.    Brainerd,  ^^  Georgia    Co.    v.    Castleberry,    43 

30  Conn.  565 ;  Chase  v.  Tuttle,  55  Ga.  187.  See  generally  Curtis  v. 
Conn.  455,  12  Atl.  874,  3  Am.  St.  64n.  Brown,   5   Cash.    (Mass.)    488;    Mer- 

"^  Schufeldt  V.  Smith,  131  Mo.  280,     iden  Britannia  v.  Zingsen,  48  N.  Y. 

31  S.  W.  1039,  29  L.  R.  A.  830,  52  247,  8  Am.  Rep.  549;  Teeters  v.  Lam- 
Am.   St.  628.  born,  43  Ohio  144,  1  N.  E.  513 ;  Good- 

^''^  Calumet  Paper  Co.  v.  Stotts  Inv.     man  v.  Chase,  1  B.  &  Aid.  297. 


1329  CHANGE    INTO    CORPORATION  §    962 

assets  to  a  corporation  formed  to  take  them  over,  which  suc- 
ceeds to  its  rights,  especially  where  corporate  stock  is  issued  to 
the  partners  for  a  portion  of  the  assets,  while  other  assets  are 
to  be  applied  to  the  satisfaction  of  firm  debts,  and  the  partner- 
ship ceases  to  do  business  as  such,  it  will  be  regarded  as  dis- 
^-solved."*'  In  other  cases,  under  somewhat  differing  circum- 
stances, the  courts  have  held  that  a  partnership  is  not  dissolved 
by  a  transfer  of  its  assets  to  a  corporation,  unless  there  is' proof 
of  its  merger  therein/^  So  the  mere  organization  of  a  com- 
pany to  take  over  the  business  of  a  partnership  without  a  formal 
transfer  of  the  property,  does  not  of  itself  dissolve  the  partner- 
ship.'" When  the  question  of  dissolution  has  arisen  with  respect 
to  the  liability  of  partners  after  organization  of  a  corporation 
to  take  over  the  firm  business,  the  decisions  are  also  conflicting. 
It  has  been  held  that  when,  after  incorporation  of  a  firm,  some* 
of  the  partners  obtain  loans  in  the  firm  name,  all  the  partners  are 
liable,  and  the  incorporation  is  not  evidence  of  a  dissolution  of 
the  partnership  unless  it  is  "impossible  that  the  partnership 
could  be  continued  and  co-exist  with  the  corporation  for  any 
purpose.""  But  in  another  case  where  the  members  of  a  part- 
nership formed  a  corporation,  transferred  to  it  all  firm  assets, 
and  took  all  the  corporate  stock  themselves,  it  was  held  that 
the  partnership  was  dissolved,  but  the  corporation  and  the  part- 
ners were  bound  for  its  debts. ^*  A  mining  partnership  is  dis- 
solved upon  transfer  of  all  its  assets  to  a  corporation.^^      And 

"•^  Francklyn  v.  Sprague,  121  U.  S.  kins  v,  Delahunty,  133  App.  Div.  422, 

215,  30  L.  ed.  ^Zd,"!  Sup.  Ct.  951;  Cape  117  N.  Y.  S.  885;  Metz  v.  Commer- 

Sable  Co.'s  Case,  3  Bland  Ch.  (Md.)  cial  Bank,  45  S.  Car.  216,  23  S.  E.  13. 

606 ;  Seuf ert  v.  Gille,  230  Mo.  453,  131  ^2  Reuttell   v.   Greenwich    Ins.    Co., 

S.  W.  102,  31  L.  R.  A.  (N.  S.)  471n;  16  N.  Dak.  546,  113  N.  W.  1029. 

Coggswell  &c.  Co.  V.  Coggswell   (N.  "^^  First   Nat.   Bank  v.   Conway,  67 

J.    Eq.),    40   Atl.   213;    Hennessy   v.  Wis.  210,  30  N.  W.  215. 

Griggs,    1    N.    Dak.    52,    44    N.    W.  74  Andres  v.   Morgan,  62  Ohio  St. 

1010.  236,  56  N.  E.  875,  78  Am.  St.  712. 

71  Pearce   v.    Sutherland,    164    Fed.  75  Dellapiazza    v.    Foley,    112    Cal. 

609,  90  C.  C.  A.  519;  Monmouth  In-  380,   44   Pac.   727.     See   also  Thorpe 

vestm.   Co.   V.   Means,    151    Fed.   159,  v.   Pennock  Merc,  Co.,  99  Minn.  22, 

80  C.  C.  A.  527 ;  Whitley  v.  Bradley,  108  N.  W.  940,  9  Ann.  Cas.  229. 
13  Cal.  App.  720,  110  Pac.  596;  Wat- 


§    963  LAW    OF    PARTNERSHIP  1330 

the  circumstances  may  show  that  partners  who  did  not  become 
members  of  the  corporation,  and  firm  creditors,  recognized  a 
transfer  of  firm  assets  to  a  corporation  as  a  dissokition  of  the 
partnership."*'  In  some  cases  the  partners  have  been  held  Hable 
as  to  creditors  because  no  notice  of  dissohition  was  given,  even 
though  a  dissolution  was  worked  as  between  themselves."'^ 

§  963.  Rights  acquired  by  a  corporation  formed  by  mem- 
bers of  a  firm. — Where  a  corporation  is  formed  by  the  mem- 
bers of  a  firm  to  succeed  it,  and  the  firm  assets  are  transferred 
to  the  corporation,  which  assumes  the  habihties  of  the  firm,  the 
corporation  also  succeeds  to  the  rights  of  such  firm.  Thus,  a 
corporation  so  acquiring  the  assets  of  a  firm,  was  held  to  acquire 
the  right  of  action  for  breach  of  a  contract  entered  into  with 
such  firm.'*  So,  a  banking  corporation  succeeding  a  firm  en- 
gaged in  banking,  was  held  to  have  acquired  the  right  to  enforce 
against  the  former  members  a  guaranty  of  payment  of  bills 
receivable  transferred  b}^  the  firm  to  such  corporation."^  Where 
a  corporation  formed  for  the  purpose  of  manufacturing  and 
dealing  in  a  certain  line  of  goods,  in  good  faith  purchases  from 
an  existing  partnership  in  a  like  business  its  plant  and  assets, 
including  its  outstanding  claims,  among  them  a  claim  for  dam- 
ages to  the  property  caused  by  another's  negligence,  the  cor- 
poration acquires  title  to  such  claim  and  may  maintain  an  action 
against  the  party  liable.®"  There  seems  to  be  no  reason  why 
the  members  of  a  firm,  who  incorporated  for  the  purpose  of 
continuing  the  same  business,  can  not  assign  a  chose  in  action 
to  the  firm's  successor.®^     In  the  transfer  of  the  fi.rm  assets  to  a 

'C  Whitwell  V.  Warner,  20  Vt.  425.  ^9  Leonhardt  v.   Citizens'   Bank,   56 

"  Overlock    v.    Hazzard,    12    Ariz.  Nebr.  38,  76  N.  W.  452. 

142,    100    Pac.   447;    Weise  v.    Gray's  so  Central    Ohio    Natural    Gas    &c. 

Harbor  Commercial  Co.,  Ill  111.  App.  Co.    v.    Capital    City    Dairy    Co.,    60 

647;     Goddard    v.     Pratt,     16    Pick.  Ohio  St.  96,  53  N.  E.  711,  64  L.  R. 

(Mass.)  412.  A.  395. 

^8  Lottman  &c.  Mfg.  Co.  v.  Hous-  ^^  Lottman  &c.  Mfg.  Co.  v.  Hous- 
ton Waterworks  Co.  (Tex.  Civ.  ton  Waterworks  Co.  (Tex.  Civ. 
App.),  38  S.  W.  357.  App.),  38  S.  W.  357;  Griffin  v.  Ma- 

cauley,  7  Grat.   (Va.)   476. 


1331  CHANGE    INTO    CORPORATION  §    965 

corporation  the  members  of  the  firm  may  agree  upon  the  amount 
of  stock  of  the  new  corporation  that  each  shall  receive  for  his 
share  in  the  firm  assets.^"  The  members  of  a  firm,  by  attempt- 
ing to  organize  themselves  into  a  corporation,  and  obtain  credit 
on  the  faith  of  their  corporate  conduct,  will  not  be  heard  to 
deny  the  existence  of  the  corporation  as  against  a  creditor  who 
gave  credit  after  the  charter  was  granted.®^ 

§  964.  Partnership  changed  to  corporation — Rights  of 
beneficiaries  of  a  deceased  partner. — Where  a  partnership 
was  turned  into  a  corporation  under  a  special  statute,  it  was  held 
that  the  beneficiaries  in  an  estate  of  a  deceased  partner  were  not 
entitled  to  maintain  a  suit  in  equity  for  the  general  accounting  of 
their  interest  in  the  assets  of  the  firm,  but  that  their  rights  must 
be  worked  out  as  stockholders  with  claims  for  dividends.  And 
where  the  guardian  of  certain  beneficiaries,  who  was  also  the 
administrator  of  the  estate  of  a  deceased  partner,  in  good  faith 
permitted  the  partnership  business  to  be  continued,  and  after  an 
increase  in  the  value  of  the  property,  the  firm  assets,  by  virtue 
of  such  special  statute,  were  transferred  to  the  corporation 
created  to  continue  the  business,  the  beneficiaries  after  arriving 
at  age  and  receiving  dividends  for  several  years,  were  precluded 
from  maintaining  a  bill  in  equity  for  an  accounting  of  the  part- 
nership estate.®*  In  such  case  the  partnership  property  became 
consolidated  in  a  unity  of  interest  in  the  corporation,  and  the 
former  partners  became  shareholders  in  the  corporation,  and 
their  liens  as  partners  ceased  when  their  rights  as  shareholders 
begun.^^ 

§  965.  Liability  of  partners  after  incorporation. — The 
mere  fact  that  a  partnership  is  succeeded  by  a  corporation  which 
receives  the  firm  assets  and  assumes  its  liabilities,  does  not  of 
itself,  on  the  plainest  principles  of  law,  relieve  the  partners  from 

82  Pennsylvania     Tack     Works     v.  s*  Hoyt  v.  Sprague,   103  U.  S.  613, 
Sowers,  2  Walker    (Pa.)   416.  26  L.   ed.   585. 

83  Stewart  Paper  Mfg.  Co.  v.  Rau,  ^^  prancklyn  v.   Sprague,   121   U.   S. 
92  Ga.  511,  17  S.  E.  748.  215,  30  L.  ed.  936,  7  Sup.  Ct.  951. 


§  965 


LAW    OF    PARTNERSHIP 


1332 


their  personal  liability;  and  the  mere  knowledge  of  a  creditor 
of  the  organization  of  the  corporation  or  that  the  partnership 
articles  provided  for  incorporation,  will  not  relieve  the  partners 
from  such  personal  liability.®"  And  partners  may  be  personally 
liable  for  contracts  made  by  a  superintendent  appointed  by  them 
in  the  organization  of  a  corporation,  on  contracts  made  by  him 
'before  the  articles  of  association  were  signed,  in  the  absence  of 
the  element  of  estoppel/^  So,  the  partners  may  be  personally 
liable  on  debts  contracted  by  the  corporation  after  its  organiza- 
rtion.  Thus,  where  the  corporation  continues  the  same  business 
in  practically  the  same  name  with  former  customers  of  the  part- 
nership, without  giving  any  notice  of  the  incorporation,  and  in 
the  absence  of  actual  notice  of  the  changed  condition  on  the 
part  of  such  dealers,   the   partners   will   be   personally   liable. ^^ 


S6  Witmer    v.     Schlatter,    2    Rawle 
(Pa.)    359. 

87  Wechselberg  v.  Flour  City  Nat. 
Bank,  64  Fed.  90,  12  C.  C.  A.  56, 
24  U.  S.  App.  308,  26  L.  R.  A.  470; 
Garnett  v.  Richardson,  35  Ark.  144; 
Duke  V.  Taylor,  Z1  Fla.  64,  19  So. 
172,  31  L.  R.  A.  484,  ^Z  Am.  St.  232 ; 
Taylor  v.  Branhara,  35  Fla.  297,  17 
So.  552,  39  L.  R.  A.  362,  48  Am. 
St.  249;  Loverin  v.  McLaughlin,  161 
111.  417,  44  N.  E.  99;  Bushnell  v. 
Consolidated  Ice  Mach.  Co.,  138  111.  . 
67,  27  N.  E.  596,  1  Smith's  Cas.  112; 
Bigelow  V.  Gregory,  1Z  111.  197;  Pet- 
tis V.  Atkins,  60  111.  454;  Coleman 
V.  Coleman,  78  Ind.  344;  Kaiser  v. 
Lawrence  Sav.  Bank,  56  Iowa  104, 
8  N.  W.  772,  41  Am.  Rep.  85,  2 
Keener's  Cas.  1939;  McLennan  v. 
Hopkins,  2  Kans.  App.  260,  41  Pac. 
1061;  Williams  v.  Hewitt,  47  La. 
Ann.  1076,  17  So.  496,  49  Am.  St. 
394;  Vredenburg  v.  Behan,  ZZ  La. 
Ann.  627;  Chaffe  v.  Ludeling,  27  La. 
Ann.  607 ;  Field  v.  Cooks,  16  La.  Ann, 
153;  Frost  v.  Walker,  60  Maine  468; 
Whipp'e    V,    Parker,    29    Mich.    369; 


State  V.  How,  1  Mich.  512;  John- 
son V.  Corser,  34  Minn,  355,  25  N. 
W,  799,  1  Smith's  Cas,  100;  Smith 
V.  Warden,  86  Mo.  382;  Martin  v. 
Fewell,  79  Mo.  401,.  1  Cumming's 
Cas.  982;  Ferris  v.  Thaw,  72  Mo. 
446 ;  Richardson  v.  Pitts,  71  Mo.  128 ; 
Davidson  v.  Hobson,  59  Mo.  App. 
130;  Cleaton  v.  Emery,  49  Mo.  App. 
345;  Globe  Pub.  Co.  v.  State  Bank, 
41  Nebr.  175,  59  N.  W.  683,  27  L.  R. 
A.  854;  Abbott  v.  Omaha  Smelting 
&c.  Co.,  4  Nebr.  416;  Booth  v.  Won- 
derly,  36  N.  J.  L.  250 ;  Hill  v.  Beach, 
12  N.  J.  Eq.  31;  Guckert  v.  Hacke, 
159  Pa.  St.  303,  28  Atl.  249;  Pater- 
son  V.  Arnold,  45  Pa.  St.  410;  Has- 
lett  V.  Wotherspoon,  2  Rich.  Eq.  (S. 
Car.)  395;  Shields  v.  Clifton  Hill 
Land  Co.,  94  Tenn.  123,  28  S.  W.  668, 
26  L.  R.  A.  509,  45  Am.  St.  700; 
Slocum  V.  Head,  105  Wis.  431,  81 
N.  W.  QZ,  50  L.  R.  A.  324;  Ber- 
geron V.  Hobbs,  96  Wis.  641,  71  N. 
W.  1056,  65  Am.  St.  85. 

S8  Perkins  v.  Rouss,  78  Miss.  343, 
29  So.  92;  Martin  v.  Fewell,  79  Mo. 
401,    1    Cumming's    Cas.   982 ;    Robin- 


1333  CHANGE    INTO    CORPORATION  §    965 

And  where  a  partnership  incorporated  and  continued  to  use  the 
firm  books,  and  continued  the  various  running  accounts  without 
Ijreak,  with  the  same  customers,  the  partnership  was  held  to  be 
estopped  to  plead  the  incorporation  as  a  defense  against  a  former 
customer,  who,  without  notice  of  the  change,  sold  it  goods  and 
charged  them  to  the  firm.®°  Where  a  partnership  formed  a  cor- 
poration and  it  thereafter  became  insolvent,  they  were  not  per- 
mitted to  escape  personal  liability  as  partners.*"^  Where  a  bank- 
ing partnership  became  incorporated  and  two  of  the  former 
partners,  acting  as  president  and  cashier  of  the  incorporated 
bank,  renewed  and  extended  the  time  of  payment  of  a  note  trans- 
ferred to  it,  and  guaranteed  by  the  firm,  it  was  held  that  the 
original  partners  could  not  avail  themselves  of  the  renewal  of 
the  note  as  a  defense  in  an  action  to  hold  them  personally  liable 
on  the  guaranty.^^  On  this  principle,  Avhere  a  partnership  was 
incorporated  under  the  same  name,  but  the  corporation  in  fact 
was  never  organized,  and  never  actually  did  business  as  such, 
l3Ut  the  business  was  continued  by  the  partnership,  a  sale  of  land 
l)y  certain  of" the  incorporators  prior  to  the  organization  of  the 
corporation,  to  a  bona  fide  purchaser  for  value  and  without 
notice  of  the  incorporation,  was  held  valid  as  against  subsequent 
creditors  of  the  incorporation.^"  So,  an  individual  or  a  partner 
may  be  held  personally  liable  for  goods  ordered  before  incor- 
poration but  delivered  after  such  individual  or  partner  had  organ- 
ized the  corporation."^ 

son  V.  First  Nat.  Bank,  98  Tex.  184,  111  N.  W.  129,  113  N.  W.  267;  Pat- 

82    S.    W.    505;    Johns    v.    Brown,    1  ton    v.    McDonald,    204    Pa.    517,    54 

White  &  W.  Tex.  App.  Civ.  Cas.,   §  Atl.  356. 

1016.  90  Samuel  &c.  Wooden-Ware  Co.  v. 

89Reid  V.  Kreling's  Sons'  Co.,  125  Illinois  &c.  Mfg.  Co.,  51  La.  Ann.  64, 

Cal.  117,  57  Pac.  11 Z.  See  also  Good-  24  So.  604. 

win  V.   Smith    (Ky.),  66   S.  W.   179,  ^^  Leonhardt  v.   Citizens'   Bank,   56 
23  Ky.  L.  1810;  Thorpe  v.  Pennock  Nebr.  38,  76  N.  W.  452. 
Mercantile  Co.,  99  Minn.  22,   108  N.  ^^  r^u  v.  Union  Paper  Mill  Co.,  95 
W.  940 ;  Holloway  v.  Brame,  83  Miss.  Ga.  208,  22   S.  E.   146. 
335,    36    So.    1 ;    Baker    Furn.    Co.    v.  "^  Henderson  Woolen  Mills  v.  Ed- 
Hall,    76   Nebr.   88.    107   N.   W.    117,  wards,  84  Mo.  App.  448. 


§    966  LAW    OF    TARTNERSHIP  1334 

§  966.  Rights  of  partners  among  themselves  after  incor- 
poration.— The  rights  of  partners  among  themselves,  and  as 
against  the  corporation,  may  depend  largely  upon  the  agreement 
entered  into  at  the  time  the  partnership  passes  into  the  corpora- 
tion. If  by  the  terms  of  such  agreement  the  partnership  is 
dissolved  and  its  affairs  wound  up,  all  rights  and  liabilities  among 
themselves  would  be  terminated,  except  perhaps  rights  and  lia- 
bilities as  to  accounting.  If  each  partner  assists  and  acquiesces 
in  the  formation  of  the  corporation,  he  can  not  then  be  heard 
to  say  that  it  was  not  in  accordance  with  the  agreement.***  But 
if  a  corporation  excludes  a  member  and  prevents  his  sharing  in 
its  management  in  violation  either  of  the  agreement  or  his  rights, 
after  having  received  his  share  of  the  partnership  assets,  he  may 
have  an  action  against  the  corporation.  Thus,  where  a  partner- 
ship organized  a  corporation,  the  partners  taking  the  stock  to 
the  full  amount  of  their  interest  in  the  firm,  and  after  the  incor- 
poration a  dispute  arose  as  to  the  extent  of  the  interest  of  one 
of  the  former  partners,  and  thereafter  the  corporation  declared 
his  interest  forfeited  and  excluded  him  from  any  share  in  its 
management,  it  was  held  in  an  action  by  him  for  damages  that 
he  was  entitled  to  recover  the  value  of  his  interest  at  the  time 
it  was  taken  from  him,  and  that  in  computing  this  there  should 
be  included  the  technical  profit  and  the  increase  in  value  of  the 
assets  of  the  corporation,  vrith  interest  on  the  entire  amount.®^ 
A  partner  in  a  partnership  specially  formed  to  be  converted  into 
a  corporation  may  resort  to  equity  to  compel  the  partners  to  go 
forward  and  fulfill  the  agreement  for  the  formation  of  the  cor- 
poration.^" Partners  have  no  title  to  corporate  products  sub- 
sequently manufactured  by  the  corporation  successor  of  the  part- 
nership.^^ 

94  Hennessj'  v.  Griggs,  1  N.  Dak.  to,  to  correct  mistakes  in  carrying 
52,  44  N.  W.  1010.  out  agreement)  ;  Bannen  v.  Kindling, 

95  Crosby  Lumber  Co.  v.  Smith,  51     142  Wis.  613,  126  N.  W.  5. 

Fed.  63,  2  C.  C.  A.  97.  ^7  Jn  re  Miller  Pure  Rye  Distilling 

96  Bowker  v.  Torrey,  211  Mass.  282,     Co.,  214  Fed.   189. 
97  N.  E.  770  (equity  may  be  resorted 


1335 


CHANGE    INTO    CORPORATION 


967 


§  967.  Rights  of  creditors  when  partnership  property  is 
transferred  to  a  corporation. — The  individual  liability  of  the 
partners  is  not  relieved  by  the  transfer  of  the  firm  assets  to  a  cor- 
poration; and  in  the  absence  of  consent  or  estoppel  the  rights  of 
the  creditors  are  not  affected.  Without  encroaching  on  related 
subjects,  it  may  be  said  in  this  connection  that  the  creditors  may, 
by  bill  in  equity,  follow  the  property  and  set  aside  the  transfer 
thus  made  to  a  corporation.^^  So,  creditors  of  an  individual  may 
set  aside  a  transfer  of  his  property  to  a  corporation  where  the 
stock  he  received  was  distributed  among  his  relatives.^"  In  such 
case  creditors  may  also  levy  an  attachment  or  execution  upon 
the  property  thus  transferred.^  Many  other  cases  illustrate  this 
proposition.-  But  where  a  creditor  consented  to  the  transfer 
and  he  thereafter  received  the  stock  as  collateral  security  for  his 
debt,  it  was  held  that  he  could  not  then  look  to  the  corporation 
for  its  payment,  though  the  corporation  afterwards  voluntarily 


08  Strieby  v.  Clinton  &c.  Mfg.  Co., 
52  N.  J.  Eq.  576,  29  Atl.  589. 

o^Metcalf  V.  Arnold,  110  Ala.  180, 
20  So.  301,  55  Am.  St.  24;  Goodale 
V.  Wheeler,  41  Ore.  190,  68  Pac. 
753. 

1  San  Francisco  &c.  R.  Co.  v.  Bee, 
48  Cal.  398;  Colorado  Trading  &c. 
Co.  V.  Acres  Commission  Co.,  18 
Colo.  App.  253,  70  Pac.  954;  Curran 
V.  Rothschild,  14  Colo.  App.  497,  60 
Pac.  1111;  Hinkley  v.  Reed,  82  111. 
App.  60;  Dolan  v.  Wilkerson,  57 
Kans.  758,  48  Pac.  23;  Mulford  v. 
Doremus,  60  N.  J.  Eq.  80,  45  Atl. 
688;  Booth  v.  Bunce,  33  N.  Y.  139, 
88  Am.  Dec.  372. 

2  Fischer  v.  Campbell,  101  Fed.  156, 
41  C.  C.  A.  256;  Taylor  v.  Seiter,  199 
111.  555,  65  N.  E.  433;  Croarkin  v. 
Hutchinson,  187  111.  633,  58  N.  E. 
678;  Hinkley  v.  Reed,  182  111.  440, 
55  N.  E.  337;  Kingman  v.  Mowry, 
182  111.  256,  55  N.  E.  330,  74 
Am.     St.     169;     Singer    &c.     Co.     v. 


Carpenter,  125  111.  117,  17  N.  E. 
761;  Shumaker  v.  Davidson,  116 
Iowa  569,  87  N.  W.  441;  Collins 
V.  Stofer,  21  Ky.  L.  652,  52  S.  \V. 
940;  Folsom  v.  Detrick  Fertilizer  &c. 
Co.,  85  Md.  52,  36  Atl.  446;  Allen  v. 
French,  180  Mass.  487,  62  N.  E.  987 ; 
Scripps  V.  Crawford,  123  Mich.  173, 
81  N.  W.  1098;  In  re  Warner,  82 
Mich.  624,  47  N.  W.  102;  Hall  v. 
Goodnight,  138  Mo.  576,  37  S.  W. 
916;  Terhune  v.  Skinner,  45  N.  J.  Eq. 
344,  19  Atl.  377;  Mathews  v.  Hardt, 
37  Misc.  653,  76  N.  Y.  S.  134;  Quee 
Drug  Co.  V.  Plaut,  55  App.  Div.  87. 
67  N.  Y.  S.  10 ;  Sheffield  v.  Mitchell, 
31  App.  Div.  266,  52  N.  Y.  S.  925; 
Tradesman  Nat.  Bank  v.  Young,  15 
App.  Div.  109,  44  N.  Y.  S.  297 ;  Buell 
V.  Rope,  6  App.  Div.  113,  39  N.  Y.  S. 
475;  Gardner  v.  Keogh  Mfg.  Co.,  63 
Hun  519,  18  N.  Y.  S.  391;  National 
Broadway  Bank  v.  Yuengling,  58  Hun 
474,  12  N.  Y.  S.  762,  36  N.  Y.  St. 
199;  Williams  v.  Colby,  53  Hun  637, 


34 — Row.  ON  Partn. — Vol.  2 


§    968  LAW    OF    PARTNERSHIP  1336 

gave  a  note  and  mortgage  to  secure  the  same.^  A  failing  debtor 
was  held  to  have  the  right  to  transfer  his  property  to  a  corpora- 
tion organized  to  take  over  his  business,  and  to  prefer  one  of 
his  creditors  by  an  assignment  of  the  stock  received  by  him  as 
collateral  security.*  Where  the  debts  of  the  partnership  have 
been  assumed  and  the  corporation  becomes  insolvent,  there  can 
be  no  preference  in  favor  of  the  corporation  debts  over  the  debts 
of  the  partnership.^ 

§  968.  Transfer  of  partnership  property  to  corporation 
made  to  hinder  and  delay  creditors. — In  the  transfer  of  the 
assets  of  a  partnership  or  of  an  individual  to  a  corporation,  the 
creditors  of  such  partnership  or  individual  are  often  hindered 
and  delayed.  And  under  some  holdings  creditors  have  no  right 
to  attack  the  transfer  or  reach  the  property,  for  the  reason,  as 
given,  that  the  mere  transfer  of  property  to  a  corporation  for 
capital  stock  therein  does  not  hinder  or  delay  the  creditors  of 
the  transferer,  the  stock  being  subject  to  execution;  the  capital 
stock  is  regarded  as  a  good  consideration  for  the  trans fer.°  But 
it  appears  from  the  adjudicated  cases  that  such  transfers  are 
sometimes  made  for  the  clear  purpose  of  hindering,  delaying 
or  defrauding  creditors.  A  fraud  may  be  committed  in  the  trans- 
fer of  a  debtor's  property  to  such  a  corporation  as  well  as  by  a 
transfer  to  another  individual  for  the  purpose  of  placing  it  beyond 
the  reach  of  creditors.    Such  a  transaction  may  be  closely  scruti- 

6  X.  Y.  S.  459,  24  N.  Y.  St.  793,  3  Hamilton,   107  Wis.   112,   82   N.   W. 

Silv.  ZZ7;  Gross  v.  Daly,  5  Daly  (N.  698;  Cass  v.  Sutherland,  98  Wis.  551, 

Y.)  540;  Bynum  v.  Clark,  125  N.  Car.  74  N.  W.  32,7;  Rielle  v.  Reid,  28  Ont. 

352,  34  S.  E.  438 ;  First  Nat.  Bank  &c.  497 ;  In  re  Carey,  39  Solicitor's  Jour. 

V.  Trebein   Co.,  59  Ohio  St.  316,  52  541. 

N.  E.  834 ;  Sayler  v.  Simpson,  45  Ohio  "  State  v.  Shapleigh  Hardware  Co., 

St.  141,  12  N.  E.  181 ;  Craig  v.  Cali-  147  Mo.  366,  48  S.  W.  927. 

fornia  Vineyard  Co.,  30  Ore.  43,  46  *  Gardner    v.    Haines,    19    S.    Dak. 

Pac.  421;   Sutton  v.  Dudley,  193  Pa.  514,    104   N.   W.  244. 

St.   194,  44  Atl.  438;  Kenmore  Shoe  5  London   v.    Bynum,    136    N.    Car. 

Co.,  Ex  parte,  50  S.  Car.  140,  27  S.  411,  48  S.  E.  764.     But  see  Thorpe 

E.  682 ;  Bristol  Bank  &c.  Co.  v.  Jones-  v.  Pennock  Mercantile  Co.,  99  Minn. 

boro    Banking  Trust   Co.,    101    Tenn.  22.  108  N.  W.  940. 

545,   48   S.  W.  228;   Troy  v.   Morse,  « Gardner    v.    Haines,    19    S.    Dak. 

22  Wash.  280,  60  Pac.  648;  Haring  v.  514,  104  N.  W.  244. 


1337  CHANGE    INTO    CORPORATION  {§   968 

nized,  and  a  court  may  declare  its  real  purpose,  "notwithstand- 
ing the  elaborate  fabrications  of  charters,  by-laws  and  paper 
transfers."  This  principle  was  applied  in  a  case  where  a  mer- 
chant, heavily  indebted,  organized  a  corporation  with  himself, 
his  wife  and  clerks  as  the  corporators,  and  thereupon  transferred 
all  his  property  to  such  corporation.  The  evident  purpose  was 
to  shield  himself  from  the  attacks  of  his  creditors,  and  to  enable 
him  to  carry  on  his  business  and  enjoy  the  income.  The  incor- 
poration, to  the  court,  seemed  to  have  been  little  but  a  paper 
scheme  devised  in  his  own  interest,'^  The  doctrine  is  well  sup- 
ported that  a  corporation  can  not  be  formed  for  the  purpose 
of  accomplishing  a  fraud  under  the  disguise  of  the  fiction;  and 
when  this  is  made  to  appear  the  fiction  will  be  disregarded  by 
the  courts  and  the  acts  of  the  parties  dealt  with  as  though  no 
such  corporation  had  been  formed.^  There  is  not  a  case  of  a 
fraudulent  conveyance  where  the  members  of  an  insolvent  part- 
nership transfers  all  its  property  to  a  newly  created  corporation 
in  which  they  own  all  of  the  stock  and  the  corporation  assumes 
all  of  the  debts,  for  the  transaction  in  no  way  hinders  or  delays 
creditors  of  the  partnership.^  A  corporation  which  continues 
the  business  of  an  insolvent  partnership  is  not,  in  the  absence 
of  fraud,  liable  for  its  debts,  where  it  is  organized  by  the  former 
partners,  who  pay  for  their  stock  by  insurance  money  collected 

^  Kellogg  V.  Douglas  County  Bank,     Standard  Oil  Co.,  49  Ohio  St.  137,  30 

58  Kans.  43,  48  Pac.  587,  62  Am.  St.  N.  E.  279,  15  L.  R.  A.  145,  34  Am.  St. 
596;  First  Nat.  Bank  v.  Trebein  Co.,     541;  Bennett  v.  Minott,  28  Ore.  339, 

59  Ohio  St.  316,  52  N.  E.  834.  39  Pac.  997,  44  Pac.  288;  Montgom- 
s  Des  Moines  Gas  Co.  v.  West,  50     ery  Web  Co.  v.  Dienelt,  133  Pa.  St. 

Iowa  16;  Chicago  &C.R.  Co.  V.  Miller,  585,    19   Atl.    428,    19    Am.    St.    663. 

91    Mich.    166,   51   N.   W.   981 ;    Ter-  That  courts  will  not  uphold  transfers 

hune   V.    Hackensack    Sav.    Bank,   45  from     partnerships     to     corporations 

N.    J.    Eq.   344,    19   Atl.    Zll ;    Booth  to  defraud  creditors,  see  Ziermer  v. 

V.  Bunco,  ZZ  N.  Y.  139,  88  Am.  Dec.  C.  G.  Bretting  Mfg.  Co.,  147  Wis.  252, 

372 ;  First  Nat.  Bank  v.  Trebein  Co.,  133   N.   W.   139,   Ann.   Cas.   1912   D, 

59  Ohio  St.  316,  52  N.  E.  834 ;  Brun-  1275n. 

dred  v.  Rice,  49  Ohio  St.  640,  32  N.        ^  Skinner  v.  Southern  Grocery  Co., 

E.    169,    34   Am.    St.   589;    State   v.  174  Ala.  359,  56  So.  916. 


§    968  LAW    OF    TARTNERSIIIP  1338 

for  the  destruction  of  the  partnership  assets  by  fire.^"  Equity 
will  set  aside  transfers  made  by  a  debtor  for  the  purpose  of  hin- 
dering and  delaying  his  creditors,  where  he  turns  over  all  his 
assets  to  a  corporation  organized  by  himself,  and  becomes  owner 
of  practically  all  the  stock,  and  continues  the  business  the  same 
as  before,  using  the  proceeds  for  his  own  benefit,  notwithstand- 
ing the  fact  that  the  incorporation  may  be  valid  and  the  cor- 
porate stock  subject  to  sale  on  execution.^^ 

10  Byrne  &c.  Dry  Goods  Co.  v.  39  Pac.  997,  44  Pac.  288;  First  Nat. 
Willis-Dunn  Co.,  23  S.  Dak.  221,  121  Bank  v.  Trebein  Co.,  59  Ohio  St.  316, 
N.  W.  620,  29  L.  R.  A.  (N.  S.)  S89n.  52  N.  E.  834. 

11  Bennett  v.   Minott,  28  Ore.  339, 


CHAPTER  XXX 


JOINT    ADVENTURES 


SECTION 

975.  Definition  and  nature. 

976.  Agreement  and  consideration. 

977.  Particular  cases. 

978.  Good  faith. 

979.  Property  involved. 

980.  Power  to  bind  co-adventurers. 

981.  Abandonment  of  the  adventure. 

982.  Right  to  profits. 

983.  Sharing  of  losses. 

984.  Contribution. 

985.  Settlement — Expenses. 

986.  Settlement — Interest. 


SECTION 

987.  Settlement — Advances. 

988.  Termination  and  duration. 

989.  Adventurer's  lien. 

990.  Actions     between     joint     adven- 

turers. 

991.  Actions — Illustrations. 

992.  Set-off — Limitation  of  actions. 

993.  Parties  and  pleading. 

994.  Evidence — Judgment. 

995.  Actions  by  or  against  third  per- 

sons. 


§  975.  Definition  and  nature. — A  joint  adventure  may  be 
defined  as  an  association  of  two  or  more  persons  to  carry  out 
a  single  business  enterprise  for  profit.^  It  is  said  a  "venture" 
is  an  undertaking  attended  with  risk,  a  business  speculation.' 
And  a  "coadventurer"  is  one  who  takes  part  with  others  in  a 
venture  or  adventure."  In  its  general  nature  a  joint  adventure 
is  similar  to  a  partnership/  and  it  is  governed  by  practically 
the  same  rules  of  law,°  although  it  is  held  not  to  be  identical 


^  It  has  also  been  defined  as  "an 
enterprise  undertaken  by  several  per- 
sons jointly."  Cyclopedic  L.  Diet, 
(quoted  in   Cyc). 

2  McRee  v.  Quitman  Oil  Co.  (Ga. 
App.),  84  S.  E.  487. 

3  McRee  v.  Quitman  Oil  Co.  (Ga. 
App.),  84  S.  E.  487. 

4  Slater  v.  Clark,  68  111.  App.  433 ; 
Doane  v.  Adams,  15  La.  Ann.  350; 
Irvine  v.  Campbell,  121  Minn.  192,  141 


N.  W.  108;  Ross  v.  Willett,  76  Hun 
211,  27  N.  Y.  S.  785,  58  N.  Y.  St.  694. 
^  Goss  V.  Lanin  (Iowa),  152  N. 
W.  43;  Hambleton  v.  Rind,  84  Md. 
456,  36  Atl.  597,  40  L.  R.  A.  216; 
Church  V.  Odell,  100  Minn.  98,  110 
N.  W.  346;  Marston  v.  Gould,  69 
N.  Y.  220;  Chester  v.  Dickerson,  54 
N.  Y.  1,  13  Am.  Rep.  550;  Hubbell 
V.  Buhler,  43  Hun  82,  6  N.  Y.  St.' 
578. 


1339 


§    975  LAW    OF    PARTNERSHIP  1340 

with  partnership.^  It  has  been  held  that  a  joint  adventure  is 
merely  a  partnership  of  limited  scope  and  duration.^  "A  joint 
adventure  is  a  limited  partnership,  not  limited  in  a  statutory 
sense  as  to  liability,  but  as  to  its  scope  and  duration,  and  under 
our  law  joint  adventures  and  partnerships  are  governed  by  the 
same  rules. "^  It  has  been  said  that  one  difference  between  a 
partnership  and  joint  adventure  is  that  "a  dissolution  for  proper 
cause  may  be  effected  by  his  coad venturers  against  a  defaulting 
associate  without  a  judicial  decree,'"*  but  in  many  jurisdictions 
this  same  rule  applies  to  partnerships.^"  It  is  said  that  the  dis- 
tinctions between  a  partnership  and  joint  adventure  are  that  a 
joint  adventure  relates  to  a  single  transaction,  and  a  partnership 
to  a  general  business  of  some  particular  kind,^^  that  a  corpora- 
tion may  become  a  party  to  a  joint  adventure,  though  not  a 
partner;^"  that  a  party  to  a  joint  adventure  may  maintain  an 
action  at  law  to  recover  profits  or  advances,  or  enforce  contri- 
butions or  for  breach  of  contract.^^  However,  the  Uniform 
Partnership  Act,  where  adopted,  has  removed  the  first  distinc- 
tion by  permitting  a  corporation  to  become  a  partner,^*  and  one 
partner  may  sue  another  at  law  on  matters  connected  with  part- 
nership affairs  as  to  which  an  accounting  is  not  necessary,  or 
as  to  a  single  unadjusted  item,^^  so  that  it  seems  there  is  no 

6  Hurley   v.    Walton,    63    111.    260;        ^  Saunders  v.   McDonough    (Ala.), 
Pickerell  v.   Fisk,   11   La.  Ann.  277;    67  So.  591. 

Edson    V.    Gates,    44    Mich.    253,    6  lo  See  ante  §§  573,  576. 

N.   W.  645 ;   Williams   v.   Gillies,   75  ii  Camp  v.  United  States,  15  Court 

N.   Y.    197;    Wright  v.    Cumpsty,   41  CI.    (U.    S.)    469;    Pickerell   v.   Fisk, 

Pa.     St.     102.      The    first    American  11  La.  Ann.  277;  McCreery  v.  Green, 

joint  adventure  cases  are:    Hourque-  38  Mich.  172;  Knapp  v.  Hanley,  108 

bie  V.  Girard,  2  Wash.   (C.  C.)   212  Mo.  App.  353,  83  S.  W.  1005;  Febbel 

Fed.    Cas.    No.    6732,    and    Lyles    v.  v.  Kahn,  29  App.  Div.  270,  51  N.  Y. 

Styles,  2  Wash.  (C.  C.)  224,  Fed  Cas.  S.  435. 

No.  8625.  12  Mestier    v.    A.    Chevalier    Pave- 

7  Ross  V.  Willett,  76  Hun  211,  27  ment  Co.,  108  La.  562,  32  So.  520. 
N.  Y.  S.  785,  58  N.  Y.  St.  694 ;  Hub-  "  See  post  §  990. 

bell  V.  Buhler,  43  Hun  82,  6  N.  Y.  i*  Uniform  Partnership  Act,  §  745, 
St.  578.  754. 

8  Ross  V.  Willett,  76  Hun  211,  27        i^  See  ante  §  745. 
N.  Y.  S.  785,  58  N.  Y.  St.  694. 


1341  JOINT    ADVENTURES  §    976 

real  distinction  between  a  joint  adventure  and  what  is  termed 
a  partnership  for  a  single  transaction/^  Though  a  joint  adven- 
ture is  confined  to  one  transaction,  yet  this  may  extend  over  a 
term  of  years/^ 

§  976.  Agreement  and  consideration. — A  contract  of  joint 
adventure  need  not  be  express,  it  may  be  impHed  from  the  con- 
duct of  the  parties.^^  It  is  not  necessary  that  the  interests  and 
profits  of  the  parties  be  definitely  settled  by  the  agreement. ^^ 
The  mutual  promises  of  the  parties  are  sufficient  consideration 
for  the  contract,'"  and  the  furnishing  of  capital  by  the  parties 
is  not  necessary  to  the  validity  of  the  contract."^  A  parol 
agreement  may  be  sufficient  to  establish  a  joint  adventure  in 
the  purchase  and  sale  of  real  estate,  and  is  not  within  the  statute 
of  frauds."-  A  written  contract  as  to  the  rights  of  adventurers 
to  reimbursement  for  purchase  money  supersedes  all  prior  parol 
agreements.^^  Where  there  was  an  oral  agreement  to  divide 
the  profits  realized  from  sale  of  certain  real  estate  and  there- 
after a  written  agreement  as  to  the  profits  of  one  particular  sale 
Avas  executed,  the  written  agreement  superseded  the  oral  agree- 
ment as  to  the  division  of  profits.-*  An  agreement  to  "enter 
into  certain  contracts  for  municipal  and  government  work"  was 
held  not  to  be  limited  merely  to  contracts  for  sewers  and  drains, 

IS  See  ante  §  168.   See  also  Garrison  soAIderton  v.  Williams,  139  Mich. 

V.  Bowman  (Tex.  Civ.  App.),  183  S.  296,  102  N.  W.  753;  Botsford  v.  Van 

W.   70.  Riper,  33  Nev.  156.  110  Pac.  70S  ;  King 

17  Derickson  v.  Whitney,  6  Gray  v.  Barnes,  109  N.  Y.  267,  16  N.  E.  332. 
(Mass.)  248;  Field  v.  Woodmancy,  siyan  Tine  v.  Hilands,  131  Fed. 
10  Cush.  (Mass.)  427;  O'Hara  v.  124;  Boqua  v.  Marshall,  88  Ark.  373, 
Harman,  14  App.  Div.  167,  43  N.  Y.  114  S.  W.  714. 

S.  556;  Taylor  v.  Bradley,  39  N.  Y.        22  King  v.  Barnes,   109  N.  Y.  267, 

129,  1  Abb.  Dec.  363,  100  Am.  Dec.  16  N.  E.  332;  Chester  v.  Dickerson, 
415.  54  N.  Y.  1,  13  Am.  Rep.  550;  Felbel 

18  Saunders  v.  McDonough  (Ala.),  v.  Kahn.  29  App.  Div.  270,  51  N.  Y. 
67   So.   591 ;    Knapp   v.    Hanley,    108  S.  435. 

Mo.  App.  353,  83  S.  W.  1005 ;  Jack-  23  Quinn  v.  Hayden,  219  Mass.  343, 

son  V.  Hooper    (N.  J.  Ch.),  74  Atl.  106  N.  E.  1002. 

130.  24KeiHch  v.  Blum,  214   Pa.  54,  63 
"Goss    V.    Lanin    (Iowa),    152    N.  Atl.  453. 

W.  43. 


§    977  LAW    OF    PARTNERSHIP  1342 

but  to  include  contracts  for  general  municipal  and  government 
work.-''"'  It  has  been  held  that  where  a  syndicate  agreement  is 
unambiguous  it  is  the  only  evidence  of  the  relations  which  the 
parties  sustained  to  each  other,  and  where  a  subscriber  to  such 
agreement  sues  the  managers  on  a  contract  which  he  alleges  they 
made  with  him  under  authority  conferred  by.  the  agreement,  it 
must  be  determined  from  the  agreement  itself  whether  they  were 
partners.-''  The  defendant  in  a  joint  contract  for  manufactur- 
ing and  selling  lumber,  where  the  contract  provided  for  payment 
from  the  proceeds  of  the  actual  cost  of  planing,  loading  and 
selling,  was  not  permitted  to  charge  either  the  reasonable  value 
or  the  customary  charge  for  such  service.-^ 

§  977.  Particular  cases. — It  has  been  held  in  the  following 
cases  that  the  relation  of  joint  adventurers  existed;  where  claim- 
ants in  bankruptcy  agreed  on  joint  account  to  purchase  certain 
bonds  and  stock  of  a  corporation;--  where  an  insurance  solicitor 
received  money  to  buy  stock  in  his  company  to  sell  at  a  profit 
and  promised  to  divide  the  profit ;-°  an  agreement  between  two 
parties  as  to  the  purchase,  sale  and  disposition  of  goods  on  a 
joint  account  ;^°  an  agreement  to  form  a  corporation  to  acquire 
lands  held  under  an  option  ;^^  where  parties  made  an  agreement 
to  procure  an  option  to  further  develop  and  operate  a  mine;^- 
where  two  attorneys  were  to  prosecute  together  claims  on  a  con- 
tingent fee  and  share  equally  in  expenses  and  profits  and  if  one 
should  die  before  the  litigation  was  finished  the  other  was  to 
complete  it  for  their  joint  benefit;'"  where  the  owner  of  a  play 
called  "Neptune's  Brides"  and  a  patented  air  reservoir  which 

25Stitzer  V.    Fonder,   214    Pa.    117,  ^o  i^obsitz  v.  E.  Lissberger  Co.,  154 

63  Atl.  421.  N.  Y.  S.  556. 

2G  Jones    V.    Gould,    123    App.    Div.  si  Saunders  v.  McDonough   (Ala.), 

236,  108  N.  Y.  S.  31.  67  So.  591. 

27  Wisconsin  Sulphite  Fibre  Co.  v.  32  Kent   v.    Costin,    130    Minn.   450, 
D.  K.    Tefifris  Lumber  Co.,   132  Wis.  153  N.  W.  874. 

1,  111  N.  W.  237.  33  Hill    V.    Curtis,    154    App.    Div. 

28  In  re  Kessler,  174  Fed.  906.  662,  139  N.  Y.  S.  428. 

29  Mueller  v.   Smith,   173   111.  App. 
45. 


1343  JOINT    ADVENTURES  §    977 

made  the  play  possible  contracted  to  divide  with  two  other 
parties  the  receipts,  expenses  and  profits  in  connection  with 
their  development  and  use.^*  Where  certain  persons  who  had 
secured  a  right  to  sell  real  estate,  induced  another  to  advance 
the  price  and  take  title  in  his  name  by  guaranteeing  the  repay- 
ment of  the  money  advanced,  with  interest,  the  profits  on  resale 
to  be  divided,  the  transaction  was  held  to-be  a  joint  adventure.^^ 
In  one  case  where  several  persons  had  agreed,  during  a  specified 
time,  to  purchase,  develop  and  sell  real  estate,  title  to  which 
was  to  be  held  by  some  of  them  as  trustees,  and  it  was  subse- 
quently agreed  that  one  of  the  trustees  should  have  active  charge 
of  the  management  and  development  of  the  property  and  of 
making  sales  thereof,  and  such  trustee  thereafter  secured  money 
from  the  parties  to  the  agreement,  proceeded  with  the  develop- 
ment of  the  property,  and  from  time  to  time  made  sales  thereof, 
receiving  the  proceeds  therefrom.  It  was  held  a  joint  adventure 
as  between  the  parties  to  the  agreement,  and  that  after  the 
expiration  of  the  term  the  court  should  direct  a  general  account- 
ing of  all  transactions  between  the  parties.^"  Although  one 
party  to  a  joint  adventure  in  which  he  and  the  plaintiff  leased 
a  theater  for  a  term  of  years  and  divided  profits,  in  order  to 
operate  the  theater  organized  a  corporation  in  which  he  and 
his  employes  held  all  the  stock  and  received  all  the  dividends, 
and  the  plaintiff  was  not  a  stockholder  in  the  organization,  it 
was  held  they  remained  joint  adventurers.^^  An  agreement 
to  procure  an  option  to  develop  a  mine  and  to  form  a  corpora- 
tion and  issue  stock  to  be  divided  among  the  parties  was  held  a 
joint  adventure  or  partnership.^^  It  was  held  that  where  three 
persons  entered  into  a  contract  under  which  two  of  them  in  con- 
sideration of  a  stated  amount  paid,  granted  to  the  third  the 
privilege  of  purchasing  all  the  coal  rights  in  certain  localities 

34  Voegtlin    v.    Bowdoin,    54    Misc.  s^  Brady  v.  Erlanger,  149  N.  Y.  S. 
254,  104  N.  Y.  S.  394.  929. 

35  Irvine  v.  Campbell,  121  Minn.  192,  ss  Kent  v.  Costin,  130  Minn.  450,  153 
141  N.  W.  108.  N.  W.  874. 

3<5  Berg  V.  Gillender,  115  App.  Div. 
288,  100  N.  Y.  S.  792. 


§    977  LAW    OF    PARTNERSHIP  1344 

named  for  a  price  stated,  such  privilege  of  purchase  to  be  in 
force  as  long  as  the  original  options  were  in  force,  or  as  long 
as  they  might  thereafter  be  extended,   and  providing  that   in 
case  of  sale  under  the  agreement  the  profits  arising  therefrom 
should  be  divided  equally  between  the  three  parties  to  the  agree- 
ment, that  in  case  of  a  sale  at  a  figure  above  the  amount  named 
in  the  contract  the  two  parties  selling  the  privilege  were  not  to 
share  in  any  of  the  profits  over  and  above  the  price  stated;  and 
that  the  profits  should  be  determined  by  the  difference  between 
the  price  in  each  of  the  original  options  executed  by  the  owners 
of  the  land  and  the  sale  price,  a  joint  adventure  and  community 
of  interest  was  established  and  that  the  rights  and  interests  of 
the  parties  concerned  are  so  complex  as  to  require  the  interven- 
tion of  equity.^''     A  pooling  agreement  where  the  owners  provide 
for  the  sale  of  the  property  and  for  a  ratable  division  of  profits 
has  been  held  to  be  a  joint  adventure/*^      A  contract  entered 
into  by  a  real  estate  agent  and  a  landowner  to  the  effect  that, 
if  the  agent  would  find  a  purchaser  for  certain  land,  he  should 
have  as  compensation  the  amount  it  should  sell   for  above  a 
certain  price,  is  a  contract  of  agency  and  not  of  joint  adventure.*^ 
In  orjJer  to  authorize  a  recovery  by  plaintiff  of  a  share  of  the 
profits  under  a  speculation  made  by  defendants,  he  must  not 
only  show  that  he  was  interested  in  the  deal,  but  what  interest 
he  had,  and  this  is  not  done  by  showing  previous  deals  in  which 
he  was  interested;  his  interest  in  each  of  them  being  different, 
and  he  must  show  a  contract  between  him  and  defendants;  it 
is  not  enough  that  he  was  interested  in  a  fund  which  the  defend- 
ants used  in  the  transaction  without  his  authority.^^      A  bank 
which  merely  financed  a  cotton  purchase  by  a  broker  was  not 
a  joint  adventurer  with  him/^     If  contributors  to  a  fund  do 

39  Edwards  v.  Hudson,  165  111.  42  whitman  v.  Bartlett  (Ala.),  46 
App.  521.  So.  972. 

40  Green  v.  Higham,  161  Mo.  333,  43  McLean  v.  City  State  Bank  of 
61  S.  W.  798;  Spier  v.  Hyde,  92  App.  Mangum,  Okla.,  210  Fed.  21,  126  C. 
Div.  467,  87  N.  Y.  S.  285.  C.  A.  601. 

41  Manker  v.  Tough,  79  Kans.  46,  98 
Pac.  792. 


1345  JOINT    ADVENTURES  §    978 

not  render  services  and  take  no  part  in  the  performance  of  the 
contract  for  which  they  have  contributed,  though  they  share 
in  the  profits,  they  are  not  joint  adventurers.**  Where,  in  a 
contract  for  the  production  of  a  certain  pubhcation  the  plaintiff 
was  to  do  the  writing,  etc.,  and  the  pubHshing  company  the 
mechanical  work,  etc.,  "the  cash  profits  to  be  divided  one-third 
to  you  (plaintiff)  and  two-thirds  to  us."  and  "your  connection 
to  be  one  of  profit-sharing,"  etc.,  it  was  held  that  the  interest  of 
the  plaintiff  was  that  of  a  profit-sharer  and  not  a  joint  owner." 

§  978.  Good  faith. — Joint  adventurers,  like  any  partners, 
stand  in  a  mutual  relationship  of  trust  and  confidence,  and  must 
act  fairly  with  each  other  and  observe  the  utmost  good  faith  in 
their  dealings. *°  "The  law  is  well  established  that  the  relation 
between  joint  adventurers  is  fiduciary  in  its  character,  and  the 
utmost  good  faith  is  required  of  the  trustee  to  whom  the  deal 
or  property  may  be  intrusted,  and  that  such  trustee  will  be  held 
strictly  to  account  to  his  co-adventurers,  and  that  he  will  not 
be  permitted  by  reason  of  the  possession  of  the  property  or 
profits,  whichever  the  case  may  be,  to  enjoy  an  unfair  advantage, 
or  have  any  greater  rights  in  the  property  by  reason  of  the  fact 

4*  Pierce  v.  McDonald,   153  N.  Y.  L.  R.  A.  216 ;  Runkle  v.  Burrage,  202 

S.  810.  Mass.    89,    88    N.    E.    573;    Field    v. 

45  Bryan    v.    Thompson    Pub.    Co.,  Woodmancy,   10  Cush.    (Mass.)    427; 

258  Mo.  187,  167  S.  W.  440.  Gasser  v.  Wall,  111  Minn.  6, 126  N.  W. 

46Lyles  V.  Styles,  2  Wash.   (U.  S.)  284;  Church  v.  Odell,   100  Minn.  98, 

224,  Fed.   Cas.  No.  8625;  Delmonico  110  N.  W.  346;  Seehorn  v.  Hall,  130 

V.    Roudebush,    5    Fed.    165,    2    Mc-  Mo.  257,  32  S.  W.  643,  51  Am.  St.  562 ; 

Crary   18;    Saunders   v.   McDonough  Jackson  v.  Hooper,  76  N.  J.  Eq.  185, 

(Ala.),  67   So.  591;   Boqua  v.   Mar-  74  Atl.    130;    Selwyn   v.   Waller,    142 

shall,   88  Ark.  2,73,   114   S.   W.   714;  N.   Y.   S.   1051;   Getty  v.   Devlin.  54 

Cole  V.  Bacon,  63  Cal.  571;  King  v.  N.  Y.  403;  Niles  v.  Lee   (S.  Dak.), 

Wise,  43  Cal.  628 ;  Humburg  v.  Lotz  140  N.  W.  259 ;   Bond  v.  Taylor,  68 

4  Cal.  App.  438,  88  Pac.  510;  Stark-  W.   Va.   317,   69   S.    E.    1000;    Berry 

weather   v.    Jenner,    27   App.    D.    C.  v.  Colborn,  65  W.  Va.  493,  64  S.  E. 

348;    Calkins   v.   Worth,   215   111.   78,  626,  17  Ann.  Cas.  1018;  Knudson  v. 

74   N.   E.   81 ;    Maxwell   v.    McWill-  George,  157  Wis.  520.  147  N.  W.  1003 ; 

iams,  145  111.  App.  155 ;  Goss  v.  Lanin  Jones   v.    Kinney,    146  Wis.    130,    131 

(Iowa),  152  N.  W.  43;  Hambleton  v.  N.  W.  339,  Ann.  Cas.  1912  C,  200. 
Rhind,  84  Md.  456,  36  Atl.  597,  40 


§    978  LAW    OF    PARTNERSHIP  1346 

that  he  is  in  possession  of  the  property  or  profits  as  trustee 
than  his  x:o-adventurers  are  entitled  to.  The  mere  fact  that  he 
is  intrusted  with  the  rights  of  his  co-adventurers  imposes  upon 
him  the  sacred  duty  of  guarding  their  rights  equally  with  his 
own,  and  he  is  required  to  account  strictly  to  his  co-adventurers, 
and,  if  he  is  recreant  to  his  trust,  any  rights  they  may  be  denied 
are  recoverable.""  "Where  several  persons  by  common  agree- 
ment join  as  buyers  of  property,  each  to  acquire  a  fractional 
undivided  interest  therein  proportionate  to  the  amount  paid  in 
by  him,  they  owe  to  one  another  in  such  enterprise  the  duty  of 
good  faith  and  full  and  fair  disclosure,  and  neither  one  can  by 
secret  commission  or  rebate  obtain  any  advantage  over  his  co- 
adventurers.  The  consent  of  each  obtained  upon  the  under- 
standing and  belief  that  the  funds,  interest  and  aid  of  each  is 
and  will  be  given  to  the  enterprise  within  the  bounds  agreed 
upon.  For  one  by  secret  treaty  with  the  seller  to  obtain  a  com- 
mission or  rebate  is  a  fraud  upon  his  fellow  buyers."*^  Thus, 
where  parties  jointly  leased  a  theater  under  an  agreement  to 
divide  profits,  and  the  business  was  left  under  the  control  of  one 
of  them,  he  was  bound  to  act  for  the  benefit  of  both,*''  If  one 
co-adventurer  without  the  other's  knowledge  consummates  a  deal 
for  the  purchase  of  land  which  they  had  bargained  for,  to  part 
of  which  the  vendor's  title  is  found  to  be  faulty,  whereby  such 
one  receives  a  profit  in  consideration  of  carrying  out  the  pur- 
chase of  the  portion  to  which  a  good  title  was  furnished,  this 
is  contrary  to  the  policy  of  the  law.°°  Persons  who  receive  con- 
fidential information  with  a  view  to  secure  their  participation 
in  joint  adventure  are  held  to  be  disqualified  to  acquire  interests 
antagonistic  to  the  person  from  whom  they  received  such  infor- 
mation.^^  A  physician  who  took  title  to  property  in  his  own 
name  on  an  agreement  that  he  and  the  patient  would  each  put 

47  Botsford  V.  Van  Riper,  33  Nev.  «  Brady  v.  Erlanger,  149  N.  Y.  S. 
156,  110  Pac.  705.  929. 

48  Jones   V.   Kinney,    146   Wis.    130,  ^o  Curry  v.  La  Fon,  133  Mo.  App. 
131    N.   W.   339,   Ann.    Cas.    1912   C,  163,  113  S.  W.  246. 

200.  siGoss   V.    Lanin    (Iowa),    152   N. 

W.  43. 


1347  JOINT    ADVENTURES  §    978 

in  half  the  price,  was  compelled  to  convey  an  undivided  one- 
half  to  the  patient,  where  he  mortgaged  the  property  for  his  part 
of  the  price. ^"  Where  one  who  was  to  receive  a  commission 
for  the  sale  of  lands  induced  others  to  join  with  him  in  its  pur- 
chase, each  to  share  proportionately  in  profits,  they  are  entitled 
to  share  in  his  commission. ^^  One  who  accepted  an  offer  to 
buy  mining  property  on  which  he  had  an  option  on  the  pur- 
chaser's agreement  to  pay  him  a  share  of  profits  on  resale,  is 
bound  to  disclose  to  them  the  actual  option  price.^*  Those  who 
aid  one  adventurer  to  procure  an  advantage  over  the  others  may 
in  equity  be  equally  liable  with  him.^^  One  who  accepts  a  con- 
sideration for  his  share  in  a  joint  adventure  is  bound,  in  the 
absence  of  fraud,  duress  or  mistake.^*'  An  appropriation  of 
common  property  to  individual  use  may  either  constitute  a  con- 
version or  create  the  relation  of  debtor  and  creditor.^^  A  party 
to  a  joint  adventure  is  bound  to  use  due  diligence  in  carrying 
out  an  undertaking,  but  does  not  guarantee  success,^*  As  in 
the  case  of  one  rendering  services,  a  joint  adventurer  contracts 
for  good  faith  and  integrity,  but  not  for  inerrancy,  and  is  liable 
for  negligence,  fraud  or  dishonesty,  but  not  for  nonnegligent 
mistakes,  though,  if  he  contracts  for  a  particular  or  extraordi- 
nary degree  of  skill  or  expertness,  a  higher  than  ordinary  degree 
of  diligence  and  skill  will  be  required  of  him.^^  Where  a  plain- 
tiff sued  to  recover  one-half  of  a  $3,000  advantage  obtained  by 
defendant  over  him  by  concealment  in  the  purchase  of  property 
used  in  a  joint  enterprise,  the  fact  that  plaintiff  and  defendant 

52McNiel   V.   Holmes    (Ore.),    ISO  ^s  Hambleton    v.    Rhind,    84    Md. 

Pac.  255.  456,  36  Atl.  597,  40  L.  R.  A.  216. 

53  Church  V.  Odell,  100  Minn.  98.  ^e  Qteri  v.  Oteri,  38  La.  Ann.  403. 
110  N.  W.  346;  Seehorn  v.  Hall,  130  "  Hourquebie  v.  Girard,  2  Wash. 
Mo.  257,  32  S.  W.  643,  51  Am.  St.  (C.  C.)  212,  Fed.  Cas.  No.  6732 ;  Beck- 
562;  Getty  v.  Devlin,  54  N.  Y.  403;  with  v.  Talbot,  2  Colo.  639;  Morris 
Sheldon  v.  Wood,  2  Bosw.  (N.  Y.)  v.  Wood  (Tenn.  Ch.),  35  S.  W. 
267.  1013. 

54  Rich  V.  Teasley,  194  Fed.  534 ;  ss  Sicklesteel  v.  Edmonds,  158  Wis. 
McCutcheon    v.    Smith,    173    Pa.    St.  122,  147  N.  W.  1024. 

101,  33  Atl.  881.  59  Knudson  v.  George,  157  Wis.  520, 

147  N.  W.  1003. 


§    979  LAW    OF    PARTNERSHIP  1348 

had  formed  a  corporation  to  conduct  the  enterprise  after  the 
purchase  of  the  property,  and  that  plaintiff  sold  his  shares  at 
a  profit  did  not  affect  his  right  of  recovery  for  the  conceal- 
ment.^" Where  real  estate  is  purchased  jointly  it  is  implied  that 
each  is  engaged  in  the  enterprise  solely  for  the  mutual  benefit 
and  common  advantage  of  all,  and  that  each  has  a  common 
interest  according  to  the  amount  of  his  subscription.*'^  Where 
there  was  a  contract  to  purchase  land  on  execution  sale,  which 
permitted  one  party  to  bid  on  his  own  account  as  long  as  any 
other  bidder  than  plaintiff  should  make  a  bid,  he  was  entitled 
to  bid  for  himself  when  third  persons  bid  and  the  other  party 
failed  to  bid.'=^ 

§  979.  Property  involved. — If  title  is  taken  in  the  name  of 
one  party  to  property  purchased  with  funds  contributed  for  the 
joint  adventure,  he  holds  it  as  trustee  for  the  other  adventurers,®^ 
and  property  bought  with  the  proceeds  of  a  joint  adventure 
belongs  to  all  the  adventurers  as  joint  property.*'*  But  where 
one  party  advances  all  the  money  for  purchasing  the  property 
and  the  others  are  to  contribute  services  for  a  share  in  the  profits, 
the  title  to  the  property  is  in  the  one  who  furnishes  the  money.®° 
It  has  been  held  that  parties  to  a  joint  adventure  have  the  power 
and  interest  of  a  partner  as  to  the  disposition  of  property.®*' 
The  power  to  bind  the  others  by  disposing  of  the  property  may 
be  given  to  a  majority.®^  A  sale  of  the  property  made  in  good 
faith  by  the  party  having  power  to  sell  binds  all  the  parties.*'^ 

fio  Humburg  V.  Lotz,  4  Cal.  App.  438,  ^^  Keller     v.     Fitzgerrell,     158     III. 

88  Pac.  510.  App.   534;    Scudder   v.   Budd,   52   N. 

61  Lomita    Land    &    Water    Co.    v.  J.  Eq.  320,  26  Atl.  904 ;  Ross  v.  Wil- 

Robinson,  154  Cal.  36,  97  Pac.  10,  18  lett,  76  Hun  211,  27  N.  Y.  S.  785,  58 

L.  R.  A.  (N.  S.)   1106.  N.   Y.   St.   694;    Moore  v.   Hunting- 

«2Gloeckner    v.    Kittlaus,    192    Mo.  ton,  7   Hun    (N.   Y.)    425;    Bowman 

477,  91  S.  W.  126.  v.  Saigling   (Tex.  Civ.  App.),  Ill   S. 

•     63  Irvine  v.  Campbell,  121  Minn.  192,  W.  1082 ;   Smith  v.   Watson,  2  B.  & 

141  N.  W.  108;  Botsfordv.  Van  Riper,  C.  401,  9  E.  C.  L.  180. 

Z3  Nev.  156.  110  Pac.  705;  Freschel  v.  ee  Lyles  v.  Styles,  2  Wash.  (U.  S.) 

Bellesheim,  47  Hun  6Z6,  14  N.  Y.  St.  224,  Fed.  Cas.  No.  8625. 

610.  67  Morey  v.  Clopton,  103  Mo.  App. 

64  Hayden     v.     Eagleson,    47    Hun  368,  77  S.  W.  467.                                   , 

639,  15  N.  Y.  St.  200.  es  Marston  v.  Gould,  69  N.  Y.  220. 


1349  JOINT    ADVENTURES  §    980 

§  980.  Power  to  bind  co-adventurer. — The  power  of  a  joint 
adventurer  to  bind  his  co-adventurer  is  more  restricted  than 
that  of  a  partner  in  a  general  mercantile  business,  and  it  is  held 
that  an  adventurer  is  not  bound  by  the  act  of  his  co-adventurer 
in  creating  indebtedness  in  conducting  a  joint  publishing  ven- 
ture.^^  A  third  person,  the  inventor  and  patentee  of  a  gas 
engine  and  his  financial  backer,  who  licensed  plaintiff  to  manu- 
facture such  engines,  and  agreed  to  reimburse  him  for  the 
building  of  an  experimental  engine  in  case  of  failure,  were  held 
joint  adventurers,  and  an  agreement  by  one  to  extend  the  time 
to  build  the  engine  was  binding  on  the  other.'"  Officers  and 
managers  of  a  syndicate  who  issued  a  prospectus  in  relation  to 
a  holding  corporation,  or  who  adopted  and  recognized  the  pros- 
pectus, are  liable  for  any  fraud  or  misrepresentation  contained 
in  it,  even  though  innocent  of  personal  wrongdoing. '^^  All  of 
the  managers  of  a  syndicate  who  intrusted  the  management  of 
certain  property  to  one  of  their  number,  are  equally  liable  for 
his  acts.'^^  Where  a  joint  adventurer  purported  to  act  solely  for 
himself  in  his  dealings  with  a  third  person  and  the  dealings  were 
outside  of  the  scope  of  the  joint  business,  the  other  adventurer 
was  not  liable  for  the  wrongful  acts  of  such  person  in  such  deal- 
ings,'^^  The  courts  will  not  impose  on  the  parties  to  the  con- 
tract a  duty  or  obligation  not  naturally  inferable  from  its  terms.'* 
Where  an  owner  of  one-third  of  a  paper  as  an  investment  had 
no  knowledge  of  contracts  and  debts  incurred  by  the  two  other 
owners  who  managed  the  business,  and  had  never  had  an  agree- 
ment with  them,  it  was  held  he  could  not  be  held  jointly  hable  with 
them.'^  In  one  case  where  parties  were  held  not  to  be  partners  be- 
cause no  mutual  agency  existed,  the  court  held  them  to  be  joint 

'^^  Strohschein      v.      Kranich,      157  ^s  Lawrence  v.  Streeter,  130  Minn. 

Mich.  335,  122  N.  W.  178.  64,  153  N.  W.  126. 

70  Anderson  v.   Weber,    148   N.   Y.  74  Hawkes    v.    Taylor,    175    111.    34, 
S.  133.  51  N.  E.  611. 

71  Lane  v.  Fenn,  65  Misc.  336,   120  ^5  Strohschein      v.      Kranich,      157 
N.  Y.  S.  237.  Mich.  335.  122  N.  W.  178,  16  Detroit 

"Jones  V.   Gould,  209  N.   Y.  419,     Leg.  N.  385. 
103  N.  E.  720. 


§    981  LAW    OF    PARTNERSHIP  1350 

adventurers,  and  stated  as  a  distinction  between  partnership  and 
joint  adventure  that  there  is  no  mutual  agency  in  the  latter 
relation,  but  this  case  goes  farther  than  most  decisions.'^  Cir- 
cumstances may  be  shown  to  discover  whether  a  party  engaged 
with  another  in  a  joint  enterprise  did  apparently  authorize  him 
to  pledge  property  of  the  joint  enterprise  to  secure  an  individual 
debt."  The  managers  of  a  syndicate  who  are  not  partners  are 
not  personally  bound  by  the  independent  agreement  of  one  of 
them."  Where  a  contract  provided  that  one  party  was  to  fur- 
nish land,  farming  implements  and  stock  and  the  other  to  employ 
laborers  and  superintend  the  work  necessary  in  producing  the 
crop,  and  disposing  of  it  on  the  market  at  such  time  as  might  be 
fixed  by  the  mutual  consent  of  the  associates,  it  was  held  neither 
could  withhold  his  consent  arbitrarily  to  a  sale  after  the  expiration 
of  a  reasonable  time  after  the  product  was  ready  for  the  market, 
and  such  refusal  to  consent  after  the  making  of  the  demand, 
would  entitle  the  other  to  damages  as  of  the  time  of  refusal,  and 
constitute  a  breach  of  contract.''^  In  a  contract  for  the  con- 
struction of  a  dredge  to  be  used  in  performing  a  contract,  a 
party  interested  in  the  latter  authorized  his  joint  adventurers  to 
borrow  money  to  build  the  dredge  and  mortgage  it  for  that  pur- 
pose, and  this  authority  constituted  a  power  coupled  with  inter- 
est which  could  not  be  revoked.^" 

§  981.  Abandonment  of  the  adventure. — If  the  purposes 
of  the  adventure  have  not  been  accomplished,  none  of  the  par- 
ties has  a  right  to  abandon  the  adventure  unless  his  copartners 
consent,  and  one  who  does  so  is  liable  in  damages  for  the  conse- 
quences of  his  act.^^     It  seems  that  the  measure  of  the  recovery 

76  Jackson  V.  Hooper,  76  N.  J.  Eq.  s^The  Seattle,  170  Fed.  284,  95  C. 
185,  74  Atl.  130.  C.  A.  480. 

77  Smith  V.  First  Nat.  Bank  of  Al-  ^i  Saunders  v.  McDonough  (Ala.), 
bany,  151  App.  Div.  317,  135  N.  Y.  67  So.  591;  Alderton  v.  Williams, 
S.  985.  139  Mich.  296,   102  N.  W.  753;   Mc- 

78  Jones  V.  Gould,  123  App.  Div.  Creery  v.  Green,  38  Mich.  172; 
236,  108  N.  Y.  S.  31.  Streat  v.  Wolf,  135  App.  Div.  81,  119 

79  Baker  v.  Keever,  130  Ga.  257,  60  N.  Y.  S.  779 ;  Taylor  v.  Bradley,  39 
S.  E.  551.  N.  Y.  129,  1  Abb.  App.  Dec.  Z62>,  100 


1351  JOINT    ADVENTURES  §    981 

of  a  party  suing  for  such  damages  is  "the  extent  of  what  he 
would  have  gained  if  he  had  been  permitted  to  complete  the 
contract,  providing,  however,  such  damages  would  be  proximate 
and  a  natural  consequence  of  defendant's  breach  and  made  to 
appear  by  reasonably  certain  data."^"  Upon  one  party's  aban- 
donment of  the  venture  it  is  the  duty  of  the  other  parties  to 
use  reasonable  diligence  to  minimize  the  damages  so  caused.^* 
It  has  been  held  that  an  adventure  as  to  which  there  is  no  time 
limit,  may  be  terminated  on  notice,^*  although  it  can  not  be  ter- 
minated as  to  a  member,  even  for  a  valid  reason,  without  notice. ^^ 
And  it  may  be  dissolved  if  cause  exists  sufficient  for  a  decree  of 
dissolution  of  a  partnership. ®°  A  party  is  not  bound  to  go  on 
with  an  adventure,  nor  liable  in  damages  for  refusal,  where  its 
continuation  will  only  entail  further  loss.^^  Nor  is  a  party 
liable  in  damages  who  refuses  to  go  ahead  after  another  party 
has  abandoned  the  adventure.^*  Where  two  parties  jointly 
obtained  an  option  for  the  purchase  of  land  and  agreed  to  pay 
installments  of  the  price  on  certain  dates,  it  was  held  that  one 
of  the  joint  purchasers  was  under  no  obligation  to  pay  an  install- 
ment either  for  his  own  benefit,  or  that  of  the  other  purchaser, » 
and  that  on  failure  to  pay,  either  of  the  purchasers  was  at  liberty 
to  make  a  new  contract  of  purchase  excluding  the  other  from 
its  benefits. ^^  So,  a  subscriber  to  a  fund  for  the  purchase  of 
land,  who  had  also  agreed  to  loan  a  part  of  the  money  needed 
to  complete  the  purchase,  has  the  right  to  withdraw  from  such 

Am.    Dec.    415;    Chambers    v.    Mitt-  90,  72  S.  E.  638;  Annaud  v.  Tupper, 

nacht,  23  S.  Dak.  449,  122  N.  W.  434;  21    N.    Scotia   11,    16   Can.    Sup.    Ct. 

Clarkson   v.   Whitaker,   12  Tex.   Civ.  718;  Allan  v.  McHeffey,  5  Nova  Sco- 

App.  483,  33  S.  W.  1032;  Davidor  v.  tia  120. 

Bradford,   129  Wis.  524,   109  N.  W.  §5  Saunders  v.  McDonough  (Ala.), 

576.     See   also   Jacobson   v.    McCul-  67  So.  591. 

lough,  113  Minn.  332,  129  N.  W.  759.  ss  Hubbell  v.   Buhler,   43   Hun   82, 

(Where  the  venture  was  the  promo-  6  N.  Y.  St.  578. 

tion  of  a  corporation.)  87  Hart  v.  McDonald,  52  La.  Ann. 

82  McCreery    v.    Green,    38    Mich.  1686,  28  So.  169. 

172.  88  Field    V.    Woodmancy,    10    Cush. 

83  Davidor   v    Bradford,    129   Wis.     (Mass.)   427. 

524,   109  N.  W.  576.  89  Commercial     Bank     v.     Weldon, 

«*  Edwards  v.  Johnson,  90  S.  Car.     148  Cal.  601,  84  Pac.  171. 

35 — Row.  ON  Partn. — Vol.  2 


§    982  LAW    OF    PARTNERSHIP  1352 

agreement  where  the  other  subscribers  failed  to  raise  the  balance 
of  the  money  needed  to  make  the  payment.^"  After  abandon- 
ment of  a  joint  adventure  by  some  of  the  parties,  the  others  who 
go  ahead  with  it  are  not  bound  to  account  for  profits  to  those 
abandoning  it.°^  And  if  one  party  refuses  to  advance  funds  he 
has  abandoned  the  adventure  and  can  not  hold  the  others  to 
account  for  profits  which  they  afterwards  made  from  it.°'  There 
may  be  a  termination  of  a  joint  adventure  by  consent  of  the 
adventurers,  after  which  there  is  no  liability  to  share  losses.^^ 
Though  one  party  to  an  adventure  may  abandon  it  for  himself, 
he  can  not  abandon  it  for  others.^* 

§  982.  Right  to  profits. — All  the  profits  arising  from  a 
joint  adventure  belong  to  all  the  parties,  and  one  party  has  no 
right  to  retain  secret  profits.®^  Thus  where  a  prospector  sent 
to  locate  mining  claims  under  a  joint  agreement,  after  the  termi- 
nation of  a  joint  agreement,  secured  mining  claims  from  persons 
whom  he  met  while  the  agreement  was  in  effect,  the  other  par- 
ties to  the  adventure  were  entitled  to  a  share  in  the  profits. ®® 
If  there  is  no  agreement  otherwise,  profits  are  to  be  divided 
equally  between  the  parties  to  the  adventure,^^  even  though  they 

90  Sicklesteel  v.  Edwards,  158  Wis.  155 ;  Jordan  v.  Markham,  130  Iowa 
122,  147  N.  W.  1024.  546,   107   N.  W.   613;    Hambleton   v. 

91  Commercial  Bank  v.  Weldon,  Rhind,  84  Md.  456,  36  Atl.  597,  40  L. 
148  Cal.  601,  84  Pac.  171;  Goodell  R.  A.  216;  Petrie  v.  Torrent,  100  Mich. 
V.  Smith.  9  Cush.  (Mass.)  592;  Pros-  117,  58  N.  W.  690,  59  N.  W.  941; 
ser  V.  Manley,  122  Minn.  448,  142  N.  Church  v.  Odell,  100  Minn.  98,  110  N. 
W.  876;  Scott  v.  Clark,  1  Ohio  St.  W.  346;  Seehorn  v.  Hall,  130  Mo. 
382.  257,  32  S.  W.  643,  51  Am.  St.  562; 

92  Yerger's  Appeal,  100  Pa.  St.  88.  Lind  v.  Webber,  36  Nev.  623,  134  Pac. 

93  Shaw  V.  Gandolfo,  9  La,  Ann.  461;  Dunlop  v.  Richards,  2  E.  D. 
32.  Smith  (N.  Y.)    181;  Selwyn  v.  Wal- 

94Goss   V.    Lanin    (Iowa),    152    N.  ler,  142  N.  Y.  S.  1051;  Berry  v.  Col- 

W.  43.  born,  65  W.  Va.  493,  64  S.  E.  636; 

95  Wann  v.  Kelley,  5  Fed.  584,  2  Mc-  Russell   v.    Austwick,    1    Sim.    52,   27 

Crary  (U.  S.)  628;  King  v.  Wise,  43  Rev.   Rep.    157;   Allan   v.   McHeflfey, 

Cal.   628;   Rever  v.   Blaisdell    (Colo.  5  Nova  Scotia  120. 

App.),  143  Pac.  385;  Yale  Gas  Stove  96  Lind  v.  Webber,  36  Nev.  623,  134 

Co.  V.  Wilcox,  64  Conn.  101,  29  Atl.  Pac.  461. 

303,  25  L.  R.  A.  90.  42  Am.  St.  159;  s^  Van   Tine  v.    Hilands,    131    Fed. 

Maxwell  v.  McWilliams,  145  111.  App.  124 ;    Wetmore    v.    Crouch.    ISO    Mo. 


1353  JOINT    ADVENTURES  §    982 

did  not  contribute  to  the  capital  equally.^^  The  proportion  in 
which  profits  are  shared  is  often  fixed  by  contract. "^  A  right 
to  one-third  of  the  profits  is  not  a  right  to  share  in  one-third  of 
gross  amounts  received.^  It  was  held  that  where  producers  of 
a  play  under  their  contract  were  to  produce  it  not  as  partners, 
but  merely  to  share  profits  and  losses,  one  might  assign  a  portion 
of  his  interest  in  profits  to  a  third  person."  In  a  case  where 
some  of  the  parties  to  a  joint  agreement  failed  to  contribute 
temporary  advances  for  the  development  of  the  property,  where 
no  demand  for  contribution  was  ever  made,  and  the  proceeds 
were  sufficient  to  repay  advances,  it  was  held  that  they  did  not 
forfeit  their  right  to  share  in  the  profits.^  But  where  a  plaintiff 
failed  to  pay  his  proportionate  share  to  the  estate  of  a  de- 
ceased associate  in  a  joint  adventure  to  purchase  land,  it  was 
held  that  he  was  not  entitled  to  demand  his  percentage  in  the 
land  so  purchased.*  So,  generally,  an  adventurer  who  fails 
to  pay  his  share  of  expense  is  precluded  from  sharing .  in 
proceeds.'^  In  a  joint  adventure  profits  means  the  net  amount 
after  all  proper  expenses  incident  to  the  business  have  been 
deducted.*'  The  term  "net  profits"  means  the  entire  gain 
in  a  venture  after  the  deduction  from  the  net  value  of  all 
assets  on  hand,  the  capital  invested  and  all  outstanding  lia- 
bilities.^     They   are   not   limited   to    money,    but   may   consist 

671,  51  S.  W.  738;  Knapp  v.  Hanley,  *  Hedges   v.    Mountjoy,    149   N.   Y. 

108   Mo.   App.   353,   83   S.   W.    1005;  S.  869. 

Furman  v.  McMillian,  2  Lea  (Tenn.)  ^  Saunders  v.   McDonough    (Ala.), 

121.  67  So.  591.  See  also  Miller  v.  Elit- 
es Withers  V.  Pemberton,  3  Coldw.  terfield,    79    Cal.    62,    21    Pac.    543; 

(Tenn.)  56;  Rankin  v.  Black.  1  Head  Goodell   v.    Smith,   9   Cush.    (Mass.) 

(Tenn.)    650;   Gee  v.   Gee,   2   Sneed  592;  Scott  v.  Clark,  1  Ohio  St.  382. 

(Tenn.)   395.  6  Doane    v.    Adams,    IS    La.    Ann. 

90  Thurston  v.  Hamblin,  199  Mass.  350;  Richardson  v    Dickinson,  26  N. 

151,  85  N.  E.  82.  H.  217;    Scott  v.   Clark,    1    Ohio    St. 

1  Simmons  v.  Lima  Oil  Co.,  71  N.  382;    Jones    v.    Davidson,    2    Sneed 

J.  Eq.  174,  63  Atl.  258.  (Tenn.)    447;    Chilberg    v.    Jones,    3 

2Selwyn  v.  Walter,  160  App.  Div.  Wash.  530,  28  Pac.  1104. 

725,  146  N.  Y.  S.  7.  7  Thurston   v.   Hamblin,   199  Mass. 

sLind  V.  Webber,  36  Nev.  623,  134  151,  85  N.  E.  82. 

Pac.  461. 


§    983  LAW    OF    PARTNERSHIP  1354 

of  a  portion  of  the  unsold  property  which  was  the  subject 
of  the  adventure,^  and  they  are  presumably  determined  accord- 
ing to  the  ordinary  rules  of  business."  In  a  pooling  agreement 
in  which  it  was  provided  that  the  parties  share  in  the  profits  or 
earnings  of  the  pooled  property,  neither  party  can  claim  a  share 
of  the  earnings  of  the  property  which  he  contributed,  but  only 
out  of  the  earnings  of  the  aggregate  property,  of  which  he  can 
claim  a  distributive  share/^ 

§  983.  Sharing  of  losses. — As  a  general  rule  all  the  par- 
ties to  a  contract  of  joint  adventure  must  share  in  its  rlsks/^ 
The  same  rule  applies  to  sharing  losses  as  to  sharing  profits,  that 
in  the  absence  of  agreement  the  parties  must  share  equally  there- 
in,^" even  where  contributions  are  unequal,^^  though  it  has  been 
held  that  where  one  party  is  to  furnish  the  capital  and  the  other 
services,  the  latter  is  not  liable  for  any  part  of  the  losses.^*  So 
a  party  who  has  in  good  faith  paid  losses  or  expenses  is  entitled 
to  recover  from  the  others  their  pro  rata  share.^^  It  has  been 
held  that  if  the  venture  is  in  the  purchase  and  sale  of  land,^^ 
or  goods,^^  there  is  no  liability  for  loss  until  the  sale  has  been 
made.  Losses  caused  wholly  by  the  negligence  or  misconduct 
of  one  party  must  be  borne  by  him.^^     Where  one  party  assumed 

^  Jones  V.  Davis,  48  N.  J.  Eq.  493,  is  Gee  v.   Gee,   2    Sneed    (Tenn.), 

21  Atl.  1035;  Scott  v.  Clark,  1  Ohio  395;  Withers  v.  Pemberton,  3  Coldw. 

St.  382.  (Tenn.)     56;    Rankin    v.    Black,     1 

oChilberg  v.   Jones,   3   Wash.   530,  Head  (Tenn.)  650. 

28  Pac.  1104.  i*Rau  v.  Boyle,  5  Bush  (Ky.)  253. 

!•>  Kennebec  &c.   R.   Co.   v.   White,  is  Lyles  v.  Styles,  2  Wash.   (C.  C.) 

38  Maine  63.  224,  Fed.   Cas.  No.  8625 ;   Runkle  v. 

11  Hourquebie  v.    Girard,  2   Wash.  Burrage,  202  Mass.  89,  88  N.  E.  573 ; 
(C.  C.)  212,  Fed.  Cas.  No.  6732.  Northrup   v.    Colter,    150    Mo.    App. 

12  Hart  V.  McDonald,  52  La.  Ann.  639,    131    S.    W.    364 ;    McMillan    v. 
1686,  28  So.  169;  Tuyes  v.  Avegno,  Whitley  (Utah),  113  Pac.  1026. 

23  La.  Ann.  177;  Claflin  v.  Godfrey,  i^  Roehl  v.   Porteous,  51   La.  Ann. 

21     Pick.     (Mass.)     1;     L'Engle    v.  1746,  26  So.  440. 

Smith,    48    Mo.    276;    Timberlake    v.  i7  Jones   v.    McNally,   53   Misc.   59, 

Hughes,  65  Mo.  App.  640;   Floyd  v.  103  N.  Y.  S.  1011. 

Efron,   66  Tex.  221,    18   S.   W.   497;  is  Hourquebie   v.    Girard,   2    Wash. 

Saunders  v.  McDonough    (Ala.),  67  (C.  C)  212;  Fed.  Cas.  No.  6732;  Sul- 

So.  591.  livan  v.  Ross,  124  Mich.  287,  82  N. 


1355  JOINT    ADVENTURES  §    984 

the  risks  of  the  transaction  and  would  have  reaped  the  profits 
thereof  and  the  other  party  held  merely  for  security  the  legal 
title  to  a  shipment  of  coffee  which  was  the  subject  of  the  ven- 
ture, and  his  interest  in  the  venture  was  confined  to  a  reim- 
bursement of  his  advances,  the  first  party  should  bear  the  loss.^° 

§  984.  Contribution. — Where  all  parties  are  to  contribute 
equally  to  capital  and  expenses,  one  who  has  advanced  more 
than  his  share  may  compel  the  others  to  reimburse  him  as  for 
money  paid  for  their  use.^"  It  has  even  been  held  that  on  the  re- 
fusal of  a  party  to  continue  in  a  plan  for  the  management  of  the 
business,  he  is  not  relieved  of  his  obligation  to  contribute."^  If 
one  party  is  insolvent  or  unable  to  pay  his  share  the  other  parties 
to  a  contract  of  joint  adventure  who  are  able  to  pay  must  con- 
tribute equally  to  the  share  of  such  party."  Under  an  agree- 
ment whereby  plaintiff  and  defendants  were  to  purchase  land 
jointly  upon  equal  terms,  for  their  mutual  benefit,  it  was  held 
that  defendants  must  account  to  plaintiff  for  money  which  they 
received  in  excess  of  his  proportionate  part  of  the  purchase 
price. -^  Where  one  party  loses  his  share  of  profits  through  an 
employe's  dishonesty,  but  on  account  of  his  own  negligence,  the 
other  party  is  not  bound  to  contribute  to  the  loss."*  One  party 
can  not  recover  from  another  on  a  loss  until  it  has  been  actually 
incurred  or  it  is  reasonably  certain  that  it  will  take  place. "^  If, 
after  the  settlement  and  dissolution  of  a  joint  adventure,  one  party 
who  has  purchased  its  uncollected  assets  from  his  associates  suf- 
fers loss  thereon,  he  can  not  recover  from  the  other  parties  any 

W.  1071.     See  Hesketh  v.  Blanchard,  21  Pillsbury     v.     Pillsbury,     20     N. 

4  East  143.  H.  90. 

"  Irby   V.    Cage,    Drew   &    Co.,    46  22  Kimball    v.    Williams,    51    App. 

So.  670,  121  La.  615.  Div.  616.  65   N.   Y.   S.  69;   Lowe  v. 

20  Buckmaster    v.     Grundy,     8     111.  Dixon,  16  Q.  B.  D.  455. 

626 ;  Tuyes  v.  Avegno,  23  La.  Ann.  23  McMuUen    v.    Harris,    165    Iowa 

177;    Doane  v.  Adams,    15   La.   Ann.  703,  147  N.  W.  164. 

350;    Pillsbury    v.    Pillsbury,    20    N.  24  Archibald   v.    De   Lisle,   25    Can. 

H.  90;  Stover  v.  Flack,  30  N.  Y.  64;  Sup.  Ct.  1. 

Finlay   v.    Stewart,    56    Pa.    St.    183 ;  25  Stoddard    v.    Murdock,    Zl    Mo. 

Brady    v.    Colhoun,    1    Penr.    &    W.  580. 
(Pa.)    140. 


§    985  LAW    OF    PARTNERSHIP  1356 

portion  of  his  loss.^"  It  has  also  been  held  that  a  party  agreeing  to 
render  services  in  connection  with  the  sale  of  a  property  may  be 
released  from  a  share  in  liability  for  loss  if  the  place  of  sale  as 
specified  in  the  contract  is  changed,  even  though  he  has  consented 
to  such  a  change.^^  The  party  entitled  to  contribution  for  losses 
may  recover  interest  from  the  date  of  payment,^^  or  from  the 
time  notice  of  the  loss  is  received  by  the  other  party. ^'^  After 
a  project  has  failed  the  subscribers  are  not  entitled  to  contribu- 
tion for  disbursements  for  traveling  or  other  expenses.^"  No 
suit  can  be  brought  by  either  party  on  a  single  item  in  such  a 
case,  but  all  losses  must  be  adjusted  by  accounting  and  upon 
the  one  claiming  a  balance  due  rests  the  burden  of  proof. ^^  If 
a  party  to  an  adventure  abandons  it  for  just  cause,  all  must  share 
equally  any  losses  sustained  up  to  that  time.^"  In  absence  of 
agreement  it  is  presumed  that  parties  are  to  contribute  equally. ^^ 

§  985.  Settlement — Expenses. — Upon  settling  accounts  at 
the  termination  of  the  adventure  the  amounts  originally  advanced 
by  each  party  must  be  repaid  and  the  expenses  incurred  in  the 
adventure  cared  for  before  the  profits  can  be  ascertained  and 
divided.^*  A  party  should  be  reimbursed  for  expenses  legiti- 
mately incurred,^^  but  not  for  a  mere  gratuitous  payment  to  a 
third  person,^^  nor  the  cost  of  reconstructing  manufactured  ar- 

26Halstead  v.  Schmelzel,  17  Johns.  114  S.  W.  714;  Doane  v.  Adams,  15 

(N.  Y.)  80.  La.  Ann.  350;  Thurston  v.  Hambhn, 

27  Shaw   V.    Gandolfo,   9   La.    Ann.  199  Mass.   151,  85   N.  E.  82;   Edson 

32.  V.  Gates,  44  Mich.  253,  6  N.  W.  645 ; 

2s  Floyd  V.  Efron,  66  Tex.  221,   18  King  v.    Barnes,    109   N.   Y.   267,    16 

S.  W.  497.  N.  E.  332 ;   Gordon  v.   Boppe,  55  N. 

29  Kane    v.    Smith,    12    Johns.     (N.  Y.    665;    Withers    v.    Pemberton,    3 
Y.)   156.  Coldvv.    (Tenn.)    56;  Furman  v.  Mc- 

30  Sicklesteel  V.  Edmonds,  158  Wis.  MiUian,    2    Lea    (Tenn.)     121;    Wis- 
122,  147  N.  W.  1024.  consin    Sulphite   Fibre   Co.   v.    D.    K. 

31  Hart  V.  McDonald,  52  La.  Ann  Jeffris  Lumber   Co.,   132  Wis.   1,   111 
1686,  28  So.  169.  N.  W.  237. 

32  Hart  V.  McDonald.  52  La.  Ann.  ss  punk  v.  Miller  (Tex.  Civ.  App.), 
1686,  28  So.  169.  142  S.  W.  24. 

33  Saunders  v.  McDonough   (Ala.),  30  ;^Q|jQy  y_  Rourke,  83  Conn.  196, 
67  So.  591.  1^  Atl.  517. 

3iBoqua  v.  Marshall,  88  Ark.  Zl\ 


1357  JOINT    ADVENTURES  §    985 

tides,  caused  by  the  negligence  of  a  party  who  was  to  manufac- 
ture them.^^  But  a  party  is  not  entitled  to  be  repaid  expenses 
when  this  would  mean  that  he  contributed  nothing  to  the  enter- 
prise, for  certain  expenses  may  be  a  part  of  that  which  a  party 
is  to  furnish  to  the  enterprise,  the  rule  as  to  expenses  not  being 
exactly  the  same  as  the  rule  in  ordinary  partnerships."^  Expenses 
which  one  party  incurs  in  carrying  out  his  portion  of  the  agree- 
ment can  not  be  charged  against  the  others. ^^  A  party  who  is  to 
advance  funds  can  not  charge  expenses  which  he  paid  in  obtain- 
ing them."*"  Allowance  can  not  be  made  for  expenses  not  ac- 
tually incurred  in  prosecuting  the  business  of  the  adventure. ^^ 
There  can  ordinarily  be  no  charge  for  services  of  a  party  unless  it 
is  so  agreed. ''^  Within  the  terms  of  a  joint  adventure  contract 
which  provided  that,  in  ascertaining  net  profits,  "taxes  on  the 
capital  employed  and  other  charges  as  usual"  were  to  be  made,  in- 
surance is  a  "usual  charge."*^  If  on  accounting  a  defendant  was 
allowed  credit  for  expense  the  plaintiff  should  be  allowed  to  open 
the  case  and  show  his  expenses.**  Where  prospective  purchasers 
were  unable  to  procure  sufficient  funds  and  the  sale  was  about 
to  fail  and  the  brokers  negotiating  the  sale  arranged  with  a 
person  to  finance  the  entire  deal  for  a  bonus,  the  bonus  was  a 
legitimate  and  necessary  expense  of  the  sale  and  all  those  en- 
titled to  share  in  the  commission  must  bear  equally  such  ex- 
pense.*^ In  a  venture  in  the  sale  of  lands  the  party  who  ad- 
vanced the  money  and  made  the  purchase  is  entitled  to  be  repaid 

^"Illuminated  Car  Sign  Co.  v.  Wil-  ^^  Kane    v.    Smith,    12    Johns.    (N. 

son,  31  Ohio  Cir.  Ct.  87.  Y.)    156. 

38  Bane  v.  Dow,  80  Wash.  631,  142  42  Hopkins  Mfg.  Co.  v.  Ruggles,  51 
Pac.  23.  Mich.  474,  16  N.  W.  862 ;  Emmel  v. 

39  Wilson  V.  Anthony,  19  Ark.  16;  Zapp,  112  Minn.  375,  127  N.  W.  1134; 
Lafon  V.  Chinn,  6  B.  Mon.  (Ky.)  Stevenson  v.  Maxwell,  2  Sandf.  Ch. 
305;  Dow  v.  Darragh,  48  N.  Y.  (N.  Y.)  273.  See  Maas  v.  Lons- 
Super.  Ct.  138.  torf,  194  Fed.  577. 

•10  Sanguinett  v.  Webster,    153   Mo.        43  stone    v.    Wright    Wire    Co..    85 
343,  S4  S.  W.  563 ;  Scudder  v.  Budd,     N.  E.  471,  199  Mass.  306. 
52  N.  J.  Eq.  320,  26  Atl.  904;   Dow        «  Pai„ter  v.   Hines.  86  Kans.  832, 
V.    Darragh,   48    Super.    Ct.    (N.   Y.)     122  Pac.  1036. 

138.  -isBoqua  v.  Marshall.  88  Ark.  373, 

114  S.  W.  714. 


§    986  LAW    OF    rARTNERSIIIP  1358 

only  what  the  lands  cost,  and  can  not  be  allowed  for  appreciation 
in  the  value  of  the  land.'*''  If  there  is  an  agreement  for  a  settle- 
ment immediately  at  the  close  of  the  adventure,  it  is  each  party's 
duty  to  present  in  due  time  a  statement  of  information  necessary 
for  a  settlement,  and  failure  by  a  party  to  do  so  may  prevent  his 
setting  aside  of  a  settlement. '*'' 

§  986.  Settlement — Interest. — It  has  been  held  that  a 
party  who  advances  more  than  his  share  of  the  funds  is  entitled 
to  interest  on  the  excess.*^  Interest  will  not  be  allowed  on  capi- 
tal, however,  in  the  absence  of  agreement.^''  Interest  may  be 
allowed  on  commissions  which  one  party  was  to  receive  for 
selling  lands,  from  the  time  when  such  commissions  were 
earned.^'*  Where  there  was  an  agreement  by  the  purchaser  of 
certain  land  that  another  should  manage  the  sale  thereof  for  ten 
years,  and  in  case  sufficient  sales  were  not  made  within  that 
time  to  reimburse  the  owner  for  his  outlay,  with  ten  per  cent, 
interest,  the  manager  was  to  receive  five  per  cent,  commissions 
on  sales  made,  and,  if  the  receipts  were  sufficient  so  as  to  reim- 
burse the  owner,  the  manager  should  receive  one-half  of  the 
profits,  it  was  held  that  on  termination  of  the  contract  period  the 
owner  should  be  credited  with  interest  at  ten  per  cent,  on  his 
investment,  together  with  disbursements  for  taxes,  foreclosure 
expenses,  expenses  for  recording  mortgages,  etc.,  and  should 
be  charged  with  interest  at  ten  per  cent,  on  all  receipts. ^^  Where 
there  is  a  complicated  adventure  in  the  purchase  of  lands,  the 
courts  will  work  out  the  right  to  interest  on  advances  and  con- 
tributions by  equitable  principles. ^^ 

4GScudder  v.   Budd,   52   N.   J.   Eq.  « Thurston  v.  Hamblin,  199  Mass. 

320,  26  Atl.  904.  151,  85  N.  E.  82.     See  Barry  v.  Ber- 

4^  Stewart    v,    Milliken,    30    Mich,  nays   (Mo.),  141   S.  W.  933. 

503.  ^°  McCreery    v.    Green,    38    Mich. 

4S  Buckmaster    v.     Grundy,    8     III.  172. 

626;   Crenshaw  v.   Crenshaw,  22  Ky.  ^^  Corbin   v.   Holmes,   83    C.    C.   A. 

L.     1782,    61     S.    W.    366.      Contra:  367,  154  Fed.  593. 

Petrie  v.  Torrent,   100  Mich.  117,  58  "Boeing  v.  Fordney   (Mich.),   150 

N.  W.  690,  59  N.  W.  941.  N.  W.  852. 


1359  JOINT    ADVENTURES  §    987 

§  987.  Settlement — Advances. — A  party  who  renders  re- 
quired services  may  recover  their  value  in  a  proper  case,  and, 
if  he  fails  to  perform  them,  may  be  chargeable  with  the  ex- 
pense of  employing  others  to  do  them.'^^  One  adventurer 
who  purchases  the  interest  of  the  other  may  charge  the 
common  fund  with  money  advanced  and  with  any  outstand- 
ing liability  in  favor  of  third  persons  for  which  he  remains 
liable  after  dissolution.^*  The  joint  property  is  bound  for 
the  repayment  of  advances. ^^  Unless  it  is  so  provided  by  con- 
tract, there  is  no  right  to  repayment  of  advances  until  the  ven- 
ture is  completed.^*'  If  a  contract  called  for  equal  contribution, 
a  party  who  furnished  all  the  capital  and  had  entire  control  of 
the  venture  may  charge  for  his  services.'^'^^  Joint  adventurers  are 
under  a  joint  liability  to  account  to  a  co-adventurer."  Where 
the  defendant  and  plaintiff,  after  the  close  of  a  farming  and 
stock-raising  business  jointly  operated  by  them,  had  a  final  ac- 
counting and  agreed  upon  a  balance,  it  was  held  that  neither 
could  claim  an  additional  credit,  in  the  absence  of  mistake  or 
concealment  by  the  other.^^  Where  a  joint  adventurer  authorized 
by  associates  to  acquire  title  to  land  acquired  an  uncontemplated 
interest,  the  others  may  demand  a  proportionate  share  of  such 
interest  on  payment  of  their  proportionate  share  of  expenses. "''''' 
But  a  party  who  furnishes  services  as  his  contribution  to  the 
venture  has  an  interest  in  the  property  and  may  recover  for  his 
services  or  compel  accounting. ''*' 

^^Goss   V.    Lanin    (Iowa),    152    N.  ^^  Williams    v.    Henshaw,    11    Pick. 

W.    43;    Morris    v.    Wood,     (Tenn.)  (Mass.)   79,  22  Am.  Dec.  366. 

35  S.  W.  1013.    See  §  350  et  seq.  s^a  McMulIen  v.  Hoffman,  75  Fed. 

54Edson  V.  Gates,  44  Mich.  253,  6  547. 

N.  W.  645.  57  Reilly  v.  Freeman,    1   App.   Div. 

ssFurman    v.     McMillian,    2    Lea  560,  Zl  N.  Y.  S.  570,  IZ  N.  Y.   St. 

(Tenn.)   121;  Withers  v.  Pemberton,  224. 

3  Coldw.   (Tenn.)   56;  Gee  v.  Gee,  2  ^s  g^hmoker    v.    Miller,    89    Kans. 

Sneed     (Tenn.)     395;     Williams     v.  594,  132  Pac.  158. 

Love,   2   Head    (Tenn.)    80,    IZ   Am.  ^9  Hedges  v.  Mountjoy,   149  N.  Y. 

Dec.     191.     Compare     Crenshaw     v.  S.  869. 

Crenshaw,  22  Ky.  L.  1782,  61   S.  W.  "o  Matthews  v.  Kerfoot.  64  111.  App. 

366.  571 ;  Field  v.  Woodmancy,   10  Cush. 


§    988  LAW    OF    PARTNERSHIP  1360 

§  988.  Termination  and  duration. — When  the  specified 
time  of  a  joint  adventure  expires,  it  is  ipso  facto  dissolved  but 
may  be  continued  after  that  time  by  the  express  or  tacit  agree- 
ment of  the  parties.^^  "Where  capital  is  embarked  in  a  joint 
adventure  for  a  prescribed  term  and  the  parties  have  clearly 
evinced  an  intent  that  it  should  remain  in  the  business  until 
the  expiration  of  the  term,  it  is  not  to  be  withdrawn  merely  be- 
cause one  of  the  joint  adventurers  has  died."""  Neither  party  can 
end  a  joint  adventure  at  his  own  volition.  The  duration,  unless 
a  fixed  date  is  mentioned,  continues  until  the  purpose  is  accom- 
plished; but  if  the  adventure  should  require  more  money  and 
time  than  was  first  estimated,  the  withdrawal  of  any  party  may 
be  made  without  liability  to  the  others.*'^  It  has  been  held  that 
realty  purchased  in  the  names  of  joint  adventurers  in  the  pursu- 
ance of  the  venture  is  held  as  tenants  in  common,  and  the  share 
of  a  deceased  party  goes  to  his  heirs.*'*  In  a  case  of  a  contract 
for  the  sale  of  mining  property  on  which  two  parties  held  an 
option,  agreeing  to  divide  the  profits,  one  could  not  without  the 
consent  of  the  other,  dissolve  the  agreement  and  transact  the 
business  in  his  own  name,  and  disregard  the  other's  right  to 
share  in  profits.''^ 

§  989.  Adventurer's  lien. — A  party  to  a  joint  adventure 
who  advances  money  for  its  carrying  on,  has  a  lien  on  the  prop- 
erty of  the  venture,  similar  in  all  respects  to  a  partner's  lien.®® 

§  990.  Actions  between  joint  adventurers. — The  general 
rule  is  that  an  equitable  action  for  an  accounting"  is  the  proper 

(Mass.)     427;    Edson    v.    Gates,    44  ^s  Qoss   v.    Lanin    (Iowa),    152    N. 

Mich.  253,  6  N.  W.  645;    Sanguinett  W.  43. 

V.   Webster,   153   Mo.   343,   54   S.   W.  64\Valcofif  v.  Bittker,  61  Misc.  414, 

563 ;  Jones  v.  Davis,  48  N.  J.  Eq.  493,  122  N.  Y.  S.  680. 

21    Atl.    1035;    Altimus    v.    Elliott,    2  es  chambers    v.    Mittnacht,    23    S. 

Pa.  62.  Dak.  449,  122  N.  W.  434. 

"Keller     v.     Fitzgerrell.     158     111.  ^g  in    re    Kessler,    174    Fed.    906; 

App.  534.  Smith    v.    The    Saugerties,    44    Fed. 

«2  Braddock  v.  Hinchman,  78  N.  J.  625 ;  Davis  v.  Kellar,  25  Ky.  L.  279, 

Eq.  270,  79  Atl.  419.  74  S.  W.  1100;  Withers  v.  Pember- 


1361 


JOINT    ADVENTURES 


§    990 


remedy  whereby  a  party  in  a  joint  adventure  may  recover  his 
share  of  profits  or  charge  his  co-adventurer  with  liabiHty  for 
losses.^^  If  there  is  a  disagreement  between  the  parties,  a  disso- 
lution of  the  joint  adventure  may  be  sought  in  equity  by  any 
party.®*  The  right  to  an  equitable  action  for  accounting  may  not 
be  precluded  by  a  right  of  action  at  law.*^^  If  the  venture  has 
been  closed  and  there  is  a  certain  sum  due  to  one  party  as  his 
share,  he  may  recover  such  amount  in  an  action  at  law;""  or 
recover  what  is  due  him  because  of  unequal  division  of  profits  f^ 
or  if  a  loss  has  been  sustained,  and  the  amount  of  it  is  certain, 
an  adventurer  may  after  the  close  of  the  venture,  bring  an  action 


ton,  3  Coldw.  (Tenn.)  56.  See 
Crenshaw  v.  Crenshaw,  61  S.  W.  366, 
22  Ky.  L.  1782.  Contra:  Hirshfeld 
V.  Weill,  121  Cal.  13,  53  Pac.  402. 

^'^  Bernett  v.  Smith-Powers  Log- 
ging Co.,  184  Fed.  139;  Bedolla  v. 
Williams,  15  Cal.  App.  738,  115  Pac. 
747;  Maxwell  v.  McWilliams.  145 
111.  App.  155;  Scudder  v.  Budd,  52 
N.  J.  Eq.  320,  26  Atl.  904;  Jones  v. 
Davis,  48  N.  J.  Eq.  493,  21  Atl.  1035 ; 
Schantz  v.  Oakman,  163  N.  Y.  148, 
57  N.  E.  288;  King  v.  Barnes,  109 
N.  Y.  267,  16  N.  E.  332;  Marston 
V.  Gould,  69  N.  Y.  220;  Lobsitz  v. 
E.  Lissberger  Co.,  154  N.  Y.  S.  556; 
Joseph  V.  Sulzberger,  136  App.  Div. 
499,  121  N.  Y.  S.  73;  Hatliaway  v. 
Clendening,  135  App.  Div.  407,  119 
N.  Y.  S.  984;  Berg  v.  Gillender, 
115  App.  Div.  288,  100  N.  Y.  S. 
792;  Boice  v.  Jones,  101  App.  Div. 
547,  94  N.  Y.  S.  896;  Spier  v.  Hyde, 
92  App.  Div.  467,  87  N.  Y.  S.  285; 
Bradley  v.  Wolff,  40  Misc.  592,  83 
N.  Y.  S.  13 ;  Parks  v.  Gates,  54  App. 
Div.  512,  66  N.  Y.  S.  1034;  Ross  v. 
Willett,  76  Hun  211,  58  N.  Y.  St. 
694,  27  N.  Y.  S.  785;  Hollister  v. 
Simonson,  18  App.  Div.  73,  45  N.  Y. 
S.   426;    Reilly   v.   Freeman,    1    App. 


Div.  560,  73  N.  Y.  St.  224,  37  N.  Y. 
S.  570;  Stitzer  v.  Fouder,  214  Pa. 
117,  63  Atl.  421;  Smith  v.  Corbett, 
16  West.  L.  R.  (B.  C.)  257. 

*^s  Jackson  v.  Hooper,  76  N.  J.  Eq. 
185,  74  Atl.  130. 

*^^  Saunders  v.  McDonough  (Ala.), 
67  So.  591. 

^nVann  v.  Kelley,  2  McCrary  (U. 
S.)  628,  5  Fed.  584;  Noyes  v.  Bar- 
nard. 63  Fed.  782,  11  C.  C.  A.  424; 
Hourquebie  v.  Girard,  2  Wash.  (C. 
C.)  212,  Fed.  Cas.  No.  6732;  Beck- 
with  v.  Talbot,  2  Colo.  639;  Hurley 
v.  Walton,  63  111.  260;  Seehorn  v. 
Hall,  130  Mo.  257,  32  S.  W.  643,  51 
Am.  St.  562 ;  Felbel  v.  Kahn,  29  App. 
Div.  270,  51  N.  Y.  S.  435;  Cleve- 
land V.  Farrar,  4  Brews.  (Pa.)  27; 
Annon  v.  Brown,  65  W.  Va.  34,  63 
S.  E.  691 ;  Ledford  v.  Emerson,  140 
N.  Car.  288,  52  S.  E.  641 ;  Corotins- 
ky  V.  Maimin,  37  Misc.  777,  76  N. 
Y.  S.  924;  Fry  v.  Potter,  12  R.  I. 
542.  Compare  Ross  v.  Willett,  76 
Hun  211,  58  N.  Y.  St.  694,  27  N.  Y. 
S.  785,  and  Joseph  v.  Sulzberger,  136 
App.  Div.  499,  121  N.  Y.  S.  73. 

71  Wright  v.  Cumpsty,  41  Pa.  St. 
102;  Sheldon  v.  Wood,  2  Bosw.  (N. 
Y.)   267. 


§    991  LAW    OF    PARTNERSHIP  1362 

at  law  to  compel  a  coparty  to  contribute  thereto.'^-  An  action  at 
law  will  also  lie  to  recover  the  amount  which  a  party  has  agreed 
to  pay  into  the  adventure,  upon  his  failure  and  refusal  to  pay 
it.'^  If  property  is  paid  for  by  one  party  where  a  contract  re- 
quires equal  investment  on  a  joint  adventure  a  bill  for  contri- 
bution may  be  maintained  before  the  sale  of  the  said  property 
by  the  one  advancing  the  funds/*  A  rescission  of  the  contract 
is  not  warranted  if  the  party  in  whose  name  the  common  prop- 
erty stands  fails  to  make  an  honest  sale  of  it  and  account  for  the 
proceeds.  The  remedy  in  this  case  lies  in  action  for  a  sale  of 
the  property,  division  of  the  net  proceeds,  and  damages  suffered 
through  the  misconduct  of  his  associate. '^^  An  action  for  debt 
can  not  be  brought  on  a  contract  of  joint  adventure,  by  which 
the  parties  were  to  share  in  profits  and  losses.^^  In  one  case  the 
rights  against  each  other  as  to  common  property  of  persons  en- 
gaged in  a  joint  venture,  were  held  analogous  to  those  of  ten- 
ants in  common.^^  One  co-adventurer  can  recover  from  another 
half  the  difference  between  the  price  which  that  other  repre- 
sented that  he  paid  for  property  for  the  joint  enterprise  and  the 
actual  price  paid,  whether  or  not  plaintiff  was  financially  in- 
jured.^* 

§  991.  Actions — Illustrations. — It  hai  been  held  'that  a 
bill  to  compel  an  accounting  by  a  joint  adventurer,  under  a  con- 
tract by  which  the  plaintiff  was  to  receive  a  share  of  the  profit 
of  the  adventure,  must  show  that  the  joint  venture  had  reached 
determination  and  profit  had  been  made,  that  the  venture  had 
reached  a  point  where  the  defendant  corporation  had  been  reim- 

72  Peltier  v.  Sewall,  12  Wend.   (N.  74  Kimball  v.   Williams,   51    N.   Y. 

Y.)  386;  Burleigh  v.  Bevin,  22  Misc.  App.  Div.  616,  65  N.  Y.  S.  69. 

38,  48  N.  Y.  S.  120 ;  Fry  v.  Potter,  "  Hollister  v.  Simonson,  170  N.  Y. 

12  R.  I.  542.  357,  63  N.  E.  342. 

73Pillsbury  v.  Pillsbury,  20  N.  H.  76  Jones   v.    McNally,   53   Misc.    59, 

90;    Finlay  v.    Stewart,   56   Pa.    183;  103  N.  Y.  S.  1011. 

Armstrong  v.  Henderson,  99  Va.  234,  7?  Hancock  v.  .Tharpe,  129  Ga.  812, 

Zl   S.   E.  839,   3   Va.   Sup.   Ct.   Rep.  60  S.  E.  168. 

142.     Compare  Williams  v.  Henshaw,  78  Humburg   v.    Lotz,    4    Cal.    App. 

11    Pick.    (Mass.)    79,   22   Am.   Dec.  438,   88   Pac.  510. 
366. 


1363  ■  JOINT    ADVENTURES  §    991 

l)ursed  its  outlay,  so  that  a  profit  was  being  currently  made,  or  that 
defendant  was  misconducting  itself  with  respect  to  the  business 
and  could  be  held  to  have  legally  perpetrated  a  fraud  on  the  plain- 
tiff.'^^ Where  one  adventurer  made  a  voluntary  payment  of  a  sum 
received  by  him  as  individual  profits  under  a  mistaken  view  of 
the  law  to  one  not  entitled  to  the  accounting,  his  liability  to 
account  to  those  parties  who  are  entitled  thereto  was  not  dis- 
charged.^'*^ A  contract  for  the  manufacture  of  plaintiff's  logs 
into  lumber  and  the  sale  of  the  product  for  the  joint  account  of 
both  plaintiff  and  defendant,  after  deducting  certain  expenses 
from  the  proceeds,  required  defendant  to  keep  the  logs,  lumber, 
and  accounts  separate  from  defendant's  other  logs,  lumber  and 
accounts,  and  this  was  held  to  be  a  necessary  implication  that 
defendant's  accounts  should  form  the  primary  basis  of  settle- 
ment, and  such  accounts  could  not  be  rejected  and  a  different 
method  of  determination  and  settlement  substituted,  unless  there 
was  shown  fraud,  bad  faith,  or  substantial  mistake  of  a  character 
sufficient  to  stamp  the  supposed  accounts  as  untrustworthy  in 
substance.^*^  Where  one  party  induced  the  other  to  purchase  for 
their  joint  account  a  block  of  mining  stock,  the  first  party  agree- 
ing to  pay  one-half  of  the  cost  and  sell  the  stock  at  an  advance 
for  their  joint  interest,  and  thereafter  refusing  either  to  sell  the 
stock  or  pay  his  share  of  the  price,  the  other  party  had  a  cause 
of  action  for  damages  for  breach  of  the  agreement,  and  also  an 
action  for  contribution  of  one-half  of  the  expense  necessarily 
incurred  in  the  joint  enterprise.^^  Where  the  complaint  fails  to 
allege  a  cause  of  action  for  an  accounting  or  for  contribution, 
the  facts  may  be  sufficient  to  constitute  a  cause  of  action  for 
terminating  the  joint  engagement;  but  if  the  prayer  for  relief  is 
for  a  sum  of  money  only,  the  complaint  does  not  state  facts 
sufficient  to  constitute  a  cause  of  action  for  an  accounting  and 

79  Simmons    v.    Lima    Oil    Co.,    71  D.  K.  Jefifris  Lumber  Co.,   132  Wis. 

N.  J.  Eq.  174,  63  Atl.  258.  1,  111  N.  W.  237. 

79a  Maxwell  v.  McWilliams,  145  111.         si  Davidor    v.    Bradford.    129    Wis. 

App.  155.  524,  109  N.  W.  576. 

^°  Wisconsin  Sulphite  Fibre  Co.  v. 


§    991  LAW    OF    PARTNERSHIP  1364 

for  contribution/-  It  was  held  that  the  fact  that  one  of  the 
plaintiffs  was  in  pari  delicto  with  the  defendant  in  converting 
money  advanced  by  the  plaintiffs  to  purchase  mining  claims  in 
a  joint  adventure  did  not  prevent  the  other  plaintiff  from  recov- 
ering.^^ Where  joint  adventurers  agreed  that  the  title  to  land 
held  by  another  adventurer,  now  dead,  should  rest  in  the  defend- 
ant, and  a  percentage  of  the  costs  of  the  proceedings  should  be 
paid  by  the  plaintiff,  the  plaintiff  may  demand  an  accounting  in 
order  to  ascertain  his  share/*  The  measure  of  damages  for  neg- 
ligence of  a  woodsman  and  cruiser,  who  showed  plaintiffs  a  dif- 
ferent and  more  valuable  timber  tract  than  that  jointly  pur- 
chased by  them  and  the  cruiser  with  plaintiff's  money,  would 
be  the  difference  between  the  value  of  the  land  actually  pur- 
chased and  the  land  which  plaintiffs  thought  they  were  purchas- 
ing/^ The  plaintiff,  in  an  action  to  recover  profits  of  a  joint  ven- 
ture, must  plead  and  prove  his  right  to  a  share  of  the  profits 
and  that  the  defendant  has  received  that  share  and  is  withhold- 
ing it  from  the  plaintiff/**  If  there  are  three  co-adventurers  and 
one  purchases  the  interest  of  another,  he  may  alone  sue  the  third 
for  his  share  of  profits/'  If  two  persons  enter  into  a  joint  ven- 
ture in  the  formation  of  a  corporation,  one  may  bring  an  action 
for  damages  against  the  other  for  breach  of  the  contract/^  Where 
the  owner  of  certain  building  lots  entered  into  a  joint  adventure 
with  another  party  for  the  sale  of  them,  and  afterward  erected 
expensive  buildings  on  the  lots,  making  such  sale  impossible,  the 
court  held  that  an  action  in  equity  would  lie  for  an  accounting 
of  the  profits,  based  on  the  value  of  the  lots  at  the  time  perform- 
ance of  the  adventure  was  made  impossible,  but  that  an  action 
at  law  was  not  proper/^    An  action  on  contract  w^as  held  to  be 

82  Jones   V.    McNally,   53   Misc.   59,  38  Maine  63;   Dorr  v.  McKinney,  9 
103  N.  Y.  S.  1011.  Allen    (Mass.)    359;    Pierce    v.    Me- 
ss Rever  v.  Blaisdell,  26  Colo.  App.  Donald,  153  N.  Y.  S.  810. 
387,  143  Pac.  385.  s^  Snow    v.    Rudolph     (Tex.     Civ. 

S4  Hedges  v.  Mountjoy,   149  N.  Y.  App.),  131   S.  W.  249. 

S.  869.  88  Mclntire  v.  Carr,   164  Mich.  37, 

85  Knudson  v.  George,  157  Wis.  520,  128  N.  W.  1079. 

147  N.  W.  1003.  89  Fox    v.    Mahony,    91    App.    Div. 

86  Kennebec  &c.   R.   Co.  v.   White,    364,  86  N.  Y.  S.  679. 


1365  JOINT   ADVENTURES  §    992 

bad  where  it  was  alleged  that  the  defendant  purchased  goods  for 
a  joint  adventure,  and  refused  to  deliver  up  to  the  plaintiff  one- 
half  of  the  said  goods  when  the  plaintiff  offered  payment  for 
half  of  them  because  there  is  no  obligation  on  the  part  of  an  ad- 
venturer to  divide  the  goods,  the  possession  of  one  being  the 
possession  of  the  others,'''*  Distribution  of  profits  may  be  com- 
pelled on  the  termination  of  a  joint  adventure,  or  if  the  parties 
advancing  money  have  already  received  an  amount  of  profit, 
distribution  may  be  compelled  at  reasonable  times,  or  if  one  asso- 
ciate is  misconducting  himself  and  perpetrating  a  fraud  on  his 
co-adventurers,  the  adventure  may  be  terminated.^^  The  aid  of  a 
court  of  equity  may  be  sought  to  dissolve  a  joint  adventure 
where  there  is  a  disagreement  between  the  associates."^  It  has 
been  held  that  in  an  action  for  an  accounting  of  the  profits  it  is 
not  necessary  to  make  a  nonresident  associate  in  a  joint  adven- 
ture a  party,  and  where  no  property  of  a  deceased  adventurer 
is  within  the  jurisdiction  of  the  court  the  representative  of  his 
estate  is  not  necessarily  a  party.^^  Action  can  not  be  brought 
upon  the  agreement  of  one  party  to  an  adventure  to  purchase, 
upon  demand  within  a  certain  time,  the  interests  of  his  co-adven- 
turers at  the  amount  they  contributed,  before  a  tender  of  such 
conveyance  of  such  interest  is  made."*  It  has  been  held  that  the 
injured  plaintiffs  have  a  right  to  an  accounting  from  a  defendant 
who  conspired  with  one  plaintiff  to  induce  the  other  plaintiffs  to 
pay  twenty-five  thousand  dollars  for  mining  claims  for  which 
he  paid  six  hundred  twenty-five  dollars,  even  though  he  only 
dealt  with  the  plaintiff  with  whom  he  was  in  conspiracy."^ 

§  992.  Set-off — Limitation  of  actions. — Payments  made 
by  the  defendant  on  behalf  of  the  plaintiff  in  connection  with  an 
action  on  a  common  venture  may  be  set  off  by  his  associate 

90  Dorr     v.     McKinney,     9     Allen        93  Angell  v.  Lawton,  16  N.  Y.  540. 
(Mass.)   359.  94  Delaware  Trust  Co.  v.  Calm,  195 

91  Simmons  v.  Lima  Oil  Co.,  71  N.     N.  Y.  231,  88  N.  E.  53. 

J.  Eq.  174,  dZ  Atl.  258.  95  Rever  v.  Blaisdell,  26  Colo.  App. 

92  Jackson  v.  Hooper   (N.  J.  Ch.),     387,  143  Pac.  385. 
74  Atl.  130. 


§    993  LAW    OF    PARTNERSHIP  1366 

against  the  demands  of  the  plaintiff, ^^  even  though  the  plaintiff 
can  not  prove  what  profits  defendant  and  other  associates  made 
in  the  transaction  in  which  such  payments  were  made  on  his 
account."^  However,  when  suit  is  brought  by  one  party  against 
the  trustee  of  the  common  fund  and  other  associates  in  a  joint 
adventure  to  obtain  his  share  of  the  fund,  one  of  the  defendants 
to  the  agreement  can  not  set  off  against  the  demand  a  debt  ow- 
ing him  personally  by  the  plaintiff.^^  Any  claim  held  by  a  party 
to  a  joint  venture  against  a  coparty  may  be  used  as  a  counterclaim 
in  an  action  to  recover  profits.''^  The  statute  of  limitations,  it  has 
been  held,  in  regard  to  actions  between  joint  adventurers,  begins 
to  run  as  to  advances  from  the  time  of  payment/  A  right  of 
action  for  breach  of  a  contract  to  purchase  stock  for  the  joint 
account  of  several  parties  accrues  when  the  one  purchasing  the 
stock  refuses  on  demand  to  transfer  to  a  coparty  his  share." 
Where  associates  in  a  joint  adventure  delayed  instituting  a  suit 
against  other  parties  because  they  were  unaware  of  the  facts 
which  entitled  them  to  a  share  in  the  profits,  it  is  not  laches.^ 

§  993.  Parties  and  pleading. — All  persons  associated  in 
an  adventure  are  not  necessary  parties  to  actions  between  two 
or  more  associates,'*  but  where  a  corporation  is  formed  by  the 
parties  to  take  over  the  common  property,  in  case  of  a  suit  to 
determine  the  respective  interests  of  the  associates  in  the  prop- 
erty and  for  distribution  of  the  corporate  stock  the  corporation 
is  a  proper  party  to  the  suit.^  A  demurrer  will  lie  to  a- complaint 
in  a  suit  to  recover  a  share  of  the  profits  where  there  is  a  failure 
to  allege  that  profits  have  been  received  by  the  defendant,^  but 

9^  Armstrong  v.  Henderson,  99  Va.  2  Joseph    v.    Sulzberger,    136    App. 

234,  n  S.  E.  839.  Div.  499,  121  N.  Y.  S.  IZ. 

97  Armstrong  v.  Henderson,  99  Va.  s  Lind  v.  Webber,  36  Nev.  623.  134 
234,  Zl  S.  E.  839.  Pac.  461. 

98  Hirshfeld  v.  Weill,   121   Cal.  13,  *  Cole  v.  Bacon,  63  Cal.  571 ;  Beck- 
53  Pac.  402.  with  v.  Talbot,  2  Colo.  639. 

99  Farmer      v.      Underwood,      146  ^  King  v.    Barnes,    109   N.    Y.   267, 
Iowa  345,  125  N.  W.  212.  16  N.  E.  332. 

1  Stover  V.  Flack,  30  N.  Y.  64.  e  Dorr     v.      McKinney,      9     Allen 

(Mass.)  359. 


1367 


JOINT    ADVENTURES 


994 


a  complaint  will  not  be  subject  to  demurrer  merely  because  of 
surplusage,  pleading  of  evidence,  or  matters  of  inducement." 
It  is  not  necessary  for  an  adventurer  asking  an  accounting  and  a 
share  in  profits  to  plead  full  performance  of  the  contract  on  his 
part,  or  that  he  stood  at  all  times  ready,  willing,  and  able  to 
fulfil  his  part  of  the  agreement.^  It  is  held  that  a  defendant  in 
an  action  for  an  accounting  can  not  recover  for  expenses  more 
than  the  maximum  amount  pleaded  in  a  sworn  answer.^ 

§  994.  Evidence — Judgment. — The  party  asking  for  an 
accounting  or  suing  for  a  money  balance  must  make  out  his 
claim  by  sufficient  evidence/**  Proof  of  the  rescission  or  aban- 
donment of  contract  for  a  joint  adventure  is  a  defense  against  a 
suit  based  on  such  a  contract/^  There  is  a  presumption  that 
profits  are  what  is  ordinarily  meant  by  the  term,  and  where  the 
complaint  asks  for  a  division  of  profits  merely  without  explana- 
tion, evidence  is  inadmissible  to  show  that  they  were  to  be  deter- 


7  Marvin  v.  Yates,  26  Wash.  50,  66 
Pac.  131. 

8  Saunders  v.  McDonough  (Ala.), 
67  So.  591. 

^  Wisconsin  Sulphite  Fibre  Co.  v. 
D.  K.  Jeffris  Lumber  Co.,  132  Wis. 
1,  111  N.  W.  237. 

10  Painter  v.  Hines,  86  Kans.  832, 
122  Pac.  1036;  Lane  v.  Fenn,  65  Misc. 
336,  120  N.  Y.  S.  237;  Wisconsin 
Sulphite  Fibre  Co.  v.  D.  K.  Jefifris 
Lumber  Co.,  132  Wis.  1,  111  N.  W. 
237.  For  cases  where  evidence  sup- 
ported claim  to  an  accounting,  see 
Bernitt  v.  Smith-Powers  Logging 
Co.,  213  Fed.  378;  Ijams  v.  Andrews, 
81  C.  C.  A.  109,  151  Fed.  725 ;  Boqua 
V.  Marshall,  88  Ark.  2,7Z,  114  S.  W. 
714 ;  Lane  v.  Fenn,  65  Misc.  336,  120 
N.  Y.  S.  237;  Bloom  v.  McPhee  & 
McGinnity  Co.,  25  Colo.  App.  256,  143 
Pac.  825 ;  Advance  Realty  Co.  v. 
Nichols,  126  Minn.  267,  148  N.  W. 
65;  Tate  v.  Kloke,  93  Neb.  382, 
140    N.   W.   278;    Sullivan    v.    King, 

Z6 — Row.  ON  Partn. — Vol.  2 


67  Ore.  428,  136  Pac.  335;  Morin 
V.  Pilon,  158  Wis.  411,  149  N.  W. 
140.  For  cases  in  which  the  evi- 
dence was  insufficient  to  entitle  the 
plaintiff  to  the  relief  sought,  see  Maas 
V.  Lonstorf,  194  Fed.  577;  Blackwell 
v.  Banks,  132  Ga.  845,  65  S.  E.  84; 
Briggs  V.  Boynton,  212  Mass.  5,  98 
N.  E.  794;  Streat  v.  Wolf,  135  App. 
Div.  81,  119  N.  Y.  S.  779;  Lewis  v. 
Dean,  76  Wash.  596,  137  Pac.  341; 
Dale  V.  Duryea,  49  Wash.  644,  96 
Pac.  223 ;  Wisconsin  Sulphite  Fibre 
Co.  V.  D.  K.  Jeffris  Lumber  Co.,  132 
Wis.  1,  111  N.  W.  237;  Humburg  v. 
Lotz,  4  Cal.  App.  438,  88  Pac.  510; 
Lauer  v.  Kaufman  (Colo.  App.),  145 
Pac.  709;  Goss  v.  Lanin  (Iowa),  152 
N.  W.  43;  Quinn  v.  Hayden,  219 
Mass.  343,  106  N.  E.  1002 ;  Vermeule 
V.  Vermeule,  82  N.  J.  Eq.  434,  89  Atl. 
535 ;  Smith  v.  Kinney,  72  Ore.  519,  143 
Pac.  901. 

11  Brady  v.  Colhoun,  1  Penr.  &  W. 
(Pa.)   140. 


§    995  LAW    OF    PARTNERSHIP  1368 

mined  in  an  unusual  manner/^  In  action  for  a  share  of  profits 
in  a  joint  venture  in  the  purchase  of  land,  cAddence  of  the  vahie 
of  the  lands  and  that  the  vendor  paid  no  commission  to  plaintiff 
was  admissible."  It  is  sufficient  to  establish  the  existence  of  a 
joint  adventure,  that  the  conduct  of  the  parties  corroborates 
the  fact,  against  the  denial  of  only  one  defendant.^*  If  one 
party  is  under  duty  to  account,  admissions  made  by  him  may  be 
proved  in  an  action  against  his  executor,  and  will  support  a  ver- 
dict for  a  less  sum  than  he  admitted  to  be  due.^^  Conflicting 
evidence  concerning  a  materi^il  issue  in  an  action  between  par- 
ties should  be  submitted  to  the  jury,"  Where  judgment  is  ren- 
dered for  one  party  against  associates  in  a  joint  adventure  for 
conversion  of  property,  it  should  be  against  all  parties  jointly 
participating  in  the  conversion.^^  If  the  amount  of  interest  on 
advances  is  limited  by  the  decree,  it  does  not  affect  the  rate  of 
interest  on  expenditures.^^  It  is  improper  to  enter  an  interlocu- 
tory judgment  for  an  accounting  in  an  action  to  dissolve  a  joint 
partnership  and  for  an  accounting  before  it  is  determined  that 
such  action  is  necessary. ^^ 

§  995.  Actions  by  or  against  third  persons. — If  one  party 
in  the  due  course  of  execution  of  a  joint  adventure  incurs  liabili- 
ties, they  are  binding  upon  all  the  parties  jointly,'"  and  the  fact 
that  their  interests  are  different  in  the  property  purchased,  when 
such  difference  is  not  brought  to  the  notice  of  the  vendor,  does 
not  affect  their  joint  liability,^^  nor  does  an  agreement  between 

1"  Chilberg  v.  Jones,  3  Wash.  530,  ^^  Reilly  v.  Freeman,  1  N.  Y.  App. 

28  Pac.  1104.  Div.  560,  IZ  N.  Y.  St.  224,  Z1  N.  Y. 

1'  Sonnesyn      v.      Hawbaker,      127  S.  570. 

Minn.  15,  148  N.  W.  476.     See  also  ^^  Stevenson  v.   Maxwell,  2   Sandf. 

Woolley  V.  Canyon  Exch.  Co.   (Tex.  Ch.  (N.  Y.)  273. 

Civ.  App.),  159  S.  W.  403.  is  Hoisting  Machinery  Co.  v.   Sco- 

1*  Mestier    v.    A.    Chevalier    Pave-  field   Engineering  Co.,   147  N.  Y.   S. 

ment  Co.,  108  La.  562,  32  So.  520.  564. 

15  Marvin   v.   Yates,  26  Wash.   50,  20  Slater  v.  Clark,  68  111.  App.  433. 
66  Pac.  131.  21  Mission     Ridge     Land     Co.     v. 

16  Schmoker  V.  Miller,  89  Kans.  594,  Nixon    (Tenn.   Ch.  App.),  48   S.  W. 
132   Pac.   158;    Sullivan  v.   Ross,   124  405. 

Alich.  287,  82  N.  W.  1071. 


1369  JOINT    ADVENTURES  §    995 

themselves  limiting  the  amount  of  habihty  of  some  to  the  capital 
contributed  by  them,  affect  their  Habihty  to  third  persons.^^  If, 
however,  the  party  creating  the  habihty  does  so  in  the  perform- 
ance of  obhgations  imposed  upon  him  individually  by  the  con- 
tract, or  if,  under  the  statute  of  frauds  the  contract  is  void,  the 
other  associates  in  a  joint  adventure  are  not  bound  there for.^^  No 
one  can  be  held  liable  as  a  party  to  a  joint  adventure  where  it 
can  not  be  proved  that  such  an  association  actually  existed  or  that 
he  was  a  member  of  it.^*  Creditors  may  bring  action  against  a 
managing  associate  where  he  has  assumed  accounts  due  them 
by  the  association.-^  Two  individual  owners  of  horses  who  fur- 
nished them  to  a  third  person  and  agreed  to  divide  the  profits, 
could  not  join  and  sue  the  hirer  for  negligent  killing  of  a  horse, 
where  there  was  no  agreement  for  joint  ownership  of  the  horses.^® 
Where  one  party  is  authorized  to  carry  on  the  business  of  a  joint 
adventure  in  his  individual  name,  he  may  maintain  an  action 
against  a  stranger  to  recover  sums  due  on  account  of  the  joint 
enterprise.'^  In  order  to  make  nonjoinder  of  parties  to  an  action 
against  joint  adventurers  available  it  must  be  pleaded.^^ 

22  Banners    v.    Harrison,    19    Barb.        25  Secor  v.  Law,  42   N.  Y.  525,  4 
(N.    Y.)    53.      Compare    Cooper    v.     Abb.  Dec.  188. 

Frierson,  48  Mass.  300.  20  Whatley  v.  Jamison,  14  Ga.  App. 

23  Lafon  V.  Chinn,  6  B.  Mon.  (Ky.)     209,  80  S.  E.  702. 

305;    Chamberlain  v.   Dow,   10  Mich.  27  Howe  v.    Savory,   49   Barb.    (N. 

319;    Cooper    v.    Frierson.    48    Miss.  Y.)  403. 

300.  28  Derickson    v.    Whitney,    6    Gray 

24  Poulson  V.  De  Navarro   57  App.  (Mass.)   248. 
Div.  623,  68  N.  Y.  S.  177. 


CHAPTER  XXXI 


LIMITED    PARTNERSHIPS 


SECTION 

1000.  Definition — Distinguished    from 
general  partnership. 

Distinguished  from  joint  adven- 
tures and  joint  stock  com- 
panies. 

Origin  and  history. 

Governed  entirely  by  statutes. 

Laws  governing  rights  of  part- 
ners. 
1005.  Construction  of  limited  partner- 
ship statutes. 

Nature  of  business  prescribed 
by  law. 

Certificate  or  partnership  con- 
tract. 

What  certificate  must  contain. 

Acknowledgment   of   certificate. 

Filing  and  recording  of  certifi- 
cate. 

Affidavit  of  payment  of  contri- 
bution of  limited  partner. 

Publication  of  notice. 

Alteration  of  certificate  pro- 
hibited. 

Commencement  and  termina- 
tion. 

1015.  Contribution    of    limited    part- 

ner. 

1016.  Kind    of    property    contributed. 

1017.  Infant  as  partner. 


1001. 


1002. 
1003. 
1004. 


1006. 

1007. 

1008. 
1009. 
1010. 

1011. 

1012. 

1013. 

1014. 


SECTION 

1018.  Use  of  the  word  "limited,"  etc. 

1019.  Firm  name  and  sign. 

1020.  Liability    of    partners    on    con- 

tracts. 

1021.  Effect   of   non-compliance    with 

statute. 

1022.  Estoppel. 

1023.  Insolvency  of  partnership. 

1024.  Assets  appHed  to  liabilities. 

1025.  Dealings    between    general    and 

limited  partners. 

1026.  Renewal  of  limited  partnership. 

1027.  Change  of  membership   or   na- 

ture of  business  conducted. 

1028.  Impairment  of  capital. 

1029.  Changing     general     to     limited 

partnership. 

1030.  Actions  by  or  against  partner- 

ship. 

1031.  Injunction — Receiver,   pleadings 

and  trial, 

1032.  Rights   of   creditors   of    limited 

partnership. 

1033.  Assignment  for  benefit  of  cred- 

itors. 

1034.  Limited  partner  as  creditor.  . 

1035.  Causes  for  dissolution. 

1036.  Rights    and    liabilities    of    part- 

ners. 

1037.  Rights  of  partners  on  dissolu- 

tion. 


§  1000.  Definition — Distinguished  from  general  partner- 
ship.— A  limited  partnership  is  a  partnership  in  which  the 
liabiHty  of  some  of  its  members  to  bear  any  losses  the  partner- 
ship may  sustain  i-s  limited  to  a  defined  amount,  while  the  liability 

1370 


1371  LIMITED    rARTNERSlIIPS  §    1000 

of  its  other  members  is  not  so  limited.  It  must  at  all  times  con- 
sist of  at  least  one  general  partner  to  be  answerable  to  the  public 
under  the  law  for  all  the  obligations  of  the  partnership  and  at 
least  one  partner  whose  liability  is  limited  to  the  sum  contributed 
by  him  to  the  firm  at  its  organization  or  to  some  amount  pro- 
vided by  the  statute.  It  is  therefore  properly  based  only  on  the 
existence  of  a  general  partnership  and  its  general  partners  have 
the  same  rights  and  incur  the  same  liability  that  members  of  a 
general  partnership  incur,  but  their  duties  are  even  more  bur- 
densome since  they  are  deprived  of  any  assistance  from  the 
limited  members.^  The  liability  of  a  limited  partner  is  generally 
limited  by  the  statute  to  the  amount  he  has  contributed  to  the 
partnership  at  its  formation.  However,  in  some  states  his  lia- 
bility is  fixed  by  statute  otherwise.  It  is  a  kind  of  a  union  of 
capital  and  labor  as  expressed  by  the  Supreme  Court  of  Connecti- 
cut" in  construing  the  limited  partnership  statute  in  which  the 
court  said :  "We  find  a  clear  general  purpose  and  intent  by  the 
legislature  to  encourage  trade  by  authorizing  and  permitting  a 
capitalist  to  put  his  money  into  a  partnership  with  general  part- 
ners possessed  of  skill  and  business  character  only,  without  be- 
coming a  general  partner  or  hazarding  anything  in  the  business 
except  the  capital  orignally  subscribed."  The  limited  or  special 
members  of  such  a  partnership  are  generally  prohibited  by  the 
statute  from  participating  in  the  conduct  of  the  firm's  business 
and  by  violating  such  prohibition  they  become  liable  to  third 
persons,  as  general  partners,  while  in  a  general  partnership  each 
member  has  an  equal  voice  in  the  conduct  of  the  partnership  busi- 
ness. In  some  jurisdictions  limited  partnerships  have  been  termed 
by  the  courts  special  partnerships,  but  as  now  used  in  most  states 
the  term  special  partnerships  has  reference,  more  accurately 
speaking,  to  a  partnership  for  a  single  transaction  only  or  for 
the  conduct  of  a  special  kind  of  business  only  and  can  have  no 

1  Richardson  v.   Carlton,   109  Iowa  Bank  v.  Gould,  5  Hill   (N.  Y.)   309; 

515,  80  N.  W.  532;  Spalding  v.  Black,  Whittemore  v.   Macdonnell,  6  U.   C. 

22    Kans.    55 ;    Bee   v.    Merrifield,    28  C.  P.  547.    See  ante  §  146. 

Hun    (N.  Y.)   219;   Madison  County  2  Q^pp  v.  Lacey,  35  Conn.  463. 


§     iOOl  LAW    OF    PARTNERSHIP  1372 

proper  reference  to  limited  partnerships,  since  they  are  formed 
under  the  statutes  to  transact  business  for  a  period  of  time 
usually  covering  several  years  and  under  their  organization  they 
are  permitted  to  transact  any  kind  of  legitimate  business,  except 
banking  and  insurance,  and  in  some  states  they  are  authorized  to 
transact  one  or  the  other  or  both  of  these  classes  of  business 
also.  Strictly  speaking,  no  partnership  should  be  termed  a  limited 
one  unless  it  has  two  classes  of  members,  one  class  having  limi- 
ted liability  and  the  other  unlimited  liability.  Such  partnerships 
in  some  respects  partake  of  the  nature  of  corporations ;  they  can 
only  exist  where  authorized  by  statute  and  the  liability  of  some 
of  their  members  is  limited  like  the  liability  of  stockholders  in 
some  kinds  of  corporations,  their  business  is  to  be  conducted  by 
the  general  partners  while  the  business  of  a  corporation  is  to  be 
conducted  by  its  board  of  directors,  but  this  distinction  must  al- 
ways be  kept  in  mind,  the  directors  of  a  corporation  are  selected 
by  the  stockholders  and  may  be  changed  by  such  stockholders, 
while  the  general  partners  in  a  limited  partnership  are  not  se- 
lected by  the  limited  members  nor  can  they  be  changed  by  them. 
A  corporation  is  an  artificial  person  and  constitutes  a  legal  entity, 
and  its  stockholders  may  transfer  their  stock,  while  a  limited 
partnership,  aside  from  its  members,  does  not  become  a  legal 
entity,  and  generally  its  members  may  not  change  except  upon 
dissolution  and  reorganization  under  the  statute. 

§  1001.  Distinguished  from  joint  adventures  and  joint 
stock  companies. — When  a  number  of  persons  by  articles  of 
association  form  a  company  for  profit,  possessing  a  common 
capital  which  is  divided  into  shares,  one  or  more  of  which  is 
possessed  by  each  member,  which  shares  may  be  transferred  by 
their  owners,  such  an  association  is  known  as  a  joint  stock  com- 
pany. It  is  not  a  corporation  because  it  does  not  comply  with 
the  laws  authorizing  the  formation  of  a  corporation,  and  hence 
never  becomes  a  single  entity  or  artificial  person,^  but  it  has  been 

^Wadsworth  v.  Duncan,  164  111.  27  Ind.  390;  McGreary  v.  Chandler, 
360,  45  N.  E.  132 ;  Hodgson  v.  Bald-  58  Maine  537 ;  Boston  &  A.  R.  Co. 
win,  65  111.  532 ;  Manning  v.  Gasharie,     v.    Pearson,    128   Mass.  445 ;    Skinner 


1373  LIMITED  PARTNERSHIPS  §  1001 

generally  regarded  by  the  courts  merely  as  a  partnership,  and 
its  rights  and  the  liability  of  its  members  governed  by  much  the 
same  rules  which  regulate  the  conduct  of  a  general  partnership, 
with  certain  exceptions  provided  by  statutes.  It  was  said  by  a 
New  York  court/  "That  a  joint  stock  company  is  a  partnership 
with  some  of  the  powers  of  a  corporation."^  Limited  associa- 
tions have  been  formed  under  the  statutes  of  some  of  the  states, 
in  which  all  the  partners  or  stockholders  have  a  limited  liability 
only.  They  are  sometimes  cahed  "Partnership  associations  lim- 
ited" or  "Limited  partnership  associations."  Some  courts  in 
their  decisions  relating  to  these  associations  apply  the  analogies 
of  the  law  of  corporations  to  them,*^  but  in  whatever  points  a 
joint  stock  company  may  resemble  a  corporation  it  differs  radi- 
cally from  a  limited  partnership,  for  while  the  holders  of  its 
shares  of  stock  may  under  the  statute  have  their  liability  limited, 
the  liability  of  all  of  them  is  limited  precisely  the  same,  but  in 
a  limited  partnership  as  we  have  seen  the  liability  of  some  of  the 
members  is  unlimited  and  that  of  the  others  is  limited.  Where 
there  is  no  statute  to  the  contrary  the  shareholders  of  a  joint 
stock  company,  like  the  members  of  a  general  partnership,  are 
liable  for  all  the  association's  debts,  but  its  business  affairs  are 
managed  by  a  board  of  trustees  or  directors,  and  a  shareholder 
not  a  member  of  the  board  has  no  participation  in  the  manage- 
ment. Joint  adventures  are  unlike  limited  partnerships,  since 
those  who  join  in  them  are  partners  therein  and  their  liability 
as  to  third  persons  is  equal  and  unlimited,  but  in  some  jurisdic- 
tions the  courts  have  not  nicely  distinguished  between  joint  ad- 
ventures, special  partnerships  and  limited  partnerships,  for  in 
New  York  the  court  has  held  that  where  two  persons  agree  to 

V.   Dayton,    19  Johns.    (N.   Y.)    513,        e  Raymond  v.  Colton,  104  Fed.  219, 

10  Am.  Dec.  286.  43  C.  C.  A.  501 ;  Blatchford  v.  Ross, 

4  Van  Aernam  v.  Blustein,  102  N.  5   Abb.    Pr.    (N.    S.)    434,   54   Barb. 

Y.  355,  7  N.  E.  537,  2  N.  Y.  St.  470.  (N.    Y.)     42,    11    How.     Pr.     110. 

■'  People  V.  Coleman,  133  N.  Y.  279,  Spraker  v.  Piatt,  158  App.  Div.  7)11, 

31   N.   E.  96,   16  L.  R.  A.  183.     But  143  N.  Y.  S.  440;   Nelson  v.  Drake, 

see  opinion  of  O'Brien,  J.,  in  Hibbs  14  Hun   (N.  Y.)  465. 
V.   Brown,   190  N.  Y.   167,  82   N.   E. 
1108. 


§     1002  LAW    OF    PARTNERSHIP  1374 

the  purchase  and  sale  of  goods  on  a  joint  account,  each  sharing 
in  the  profits  and  losses,  it  is  a  joint  adventure  or  limited  part- 
nership/ There  is  a  tendency  of  the  courts  to  hold  that  joint 
stock  companies  and  joint  adventures  are  not  strictly  to  be  re- 
garded as  partnerships,  nor  yet  as  corporations,  but  that  being 
neither  the  one  or  the  other  the  rights  and  liabilities  of  those 
interested  in  them  are  to  be  determined  from  the  facts  and  cir- 
cumstances of  each  case,  and  that  neither  the  law  governing 
partnerships  or  that  governing  corporations  will  apply  to  them. 
The  courts  in  some  states  seek  to  establish  a  new  system  of  law 
to  govern  the  rights  of  such  organizations,  some  applying  by 
analogy  the  principles  of  corporation  law  to  them  and  some 
the  principles  governing  partnerships.  In  a  case  in  New  York,^ 
where  a  syndicate  was  formed  to  buy  a  railroad  and  construct 
a  part  of  one  and  purchase  and  operate  and  sell  coal  mines 
along  its  lines,  and  in  the  end,  upon  the  sale  of  the  property, 
divide  the  proceeds  pro  rata  among  the  members,  the  court  in 
construing  the  powers  under  the  syndicate  contract  and  the  lia- 
bility of  the  syndicate  members  said :  "This  was  not  strictly  a 
partnership,  though  it  had  many  of  the  features  of  such  a  rela- 
tion. It  was  what  is  now  generally  kno\vn  as  a  joint  adventure 
rather  than  a  commercial  partnership.  The  authorities  in  some 
of  the  states  hold  that  in  the  prosecution  of  the  venture  each 
party  has  the  same  full  power  to  bind  his  associates  in  any  con- 
tract in  regard  to  the  venture  that  an  ordinary  commercial  part- 
ner would  have.  We  are  not  now  inclined  to  hold  that  doctrine 
in  its  full  integrity,  but  such  a  ruling  is  not  necessary  to  the  dis- 
position of  the  case,"  but  whatever  may  be  the  status  of  joint 
adventures  and  joint  stock  companies  under  the  law,  neither  can 
be  properly  denominated  limited  partnerships  under  the  definition 
of  such  partnerships. 

§  1002.     Origin    and   history. — Limited    partnerships    are 
said  to  have  been  known  and  recognized  in  Pisa  and  Florence 

7Lobsitz  V.  E.  Lissberger  Co.,  154        « Jones   v.   Gould,  209  N.   Y.  419, 
N.  Y.  S.  556.  103  N.  E.  720. 


1375  LIMITED  PARTNERSHIPS  §  1002 

as  early  as  the  twelfth  century,  and  in  Florence  they  have  been 
called  "La  Societe  en  Commondite"  since  the  fourteenth  cen- 
tury. Such  partnerships  were  unknown  in  England  until  a  com- 
paratively few  years  ago.  During  the  middle  ages  wealth  was 
largely  in  the  hands  of  the  nobles  and  clergy,  and  it  was  hardly 
thought  to  be  proper  for  their  class  to  engage  in  mere  trade, 
hence  they  had  a  plan  adopted  in  Italy  by  which  they  could  invest 
their  money  in  business  and  receive  the  profits  without  being  gen- 
erally known  as  engaged  in  trade.  The  plan  was  early  carried 
to  France,  where  it  has  ever  since  been  in  force.  When  Louisiana 
was  a  French  territory  naturally  such  partnerships  were  pro- 
vided for  there  and  were  designated  as  "partnerships  in  com- 
mendam."  In  1822  a  law  was  enacted  by  the  legislature  of  the 
state  of  New  York  authorizing  the  organization  of  limited  part- 
nerships.^ This  law  was  patterned  after  the  French  law,  and 
soon  after  the  state  of  Connecticut  passed  a  similar  law,  also 
taken  from  the  French  but  not  copied  from  the  New  York  stat- 
ute.^'' In  1836  Pennsylvania  enacted  a  statute  very  similar  to  the 
New  York  law,  and  since  that  time  nearly  all  of  the  states  have 
adopted  laws  providing  for  the  formation  of  limited  partnerships, 
some  following  the  New  York  statute  and  others  the  Connecticut 
law.  The  general  features  of  all  the  statutes  are  so  nearly  alike 
in  their  provisions  that  the  subject  can  be  properly  treated  as  a 
whole,  but  since  the  statutes  of  the  various  states  differ  in  some 
provisions,  one  must  examine  the  statutes  of  his  own  state  to 
ascertain  the  purposes  for  which  such  a  partnership  may  be 
created,  and  the  steps  necessary  to  create  it.^^  All  these  statutes 
are  designed  to  encourage  capitalists  to  invest  their  money  in 
trade  and  commerce,  by  limiting  their  liability.    This  form  of 

9  Laws    New    York    1822,    p.    259.  tinental  Nat.  Bank  v.  Strauss,  137  N. 

See  also  Batchelder  v.  Altheimer,  10  Y.  553,  32  N.  E.  1066 ;  White  v.  Eise- 

Mo.  App.  181;  Ames  v.  Downing,  1  man,   134  N.  Y.   101,  31   N.  E.  276; 

Bradf.  Sur.  (N.  Y.)  321.  Ames  v.  Downing,  1  Bradf.  Sur.  (N. 

loClapp  V.  Lacey,  35  Conn.  463.  Y.)    321;    Fourth    St.    Nat.   Bank   v. 

"Clapp   V.    Lacey,   35    Conn.   463;  Whitaker,    170   Pa.    St.   297,   33   Atl. 

Anderson  v.  Stone,  24  111.  App.  342;  100;    Patterson   v.   Holland,   7   Grant 

Spalding  v.  Black,  22  Kans.  55;  Con-  Ch.   (U.  C.)   1. 


§     1003  LAW    OF    PARTNERSHIP  1376 

partnerships  was  much  in  use  before  the  growth  of  corporations, 
but  since  the  liability  of  stockholders  in  some  kinds  of  corpora- 
tions may  be  limited,  probably  the  number  of  limited  partner- 
ships have  not  increased  correspondingly  with  the  growth  of 
trade  generally. 

§  1003.  Governed  entirely  by  statutes. — The  limited  part- 
nership is  a  child  of  the  statute  law,^"  and  while  the  law  governing 
the  rights  of  a  general  partnership  will  apply  to  the  acts  and 
conduct  of  the  general  partners  in  a  limited  partnership  and  their 
liability  will  be  so  measured,  the  rights  of  limited  partners  and 
the  public  in  dealing  with  the  partnersliip  in  which  they  are  inter- 
ested as  limited  members,  are  prescribed  by  the  statute,  and  no 
such  thing  as  a  limited  partnership  can  exist  in  the  absence  of 
a  statute  providing  for  its  formation.^^  It  can  be  formed  only  in 
one  way  and  that  is  by  taking  the  steps  designated  by  the  statute 
authorizing  such  partnerships,  and  since  the  effect  of  such  an 
organization  is  to  limit  the  liability  of  its  special  members  and 
to  deprive  those  dealing  with  the  firm  from  holding  such  mem- 
bers liable  for  the  firm's  debts,  these  steps  must  be  taken  precisely 
as  provided  by  the  statute.  There  must  be  a  full  and  fair  compli- 
ance with  the  statute  or  the  limited  members  will  be  held  to 
unlimited  liability  the  same  as  the  general  partners. 

12  Coope  V.  Eyre,  1  H.  Bl.  Zl ;  In  53 ;  Levy  v.  Lock,  5  Daly  46,  47  How. 
re  Merrill,  12  Blatchf.  (U.  S.)  221,  Pr.  (N.  Y.)  394;  Jacquin  v.  Buisson, 
Fed.  Cas.  No.  9467,  13  Nat.  Bank.  11  How.  Pr.  (N.  Y.)  385;  Ames  v. 
Reg.  91;  Peabody  v.  Oleson,  15  Colo.  Downing,  1  Bradf.  Sur.  (N.  Y.)  321; 
App.  346,  62  Pac.  234 ;  Clapp  v.  Lacey,  Lachaise  v.  Marks,  4  E.  D.  Smith 
35  Conn.  463;  Safe-Deposit  &c.  Co.  v.  (N.  Y.)  610;  Skolny  v.  Richter,  139 
Calm,  102  Md.  530,  62  Atl.  819 ;  Lan-  App.  Div.  534,  124  N.  Y.  S.  152 ; 
caster  v.  Choate,  5  Allen  (Mass.)  Fanshawe  v.  Lane,  16  Abb.  Pr.  (N. 
530;  Pierce  v.  Bryant,  5  Allen  Y.)  71;  Tindel  v.  Park,  154  Pa.  St. 
(Mass.)  91;  Batchelder  v.  Altheimer,  36,  26  Atl.  300;  McKnight  v.  Rat- 
io Mo.  App.  181;  Fifth  Ave.  Bank  cliff,  44  Pa.  St.  156;  Singer  v.  Kelly, 
V.  Colgate,  120  N.  Y.  381,  24  N.  E.  44  Pa.  St.  145;  Vilas  Bank  v.  Bul- 
799,  8  L.  R.  A.  712,  4  Silv.  Ct.  App.  lock,  10  Phila.  309,  32  Leg.  Int.  66,  1 
544;  Manhattan  Co.  v.  Laimbeer,  108  Wkly.  Notes  Cas.  (Pa.)  219;  McAr- 
N.  Y.  578,  15  N.  E.  712;  Van  Riper  thur  v.  Chase,  13  Grat.  (Va.)  683. 
V.  Poppenhausen,  43  N.  Y.  68 ;  Dnrant  ^^  Henkel  v.  Heyman,  91  111.  96. 
V.    Abendroth,   41    N.    Y.    Super.    Ct. 


1377  LIMITED    PARTNERSHIPS  §    1004 

§  1004.  Laws  governing  rights  of  partners. — As  we  have 
seen  Hmited  partnerships  can  only  exist  in  pursuance  of  statutes, 
it  follows  that  the  statutes  of  a  state  can  not  authorize  such  a 
partnership  to  be  formed  or  to  do  business  wholly  in  some  other 
state,  and  if  this  was  attempted  the  partnership  would  be  deemed 
to  be  a  general  partnership  in  both  states/^  However,  a  limited 
partnership  duly  formed  pursuant  to  the  law  of  the  state  where 
formed  may  have  business  transactions  in  other  states  without 
becoming  a  general  partnership."  If  such  partnership  is  permit- 
ted to  enter  into  contracts  in  a  state  other  than  where  it  is  formed, 
the  construction  of  such  contract  and  the  liability  thereunder 
will  be  measured  by  the  law  of  the  state  where  the  contract  is 
made.^'^  The  liability  of  the  limited  partners  must  in  general, 
however,  be  determined  by  the  law  of  the  state  under  which  the 
limited  partnership  is  formed/''  A  limited  partnership  in  its  very 
nature  is  based  upon  and  can  not  exist  without  general  partners  or 
a  general  partner.  It  follows  where  a  limited  partnership  trans- 
acts any  business  in  a  state  other  than  where  formed,  the  rights 
and  liabilities  of  the  general  members  of  such  partnership,  in  the 
absence  of  a  statute,  are  to  be  ascertained  under  the  principles 
of  the  common  law  which  apply  to  those  persons,  associated  in 
the  ordinary  partnership  relation. ^^  But  a  case  decided  in  Michi- 
gan reiterates  the  former  holding  of  the  Supreme  Court  of  that 
state,  "that  the  law  governing  corporations,  rather  than  the 
law  governing  copartnerships,  is  applicable  to  a  partnership  lim- 

i^Jacquin  v.  Buisson,  11  How.  Pr.  i^  Lawrence      v.      Batcheller,      131 

(N.  Y.)  385.  Mass.  504;  Locke  v.  Lewis,  124  Mass. 

15  Lawrence  v.  Batcheller,  131  1,  26  Am.  Rep.  631 ;  Gray  v.  Gibgon, 
Mass.  504;  Locke  v.  Lewis,  124  Mass.  6  Mich.  300;  Taylor  v.  Webster,  39 
1,  26  Am.  Rep.  631 ;  King  v.  Sarria,  N.  J.  L.  102 ;  Hogg  v.  Orgill,  34  Pa. 
7  Hun  (N.  Y.)  167;  Hogg  v.  Or-  St.  344;  Barrow  v.  Downs,  9  R.  L 
gill,  34  Pa.  St.  344;  Hastings  v.  Hop-  446,  11  Am.  Rep.  283. 

kinson,  28  Vt.  108.  is  Jemison  v.  Bearing,  41  Ala.  283 ; 

16  Locke  V.  Lewis,  124  Mass.  11,  Spalding  v.  Black,  22  Kans.  55 ;  Safe- 
26  Am.  Rep.  631 ;  King  v.  Sarria,  69  Deposit  Co.  v.  Cahn,  102  Md.  530, 
N.  Y.  24.  25  Am.  Rep.  128;  Ward  62  Atl.  819;  Lancaster  v.  Choate,  5 
V.    Newell,    42    Barb.    (N.    Y.)    482,  Allen  (Mass.)  530. 

28  How.  Pr.  102 ;  Barrow  v.  Downs, 
9  R.  L  446,  11  Am.  Rep.  283. 


§     1005  LAW    OF    PARTNERSHIP  1378 

ited."^^  In  states  where  the  statutes  authorizing  the  organization 
of  Hmited  partnerships  provide  for  the  formation  of  joint  stock 
companies  or  associations,  and  treat  them  as  limited  partner- 
ships, there  may  be  some  tendency  toward  applying  corporation 
law  to  such  partnerships,  but  it  seems  quite  inconsistent  to  do  so 
in  states  where  the  New  York  or  Connecticut  laws  have  been 
followed  in  authorizing  the  formation  of  limited  partnerships. 
So  long  as  such  organizations  are  held  to  be  partnerships  under 
the  management  of  the  general  or  unlimited  members,  it  would 
seem  that  the  laws  governing  partnerships  rather  than  the  laws 
governing  corporations  should  be  applied  to  limited  partner- 
ships. 

§  1005.  Construction  of  limited  partnership  statutes. — 
There  is  a  great  deal  of  conflict  in  the  decided  cases  as  to  whether 
statutes  governing  limited  partnerships  should  be  construed 
strictly  or  liberally,  and  while  there  is  very  respectable  authority 
for  the  proposition  that  statutes  which  authorize  the  formation 
of  limited  partnerships  must  be  strictly  construed  against  limited 
partners,^"  it  is  believed  the  weight  of  authority  is  that  such  stat- 
utes in  so  far  as  they  do  not  affect  the  rights  of  third  persons 
should  be  liberall}^  construed  so  as  not  to  destroy  the  protection 
of  the  statute  extended  to  those  who  invest  their  capital  and  be- 
come limited  partners.  In  an  early  case  in  Pennsylvania"^  it  was 
said :  "It  is  not  intended  to  deny  that  the  requirements  of  the 
statute  must  be  strictly  pursued  in  organizing  and  conducting 
limited  partnerships,  but  this  should  not  change  the  rule  of  inter- 
pretation which  requires  in  public  beneficial  statutes  that  con- 
struction which  will  promote  their  objects  rather  than  destroy 
them."  It  has  recently  been  well  said  that  "the  courts  should 
adopt  and  enforce  a  reasonable  construction  of  the  statute  which, 
on  the  one  hand,  will  not  defeat  one  of  the  objects  of  the  law, 
which  is  to  induce  the  investment  of  capital  in  business,  and 
upon  the  other  hand  will  not  under  cover  of  a  substantial  com- 

19  Armstrong  v.  Stearns,  156  Mich.        20  Cummings     v,     Hayes,     100     III. 
597,  121  N.  W.  312.  App.  347. 

21  Singer  v.  Kelly,  44  Pa.  St.  145. 


1379  LIMITED    PARTNERSHIPS  §     1005 

pliance  with  the  requirements  of  the  statute  fritter  away  the 
protection  which  the  law  has  thrown  around  those  who  deal  with 
the  firm."  But  good  faith  and  honest  intention  will  not  absolve 
a  special  partner  from  general  liability,  any  more  than  will  the 
fact  that  the  creditor  has  not  been  injured  by  the  noncompliance 
with  the  statute.  Yet,  on  the  other  hand,  actual  compliance  does 
not  demand  that  a  limited  partner  be  deprived  of  his  rights,  as 
such,  by  reason  of  mere  formal  defects  or  technical  violations."" 
A  belief  in  the  truth  of  the  statements  which  he  makes  in  a  re- 
newal certificate  does  not,  however,  save  him  from  the  penalty 
attaching  to  their  falsity.""  It  has  been  said  that  where  no  gov- 
erning statute  exists,  the  rights  and  liabilities  of  members  of  a 
limited  partnership  are  to  be  ascertained  by  reference  to  those 
principles  of  the  common  law  which  obtain  wdien  those  associated 
in  the  ordinary  partnership  relation  are  involved.^*  Speaking  of 
the  construction  that  should  be  given  to  such  statutes  the  Su- 
preme Court  of  Pennsylvania"^  has  well  said  that,  "The  statute 
in  our  judgment  is  not  in  derogation  of  the  common  law  because 
limited  partnerships  are  unknown  to  that  law,  but  are  enabling, 
enlarging  and  regulating  statutes,  remedial  in  character  and  not 
therefore  to  be  construed  strictly."  In  construing  such  a  statute 
the  New  York  court^°  said,  "This  may  well  be  regarded  as  a 

22  R.  S.  Oglesby  Co.  v.  Lindsey,  112  24jemison  v.  Dearing,  41  Ala.  283; 
Va.  767,  72  S.  E.  672,  Ann.  Cas.  1913  Spalding  v.  Black,  22  Kans.  55 ;  Safe- 
B,  913n.  Deposit    &c.    Co.    v.    Cahn,    102    Md. 

23  Reitzel  V.  Haines,  170  Pa.  St.  530,  62  Atl.  819 ;  Lancaster  v.  Choate, 
306,  33  Atl.  103,  37  Wkly.  Notes  Cas.  5  Allen  (Mass.)  530;  Nutting  v.  Ash- 
80.  For  renewal  certificate  held  suf-  croft,  101  Mass.  300;  Jaffe  v.  Krum, 
ficient  provided  the  original  capital  88  Mo.  669;  Ames  v.  Downing,  1 
remained  intact,  although  the  special  Bradf.  Sur.  (N.  Y.)  321;  Continental 
partners  were  named  as  individuals,  Nat.  Bank  v.  Strauss,  60  N.  Y.  Super, 
instead  of  a  firm  as  required  by  Ct.  151,  43  N.  Y.  St.  68,  17  N.  Y.  S. 
statute,  see  Patterson  v.  Youngs,  139  188;  Jacquin  v.  Buisson,  11  How.  Pr. 
N.  Y.  S.  670.     See  also  Pfirmann  v.  (N.  Y.)   385. 

Henkel,    1    111.   App.    145;    Durant  v.  25  Rgitzel    v.    Haines,    170    Pa.    St. 

Abendroth,  69  N.  Y.  148,  25  Am.  Rep.  306,  33  Atl.  103. 

158 ;   Van   Ingen  v.  Whitman,  62  N.  26  y^n   Riper  v.   Poppenhausen,  43 

Y.   513;   Ward   v.   Newell,   42   Barb.  N.  Y.  68. 

(N.  Y.)  482,  28  How.  Pr.  102. 


§     1006  LAW    OF    PARTNERSHIP  1380 

remedial  statute  and  should  receive  a  liberal  construction,  with 
a  view  to  suppress  the  mischief  and  advance  the  remedy."  The 
tendency  of  judicial  decisions  is  to  give  to  such  statutes  ordinary, 
fair  and  reasonable  construction;  in  short,  such  a  construction 
as  will  reasonably  safeguard  the  rights  of  the  public  and  at  the 
same  time  induce  the  investment  of  capital  in  such  enterprises.^^ 

§  1006.  Nature  of  business  prescribed  by  law^. — While  the 
statutes  of  the  various  states  are  not  entirely  alike  in  limiting  the 
kind  of  business  limited  partnerships  may  be  formed  to  conduct, 
still  they  generally  provide  for  the  formation  of  such  partner- 
ships to  transact  any  kind  of  lawful  business  except  insurance 
and  banking,  which  are  usually  prohibited.-^  Where  it  is  at- 
tempted to  form  a  limited  partnership  to  transact  any  kind  of 
business,  not  authorized  by  the  statute  under  which  it  is  formed, 
if  the  business  to  be  conducted  is  not  unlawful  the  partnership 
will  not  be  invalid,  but  will  be  held  to  be  a  general  partnership 
in  which  all  the  partners  will  be  held  to  unlimited  liability.^^ 

§  1007.  Certificate  or  partnership  contract. — Persons  de- 
siring to  form  a  limited  partnership  are  required  to  make  and 
execute  such  a  certificate  as  may  be  prescribed  by  the  statutes  of 
the  state  in  which  the  partnership  is  to  be  formed,^*'  and  file  such 
certificate  in  the  office  where  such  statute  requires  it  to  be  filed, 
which  is  usually  the  office  in  the  county  where  deeds  of  convey- 

27  Anderson  v.  Stone,  24  111.  App.  codes  and  statutes  of  the  various 
342 ;  Ulman  v.  Briggs,  32  La.  Ann.  states,  also  Tracy  v.  Tuffly,  134  U. 
655 ;  Buck  V.  Alley,  45  N.  Y.  488,  S.  206,  33  L.  ed.  879,  10  Sup.  Ct.  527 ; 
40  N.  E.  236;  Manhattan  Co.  v.  Laim-  Jacquin  v.  Buisson,  11  How.  Pr.  (N. 
beer,  108  N.  Y.  578,  15  N.  E.  712;  Y.)  385 ;  Ussery  v.  Crusman  (Tenn.), 
Fifth  Ave.  Bank  v.  Colgate,  54  N.  Y.  47  S.  W.  567. 

Super.  Ct.  188;  Blumenthal  v.  Whit-  29  McGehee  v.   Powell,  8  Ala.  827. 

aker,    170   Pa.    St.   309,   33   Atl.    103;  so  Qimmings     v.     Hayes,     100     111. 

R.  S.  Oglesby  Co.  v.  Lindsey,  112  Va.  App.    347;    Haggerty   v.    Foster,    103 

767,  72  S.  E.  672,  Ann.  Cas.  1913  B,  Mass.    17;    Selden    v.    Hall,    21    Mo. 

913n.  App.    452;    Smith    v.    Argall,    6    Hill 

28  Burns'  Rev.  Ind.  Stat,  1915,  §  (N.  Y.)  479;  Fifth  Ave.  Bank  v.  Col- 
9693,  where  it  is  provided  that  such  gate,  54  N.  Y.  Super.  Ct.  188;  Bowen 
partnerships  shall  not  be  formed  for  v.  Argall,  24  Wend.  (N.  Y.)  496; 
the  purpose  of  writing  insurance.   See  Manhattan   Co.   v.  Laimbeer,   108  N. 


1381 


LIMITED    PARTNERSHIPS 


§     1008 


ance  are  required  to  be  recorded.^  ^  A  failure  to  execute  and  file 
such  a  certificate  as  is  required  by  the  statute  will  constitute  the 
firm  a  general  partnership  with  unlimited  liability,^-  and  in  case 
of  failure  to  have  the  certificate  recorded  where  the  statute  re- 
quires it  to  be  recorded  will  render  the  partnership  a  general 
one.^^  The  certified  partnership  contract  called  the  certificate  con- 
stitutes the  agreement  between  the  partners  and  is  binding  upon 
them  whether  it  is  sufficient  to  constitute  a  limited  partnership 
or  not.  If  the  statute  authorizing  the  formation  of  a  limited  part- 
nership is  not  fully  complied  with  the  partners,  as  far  as  third 
persons  are  concerned,  become  general  and  are  liable  without 
limitation  for  the  losses  of  the  firm. 

§  1008.  What  certificate  must  contain. — The  statutes 
very  generally  provide  that  the  partnership  contract  shall  con- 
tain: (1)  The  firm  name  to  be  used  by  the  limited  partnership 
in  the  conduct  of  its  business  f*  (2)  the  nature  of  the  business 
which  the  partnership  intends  to  conduct  f^  (3)  the  place  where 


Y.  578,  15  N.  E.  712;  Hogg  v.  Or- 
gill,  34  Pa.  St.  344;  Patterson  v. 
Holland,  7  Grant  Ch.  (U.  C.)  1; 
Ulman  v.  Briggs,  32  La.  Ann.  655. 

31  Tracy  v.  Tuffly,  134  U.  S.  206, 
33  L.  ed.  879,  10  Sup.  Ct.  527 ;  Henkel 
V.  Heyman,  91  111.  96;  Adam  v.  Mus- 
son,  Zl  111.  App.  501 ;  Ulman  v.  Briggs, 
32  La.  Ann.  655 ;  Lachomette  v. 
Thomas,  5  Rob.  (La.)  172;  Fifth 
Ave.  Bank  v.  Colgate,  120  N.  Y.  381, 
24  N.  E.  799,  8  L.  R.  A.  712,  4  Silv. 
Ct.  App.  544;  Durant  v.  Abendroth, 
41  N.  Y.  Super.  Ct.  59;  Sheble  v. 
Strong,  128  Pa.  St.  315,  18  Atl.  397; 
Haddock  v.  Grinnell  Mfg.  Corp.,  109 
Pa.  St.  372,  1  Atl.  174;  Purdy  v. 
Lacock,  6  Pa.  St.  490 ;  Ussery  v.  Crus- 
man  (Tenn.),  47  S.  W.  567;  R.  S. 
Oglesby  Co.  v.  Lindsey,  112  Va.  767, 
72  S.  E.  672,  Ann.  Cas.  1913  B,  913n. 

32  Haslet  V.  Kent,  160  Pa.  St.  85, 
28  Atl.  501 ;  Vanhorn  v.  Corcoran, 
127  Pa.  St.  255,  18  Atl.  16,  4  L.  R. 


A.  386;  Spencer  Optical  Mfg.  Co. 
V.  Johnson,  ^Z  S.  Car.  533,  31  S.  E. 
392. 

33  Henkel  v.  Heyman,  91  111.  96; 
Purdy  V.  Lacock,  6  Pa.  St.  490.  But 
see  Manhattan  Co.  v.  Laimbeer,  21 
Abb.  N.  Cas.  27,  108  N.  Y.  578,  15 
N.  E.  712. 

■34  Tracy  v.  Tuffly,  134  U.  S.  206, 
Z2,  L.  ed.  879,  10  Sup.  Ct.  527;  Pfir- 
mann  v.  Henkel,  1  111.  App.  145 ; 
Hardt  v.  Levy,  72  Hun  225,  25  N. 
Y.  S.  248,  55  N.  Y.  St.  706 ;  Blumen- 
thal  V.  Whitaker,  170  Pa.  St.  309,  ZZ 
Atl.  103. 

35  Tracy  v.  Tuffly,  134  U.  S.  206, 
ZZ  L.  ed.  879,  10  Sup.  Ct.  527 ;  Selden 
V.  Hall,  21  Mo.  App.  459;  Fifth  Ave. 
Bank  v.  Colgate,  120  N.  Y.  381,  24 
N.  E.  799,  8  L.  R.  A.  712,  4  Silv.  Ct. 
App.  544 ;  Hogg  v.  Orgill,  34  Pa.  St. 
344;  Benedict  v.  Van  Allen,  17  U. 
C.  Q.  B.  234. 


1008 


LAW    OF    PARTNERSHIP 


1382 


the  partnership  business  is  to  be  conducted;^''  (4)  the  names  of 
the  general  partner  or  partners  and  the  names  of  the  limited 
partner  or  partners  must  be  stated ;^^  (5)  their  places  of  resi- 
dence must  be  given  and  the  certificate  must  designate  who  are 
limited  partners  and  who  general  partners  ;^^  (6)  a  statement  of 
the  time  of  the  commencement  of  the  partnership  and  when  it 
will  terminate  ;^^  (7)  the  certificate  must  also  contain  a  statement 
showing  the  capital  furnished  by  each  of  the  limited  partners  and 
that  such  contributions  have  been  paid  in  cash,  except  in  states 
where  such  contributions  are  permitted  to  be  made  in  property 
other  than  cash.*"  In  case  the  contribution  of  a  limited  partner 
is  not  by  the  statute  required  to  be  made  in  cash,  but  is  allowed 
to  be  made  either  in  cash  or  property,  the  certificate  must  disclose 
its  nature,  and  if  made  in  property  must  state  what  kind  of 
property  and  what  is  its  actual  value.  The  statutes  in  such  a  case 
usually  provide  that  the  property  contributed  shall  have  been  ap- 
praised by  disinterested  persons  and  its  real  value  thus  ascer- 


36  Tracy  v.  Tuffly,  134  U.  S.  206, 
33  L.  ed.  879,  10  Sup.  Ct.  527;  Sel- 
den  V.  Hall,  21  Mo.  App.  452;  Levy 
V.  Lock,  5  Daly  (N.  Y.)  46,  47  How. 
Pr.  394;  Patterson  v.  Holland,  7 
Grant  Ch.  (U.  C.)  1. 

37  Tracy  v.  Tuffly,  134  U.  S.  206, 
33  L.  ed.  879,  10  Sup.  Ct.  527;  Fifth 
Ave.  Bank  v.  Colgate,  120  N.  Y.  381, 
24  N.  E.  799,  8  L.  R.  A.  712,  4  Silv. 
Ct.  App.  544;  Bowen  v.  Argall,  24 
Wend.  (N.  Y.)  496;  Blumenthal  v. 
Whitaker,  170  Pa.  St.  309,  33  Atl. 
103 ;  Laflin  Powder  Co.  v.  Steytler, 
146  Pa.  St.  434,  23  Atl.  215,  14  L. 
R.  A.  690;  Haddock  v.  Grinnell  Mfg. 
Corp.,  109  Pa.  St.  372,  1  Atl.  174. 

38  Tracy  v.  Tuffly,  134  U.  S.  206, 
33  L.  ed.  879,  10  Sup.  Ct.  527;  Pfir- 
mann  v.  Henkel,  1  111.  App.  145 ;  Sel- 
den  V.  Hall,  21  Mo.  App.  452;  La- 
chaise  V.  Marks,  4  E.  D.  Smith  (N. 
Y.)  610;  Hardt  v.  Levy,  72  Hun 
225,  25  N.  Y.  S.  248,  55  N.  Y.   St. 


706;  Haddock  v.  Grinnell  Mfg.  Corp., 
109  Pa.  St.  372,  1  Atl.  174;  Hogg 
v.  Orgill,  34  Pa.  St.  344;  Ussery  v. 
Crusman  (Tenn.),  47  S.  W.  567; 
Benedict  v.  Van  Allen,  17  U.  C.  Q. 
B.  234 ;  Whittemore  v.  Macdonnell,  6 
U.  C.  C.  P.  547. 

39  Tracy  v.  Tuffly,  134  U.  S.  206, 
33  L.  ed.  879,  10  Sup.  Ct.  527;  Sel- 
den  v.  Hall,  21  Mo.  App.  452;  Hag- 
gerty  v.  Taylor,  10  Paige  (N.  Y.) 
262 ;  Madison  County  Bank  v.  Gould, 
5  Hill  (N.  Y.)  309;  Blumenthal  v. 
Whitaker,  170  Pa.  St.  309,  33  Atl. 
103. 

40  Tracy  v.  Tuffly,  134  U.  S.  206. 
33  L.  ed.  879,  10  Sup.  Ct.  527;  In  re 
Merrill,  12  Blatchf.  (U.  S.)  221,  Fed. 
Cas.  No.  9467;  Wilson  v.  Bean,  33 
111.  App.  529;  Haggerty  v.  Foster, 
103  Mass.  17;  Fifth  Ave.  Bank  v. 
Colgate,  54  N.  Y.  Super.  Ct.  188; 
Van  Ingen  v.  Whitman,  62  N.  Y. 
513;  Blumenthal  v.  Whitaker,  170  Pa. 


1383 


LIMITED    PARTNERSHIPS 


§    1008 


tained."  If  the  certificate  fails  to  fulfil  the  requirements  of  the 
statute  in  this  particular  it  will  have  the  effect  of  making  the 
partnership  a  general  and  not  a  limited  one/^  However,  it  has 
been  held  that  a  limited  partner  will  not  be  deprived  of  the  pro- 
tection the  statute  gives  him  by  reason  of  mere  formal  defects 
or  technical  violations,"  but  a  false  statement  in  the  certificate, 
even  if  in  good  faith  believed  by  a  limited  partner  to  be  true, 
will  render  him  liable  as  a  general  partner/*  If  the  contribution 
is  stated  to  be  property  and  not  cash  the  mere  fact  that  the  value 
placed  on  it  is  excessive,  where  the  valuation  is  made  in  good 
faith,  will  not  render  the  limited  partner  liable  as  a  general 
partner."*^  As  an  illustration  (to  be  varied  according  to  the  stat- 
ute of  any  particular  state  where  the  question  arises),  some  Ohio 


St.  309,  33  Atl.  103;  Haddock  v. 
Grinnell  Mfg.  Corp.,  109  Pa.  St.  372, 
1  Atl.  174;  Richardson  v.  Hogg,  38 
Pa.  St.  153;  Spencer  Optical  Mfg. 
Co.  V.  Johnson,  53  S.  Car.  533,  31  S. 
E.  392;  McArthur  v.  Chase,  13  Grat. 
(Va.)    683. 

41  HolHday  v.  Union  Bag  &c.  Co., 
3  Colo.  342;  Wilson  v.  Bean,  33  111. 
App.  529;  Blumenthal  v.  Whitaker, 
170  Pa.  St.  309,  33  Atl.  103;  Haslet 
V.  Kent,  160  Pa.  St.  85,  28  Atl.  501 ; 
Cock  V.  Bailey,  146  Pa.  St.  328,  23 
Atl.  370;  Vandike  v.  Rosskam,  67 
Pa.  St.  330. 

42  Gearing  v.  Carroll,  151  Pa.  St. 
79,  24  Atl.  1045 ;  Sheble  v.  Strong,  128 
Pa.  St.  315,  18  Atl.  397;  Maloney  v. 
Bruce,  94  Pa.  St.  249;  Siegel  v.  Wood, 
3  Pa.  Dist.  463. 

43  R.  S.  Oglesby  Co.  v.  Lindsey,  112 
Va.  767,  72  S.  E.  672,  Ann.  Cas.  1913 
B,  913n. 

44Abendroth  v.  Van  Dolsen,  131 
U.  S.  66,  33  L.  ed.  57,  9  Sup.  Ct.  619; 
Holliday  v.  Union  Bag  &c.  Co.,  3 
Colo.  342;  Wilson  v.  Bean,  33  111. 
App.  529;  Haggerty  v.  Foster,  103 
Mass.   17;   Pierce  v.  Bryant,  5  Allen 


(Mass.)  91;  Hogan  v.  Hadzsits,  113 
Mich.  568,  71  N.  W.  1092;  Buck  v. 
Alley,  145  N.  Y.  488,  40  N.  E.  236; 
White  V.  Eiseman,  134  N.  Y.  101,  31 
N.  E.  276;  Sharp  v.  Hutchinson,  100 
N.  Y.  533,  3  N.  E.  500;  Van  Ingen 
V.  Whitman,  62  N.  Y.  513;  Beers  v. 
Reynolds,  12  Barb.  (N.  Y.)  288; 
Haviland  v.  Chace,  39  Barb.  (N.  Y.) 
283;  Fulmer  v.  Abendroth,  40  Hun 
639,  2  N.  Y.  St.  123 ;  Reitzel  v.  Haines, 
170  Pa.  St.  306,  33  Atl.  103;  Fourth 
St.  Nat.  Bank  v.  Whitaker,  170  Pa. 
St.  297,  33  Atl.  100;  Van  Horn  v. 
Corcoran,  127  Pa.  St.  255,  18  Atl.  16 ; 
Hite  Natural  Gas  Co.'s  Appeal,  118 
Pa.  St.  436,  12  Atl.  267;  Eliot  v. 
Himrod,  108  Pa.  St.  569;  Singer  v. 
Kelly,  44  Pa.  St.  145 ;  Hite  Nat.  Gas 
Co.'s  Appeal,  118  Pa.  St.  436,  12  Atl. 
267,  10  Cent.  Rep.  805;  McArthur  v. 
Chase,  13  Grat.  (Va.)  683;  Watts 
V.  Taft,  16  U.  C.  Q.  B.  256. 

45  Rehfuss  V.  Moore,  134  Pa.  St. 
462,  19  Atl.  756,  7  L.  R.  A.  663. 
See  also  Cock  v.  Bailey,  146  Pa.  St. 
328,  23  Atl.  370;  Sheble  v.  Strong, 
128  Pa.  St.  315,  18  Atl.  397. 


37 — Row.  ON  Partn. — Vol.  2 


§     1008  LAW    OF    TARTNERSHIP  1384 

Statutes  relating  to  limited  partnership  certificates  are  here  given : 
Ohio  Code,  section  8038:  "The  persons  forming  such  (limited) 
partnership  shall  make  and  severally  sign  a  certificate,  which 
must  contain :  ( 1 )  The  name  or  firm  under  which  the  partnership 
is  to  be  conducted;  (2)  the  names  and  respective  places  of  resi- 
dence of  all  the  partners,  distinguishing  who  are  general  and  who 
are  special  partners;  (3)  the  amount  of  capital  which  each  spe- 
cial partner  has  contributed  to  the  common  stock;  (4)  the  gen- 
eral nature  of  the  business  to  be  transacted;  and  (5)  when  the 
partnership  is  to  commence  and  when  it  is  to  terminate."  Section 
8039 :  "Such  certificate  shall  be  acknowledged  before  an  officer 
authorized  to  take  acknowledgment  of  deeds.  When  either  of 
the  partners  resides  out  of  this  state,  the  certificate  may  be  ac- 
knowledged by  such  partner  before  a  justice  of  the  peace,  or  judge 
of  any  of  the  courts  of  the  state  or  territory  where  he  resides. 
Such  acknowledgment  shall  be  certified  by  the  officer  taking  it." 
Section  8040 :  "The  certificate  so  acknowledged  shall  be  recorded 
by  the  recorder  of  the  county  in  which  the  principal  place  of  the 
business  of  the  partnership  is  situated,  in  a  book  to  be  kept  for 
that  purpose,  open  to  public  inspection.  If  the  partnership  has 
places  of  business  in  different  counties,  the  certificate,  and  ac- 
knowledgment shall  be  recorded  in  like  manner  in  the  office  of 
recorder  in  every  such  county.  If  a  false  statement  is  made  in 
such  certificate,  all  the  persons  interested  in  the  partnership  shall 
be  liable,  as  general  partners,  for  all  its  engagements."  Section 
8041 :  "The  partners  shall  publish  a  copy  of  such  certificate  for 
six  weeks  immediately  after  it  is  recorded,  in  a  newspaper  printed 
in  the  county  where  their  principal  place  of  business  is  situated. 
A  like  publication  shall  be  made  in  every  county  where  the  part- 
nership has  a  place  of  business.  In  case  such  publication  is  not 
so  made,  the  partnership  shall  be  deemed  general."  Section  8042 : 
"Such  partnership  shall  not  be  deemed  to  be  formed  until  such 
certificate  has  been  made,  acknowledged  and  recorded."  The  fore- 
going sections  illustrate  the  necessity  of  closely  following  the 
statutes  providing  for  the  formation  of  limited  partnerships.    It 


1385  LIMITED    PARTNERSHIPS  §     1010 

was  held  in  a  case  in  South  Carolina/"  that  the  provision  in  South 
Carolina  Revised  Statutes,  section  1410  (which  is  the  same  pro- 
vision as  in  the  Ohio  statute  above  quoted),  "that  a  certificate 
to  form  a  limited  partnership  shall  contain,  inter  alia,  a  state- 
ment of  the  amount  of  capital  which  each  special  partner  has 
contributed  to  the  common  stock,"  is  not  substantially  complied 
with  by  a  statement  of  the  aggregate  sum  contributed  by  all  the 
special  partners.  The  question  has  arisen,  as  to  the  signing  of  the 
certificate  by  an  attorney  in  fact  for  one  of  the  partners.  An 
Illinois  court  has  held  that  if  it  be  permissible  for  a  person  desir- 
ous of  forming  a  limited  partnership  to  sign  and  acknowledge 
the  necessary  certificate  by  an  attorney  in  fact,  such  acknowledg- 
ment must  be  accompanied  by  evidence  showing  the  authority  of 
the  attorney  to  act.*^ 

§  1009.  Acknowledgment  of  certificate. — By  the  statutes 
of  most  of  the  states  the  certificate  before  being  filed  must  be 
acknowledged  by  those  signing  it  or  at  least  be  witnessed,  and 
the  acknowledgment  must  be  made  before  an  officer  authorized 
to  take  acknowledgments.**  Where  an  attorney  in  fact  signs  the 
name  of  a  limited  partner  to  the  certificate  and  acknowledges  it 
and  it  is  not  shown  tliat  he  had  any  authority  to  do  so,  the  forma- 
tion of  such  limited  partnership  is  not  sufficient  under  the  statute 
and  the  partnership  will  be  deemed  to  be  a  general  one.*^ 

§  1010.  Filing  and  recording  of  certificate. — It  is  very  gen- 
erally provided  by  the  statutes  that  the  certificate  of  partnership 
must  be  filed  with  a  certain  officer  in  the  county  (usually  the 
officer  with  whom  deeds  are  filed  for  record)  and  it  has  been 

4«  Spencer    Optical    Mfg.     Co.    v.  496;  Fifth  Ave.  Bank  v.  Colgate,  120 

Johnson,  53  S.  Car.  533,  31  S.  E.  392.  N.  Y.  381,  24  N.  E.  799,  8  L.  R.  A. 

4"  Cummings  v.  Hayes,  100  111.  App.  712,  4  Silv.   Ct.  App.  544 ;   Haddock 

347.  V.   Grinnell   Mfg.   Corp.,    109   Pa.    St. 

48  Tracy  v.  Tuffly,   134  U.   S.  206,  372,   1   Atl.   174;   Ussery  v.  Crusman 

33  L.  ed.  879,  10  Sup.  Ct.  527;  Walker  (Tenn.),  47  S.  W.  567. 

V.  Wood,  170  111.  463,  48  N.  E.  919;  ^g^alker   v.    Wood,    170    111.   463, 

Selden    v.    Hall.    21    Mo.    App.    452 ;  48  N.  E.  919. 
Bowen  v.  Argall,  24  Wend.   (N.  Y.) 


§     1011  LAW    OF    TARTNERSHIP  1386 

held  that  the  statute  requiring  this  to  be  done  is  mandatory  and 
that  a  full  compliance  with  the  provisions  of  the  statute  consti- 
tutes a  condition  precedent  to  the  creation  of  a  limited  partner- 
ship.^" The  certificate  after  being  executed,  acknowledged  and 
filed  must  be  recorded  and  a  failure  to  do  so  will  make  the  part- 
nership a  general  one.  It  is  therefore  incumbent  on  a  limited 
partner  to  see  to  it  that  a  proper  record  is  made,^^  but  when  the 
certificate  is  left  in  the  hands  of  the  recorder  or  officer  with  whom 
it  is  required  to  be  filed  and  recorded,  the  failure  of  the  officer 
to  record  it  will  not  affect  the  rights  of  the  partners,  for  the  arti- 
cles will  be  assumed  to  be  recorded.^"  Still  it  is  held  incumbent 
upon  a  limited  partner  to  show  that  each  step  required  to  be  taken 
has  been  taken  in  order  that  he  may  avoid  liability  to  third  per- 
sons as  a  general  partner,  and  where  the  statute  requires  an  index 
to  be  made  showing  where  the  recorded  certificate  may  be  found 
such  index  must  be  made.^^ 

§  1011.  Affidavit  of  payment  of  contribution  of  limited 
partner. — Generally  it  is  provided  by  the  statutes  that  an  af- 
fidavit of  one  or  more  of  the  general  partners  be  made  and  filed 
with  the  certificate  of  partnership  showing  that  the  contributions 
of  the  limited  members  have  been  paid  in  cash  or  in  other  prop- 
erty of  an  ascertained  value,  where  the  statute  permits  payment 
in  property,  and  while  these  affidavits  are  not  required  to  follow 
the  language  of  the  statute  they  must  contain  in  substance  all  the 
requirements  named  in  the  statute,  for  a  failure  of  substantial 
compliance  with  the  requirements  will  render  all  the  partners 

50  Manhattan  Co.  v.  Laimbeer,  17  24  N.  E.  799,  8  L.  R.  A.  712,  4  Silv. 
Abb.  N.  Cas.  123,  53  N.  Y.  Super.  Ct.  Ct.  App.  544 ;  Sheble  v.  Strong,  128 
22.  Pa.  St.  315,  18  Atl.  397. 

51  Tracy  v.  Tuffly,  134  U.  S.  206,  ^2  Henkel  v.  Heyman,  91  111.  96; 
33  L.  ed.  879,  10  Sup.  Ct.  527 ;  Henkel  Manhattan  Co.  v.  Laimbeer,  21  Abb. 
V.  Heyman,  91  111.  96;  Pfirmann  v.  N.  Cas.  27,  108  N.  Y.  578,  15  N.  E. 
Henkel,  1  111.  App.  145 ;  Rayne  v.  712.  But  see  Gray  v.  Gibson,  6  Mich. 
Terrell,  33  La.  Ann.  812;  Nichols  v.  300. 

Buell,  157  Mich.  609,  122  N.  W.  217 ;  ^3  r.  s.  Oglesby  Co.  v.  Lindsey, 
Gray  v.  Gibson,  6  Mich.  300;  Fifth  112  Va.  767,  72  S.  E.  672,  Ann.  Cas. 
Ave.  Bank  v.  Colgate,  120  N.  Y.  381,    1913  B,  913n. 


1387  LIMITED    PARTNERSHIPS  §     1011 

liable  as  general  partners.^*  Where  an  affidavit  is  false  as  to  the 
capital  of  a  limited  partnership,  the  special  partner  will  be  held 
liable  as  a  general  partner  in  most  of  the  states. ^^  Where  the  re- 
quired affidavit  purports  to  have  been  made  by  an  attorney  in 
fact  for  a  partner  and  no  authority  is  shown  authorizing  him  to 
make  such  affidavit,  it  will  not  be  a  compliance  with  the  statute 
and  such  partnership  will  be  a  general  one  with  unlimited  lia- 
bility.^^ Under  the  New  York  statute  providing  that  when  the 
certificate  of  a  limited  partnership  shall  be  filed,  an  affidavit  by 
one  or  more  of  the  general  partners  shall  be  filed  in  the  same 
office,  stating  that  "the  sums  specified  in  the  certificate  to  have 
been  contributed  by  each  of  the  limited  partners  to  the  common 
stock,  have  been  actually  and  in  good  faith  paid  in  cash,"  and 
that  "if  any  false  statement  be  made  in  such  *  *  '-^  affidavit,  all 
the  persons  interested  in  such  partnership  shall  be  liable  for  all 
the  engagements  thereof  as  general  partners,"  it  was  held  that  a 
statement  in  the  affidavit  that  the  amount  stated  in  the  certificate 
to  have  been  contributed  by  a  limited  partner  had  been  paid  in 
at  the  time  the  affidavit  was  filed,  on  which  day  the  partnership 
commenced,  whereas  it  was  not  paid  in  until  a  week  later,  ren- 
dered the  limited  partner  liable  generally."  Under  different  state 
statutes,  the  question  may  arise  as  to  what  constitutes  payment  of 
the  special  partner's  contribution.  Under  the  Michigan  act,  re- 
quiring the  filing  of  an  affidavit  stating  that  the  amount  of  a 

54  Abendroth  v.  Van  Dolsen,  131  U.  been  paid,  it  is  a  false  affidavit,  and  all 

S.  66,  33  L.  ed.  57,  9  Sup.   Ct.  619;  the  members   of   the  partnership  be- 

Crouch  V.   First  Nat.   Bank,    156  III.  come  general  partners,  including  lim- 

342,  40  N.  E.  974;  Hutchins  v.  Page,  ited    members     who    have    complied 

204  Mass.  284,  90  N.  E.  565,  134  Am.  with  the  statute.    Whittemore  v.  Mac- 

St.   656 ;    Buck  v.   Alley,    145    N.   Y.  donnell,  6  U.  C.  C.  P.  547. 

488,  40  N.  E.  236 ;  Loomis  v.  Hoyt,  52  ss  Myers   v.   Edison   General   Elec- 

N.    Y.    Super.    Ct.    287;    Reitzel    v.  trie  Co.,  59  N.  J.  L.  153,  35  Atl.  1069 ; 

Haines,  170  Pa.  St.  306,  33  Atl.  103 ;  Maginn  v.  Lawrence,  45  N.  Y.  Super. 

R.    S.    Oglesby    Co.    v.    Lindsey,    112  Ct.    235;    Fulmer    v.    Abendroth,    40 

Va.  767,  72  S.  E.  672,  Ann.  Cas.  1913  Hun  639,  2  N.  Y.  St.  123. 

B,  913n.     If  any  one  of  the  limited  so  Walker  v.  Wood,  170  111.  463,  48 

partners   has    failed   to   comply   with  N.  E.  919. 

the  statute  and  pay  in  his  contribu-  ^"^  Myers  v.  Edison  General  Elec- 
tion to  the  partnership  and  the  affi-  trie  Co.,  59  N.  J.  L.  153,  35  Atl.  1069. 
davit  states  that  all  contributions  have 


§     1012  LAW    OF    PARTNERSHIP  1388 

special  or  limited  partner's  contribution  to  the  capital  stock  as 
shown  by  the  certificate  of  partnership  has  been  actually  and  in 
good  faith  contributed,  in  money  or  property  at  cash  value,  a 
check  given  to  the  firm,  which  was  good  when  delivered,  and 
paid  on  presentation,  and  which  could  be  presented  at  any  time, 
constitutes  a  contribution  of  cash  and  justifies  an  affidavit  that 
such  contribution  had  been  made  in  good  faith,  though  the  check 
was  not  presented  for  payment  until  afterward. ^^ 

§  1012.  Publication  of  notice. — After  the  certificate  is 
properly  recorded  the  statutes  require  that  a  notice  containing 
its  substance  shall  be  published  in  a  local  paper  of  general  circu- 
lation for  a  designated  period  of  time.^^  It  was  held  in  a  case  in 
North  Carolina,*^^  that  under  Code,  section  3096  (which  is  prac- 
tically the  same  provision  as  is  found  in  New  York,  Ohio,  and 
other  states),  providing  that  the  terms  of  a  limited  partnership 
must  be  published,  immediately  after  its  formation,  for  six  weeks, 
in  some  newspaper  of  the  county,  or  near  the  place  of  the  part- 
nership business,  or  the  partnership  shall  be  deemed  general,  a 
special  partner,  to  escape  general  liability,  must  show  such  pub- 
lication. The  notice  published  must  be  substantially  in  accord 
with  the  provisions  of  the  certificate,  for  the  publication  of  the 
notice  is  intended  to  inform  the  public  as  to  the  nature  of  the 
business  to  be  conducted  by  the  partnership,  and  as  to  who  con- 
stitutes the  firm  and  what  property  or  cash  has  been  contributed 
by  the  limited  members  of  the  partnership.®^ 

§  1013.  Alteration  of  certificate  prohibited. — The  recorded 
certificate  of  a  limited  partnership,  together  with  its  publication, 

58  Chick  V.  Robinson,  95  Fed.  619,  Jackson,  18  Tex.  Civ.  App.  353,  45 
Zl  C.  C.  A.  205,  52  L.  R.  A.  833.  S.  W.  615. 

59  Tracy  v.  Tuffly,  134  U.  S.  206,  eo  Davis  v.  Sanderlin,  119  N.  Car. 
2>Z  L.  ed.  879,  10  Sup.  Ct.  527 ;  Pierce  84,  25  S.  E.  815. 

V.  Bryant,  5  Allen   (Mass.)  91;  Man-  e^Argall    v.    Smith,    3    Denio     (N. 

hattan  Co.  v.  Phillips,  109  N.  Y.  383,  Y.)   435;  Manhattan  Co.  v.   Phillips, 

17  N.  E.  129;  Madison  County  Bank  109  N.  Y.  383,  17  N.  E.  129;  Metro- 

V.  Gould,  5  Hill   (N.  Y.)   309;  Davis  politan  Nat.  Bank  v.  Sirret,  97  N.  Y. 

V.    Sanderlin,    119  N.    Car.   84,   25    S.  320,  15  Abb.  N.  Cas.  318. 
E.  815 ;   Carter-Battle  Grocer   Co.  v. 


1389  LIMITED    PARTNERSHIPS  §     1014 

is  intended  to  represent  to  the  public  the  facts  as  to  the  nature 
of  the  business  in  which  the  firm  is  engaged,  its  capital,  its  name 
and  its  membership  and  place  of  business,  and  in  the  absence  of 
a  statutory  permission  any  alteration  in  the  nature  of  its  busi- 
ness, its  capital,  name,  membership  or  place  of  business  will  have 
the  effect  of  dissolving  the  partnership.^-  However,  in  some 
states  the  statutes  permit  the  partnership  to  take  in  new  members 
and  additional  capital  and  permit  one  partner  to  sell  and  transfer 
his  interest  in  the  partnership  without  causing  its  dissolution.*'^ 

§  1014.  Commencement  and  termination. — No  limited 
partnership  is  formed  until  all  the  requirements  of  the  statute 
authorizing  its  formation  have  been  complied  with,  and  if  it  at- 
tempts to  transact  any  business  prior  to  complying  with  all  of 
such  requirements,  it  will  be  held  to  do  so  as  a  general  partner- 
ship and  those  intending  to  be  only  limited  partners  find  them- 
selves liable  as  general  partners.*'*  Where  the  members  of  a  lim- 
ited partnership  have  taken  every  step  required  by  the  statute  to 
complete  the  formation  of  the  partnership,  and  where  the  papers 
have  gone  out  of  their  hands  into  the  hands  of  the  recorder  for 

62  Tracy  v.  Tuffly,  134  U.  S.  206,  386;  Stringfellow  v.  Wise  (Va.),  27 
33  L.  ed.  879,  10  Sup.  Ct.  527 ;  Buck  S.  E.  432.  Where  there  is  a  mis- 
V.  Alley,  145  N.  Y.  488,  40  N.  E.  236;  take  in  the  published  notice  of  the 
Walkenshaw  v.  Perzel,  27  N.  Y.  filing  of  a  certificate  as  to  the  time 
Super.  Ct.  426,  32  How.  Pr.  (N.  Y.)  when  such  partnership  will  begin, 
233;  Hardt  v.  Levy,  72  Hun  225,  25  and  it  is  stated  that  it  was  to  com- 
N.  Y.  S.  248,  55  N.  Y.  St.  706;  Out-  mence  on  November  16,  instead  of 
calt  V.  Burnet,  1  Handy  (Ohio)  404,  October  16,  it  was  held  that  if  the 
12  Ohio  Dec.  207;  Singer  v.  Kelly,  contract  in  suit  had  been  made  be- 
44  Pa.  St.  145.  fore    November    16,    all    the    parties 

63  See  statutes  of  state  in  question,     would  be  liable  as  general  partners. 
6*  Fox    V.    Graham,    How.    N.    P.     The  judge  said,  "If  this  contract  had 

(Mich.)  90;  Gray  v.  Gibson,  6  Mich,  been  made  before  the  time  mentioned 

300;   Smith  v.  Warden,  86  Mo.  382;  in  said  notice  for  the  commencement 

White  v.  Eiseman,  134  N.  Y.  101,  31  of   the   partnership   had    arrived,   the 

N.   E.  276;    Rosenberg   v.    Block,   50  objection   would  be    fatal."    Madison 

N.  Y.  Super.  Ct.  357;  Hinds  v.  Bat-  County  Bank  v.  Gould,  5  Hill  (N.  Y.) 

tin,    163    Pa.    St.    487,    30    Atl.    164;  309.    See  also  Levy  v.  Lock,  47  How. 

Sheble  V.  Strong,  128  Pa.  St.  315,  18  Pr.  (N.  Y.)  394;  Van  Riper  v.  Pop- 

Atl.  397;  Vanhorn  v.   Corcoran,   127  penhausen,  43  N.  Y.  68;  Andrews  v. 

Pa.  St.  255,  18  Atl.  16,  4  L.  R.  A.  Schott,  10  Pa.  St.  47. 


§     1015  LAW    OF    PARTNERSHIP  1390 

record,  they  will  be  deemed  to  have  complied  with  the  law  and 
a  faihire  of  the  officer  to  actually  record  the  certificate  will  not 
render  the  partnership  a  general  one,  for  the  record  will  be  as- 
sumed to  be  made  when  the  certificate  is  put  in  the  hands  of  the 
officer  for  record.*^^  The  certificate  necessary  to  the  formation 
of  a  limited  partnership  must  contain  a  statement  of  the  time 
when  the  partnership  will  begin  to  transact  business  and  also 
when  the  partnership  will  terminate.^*^  If  it  continues  to  conduct 
its  business  after  the  expiration  of  the  period  for  which  it  was 
formed  it  becomes  a  general  partnership  without  limitation  of 
liability." 

§  1015.  Contribution  of  limited  partner. — While  a  gen- 
eral partner  in  a  limited  partnership  is  only  required  to  furnish 
his  labor  and  services  and  to  submit  to  unlimited  liability  for  the 
partnership  debts,  the  limited  partner  must  contribute  some  por- 
tion of  the  capital  of  the  partnership  and  his  contribution  becomes 
property  which  may  be  looked  to  by  persons  transacting  business 
with  the  firm.^^  The  contribution  is  for  the  benefit  of  creditors 
of  the  firm  who  have  a  right  to  assume  that  it  has  been  paid  in, 
and  where  it  is  not  in  good  faith  paid  in  compliance  with  the 
statute,  in  most  of  the  states  such  failure  will  render  a  limited 
partner  liable  for  the  obligations  of  the  firm  the  same  as  are  the 
general  partners,  and  if  one  limited  partner  fails  to  pay  in  his 
contribution  all  other  limited  partners,  even  where  they  have 
made  their  contributions  in  good  faith  also  become  liable  as  gen- 
eral partners.''^    In  some  states  the  statutes  provide  that  where  a 

c^Henkel   v.   Heyman,   91    111.   96;  es  Bowen  v.  Argall,  24  Wend.    (N. 

Manhattan  Co.  v.  Laimbeer,  21  Abb.  Y.)    496;    Madison    County    Bank   v. 

N.  Cas.  27,  108  N.  Y.  578,  15  N.  E.  Gould,    5    Hill    (N.    Y.)    309;    Van 

712.  Ingen    v.    Whitman,    62    N.    Y.    513; 

66  Tracy  v.  Tuffly,  134  U.  S.  206,  Smith  v.  Argall,  6  Hill  (N.  Y.)  479; 
33  L.  ed.  879,  10  Sup.  Ct.  527;  Selden  Hardt  v.  Levy,  72  Hun  225,  25  N. 
V.  Hall,  21  Mo.  App.  452 ;  Madison  Y.  S.  248,  55  N.  Y.  St.  706. 
County  Bank  V.  Gould.  5  Hill  (N.  Y.)  69  Abendroth  v.  Van  Dolsen,  131 
309;  Blumenthal  v.  Whitaker,  170  Pa.  U.  S.  66,  33  L.  ed.  57,  9  Sup.  Ct.  619; 
St.  309.  33  Atl.  103.  In    re    Merrill,    12    Blatchf.    (U.    S.) 

67  Bailey    v.    Hornthal,    154    N.    Y.  221.  Fed.  Cas.  No.  9467;  Holliday  v. 
648.  49  N.  E.  56,  61  Am.  St.  645.  Union  Bag  &c.  Co.,  3  Colo.  342 ;  Line- 


1391  LIMITED    PARTNERSHIPS  §     1016 

limited  partner  fails  to  make  his  contribution,  he  may  be  com- 
pelled to  pay  the  same  in  for  the  benefit  of  creditors,  but  is  not 
held  liable  for  more  than  that/° 

§  1016.  Kind  of  property  contributed. — Where  the  stat- 
utes of  a  state  require  a  limited  partner  to  make  his  contribution 
in  cash  it  can  not  be  made  in  any  other  way,  and  even  if  he  should 
turn  over  to  the  partnership  property  worth  more  than  the  cash 
required  it  will  not  be  a  compliance  with  the  statute  and  he  will 
be  liable  as  a  general  partner.'^ ^  It  is  held  in  some  states  that  the 
limited  partner's  contribution  may  be  made  by  check  where  the 
check  is  good  and  made  in  good  faith  and  is  paid,'^"  but  in  juris- 
dictions where  the  contributions  are  allowed  to  be  made  in  prop- 
erty other  than  cash,  the  property  must  be  turned  over  at  a  cer- 
tain cash  value  and  in  some  states  the  property  contributed  must 
be  appraised,  and  where  this  step  is  required  and  not  complied 
with  the  limited  partner  becomes  liable  as  a  general  partner.'^^ 
To  comply  with  the  statute  the  contribution  of  a  limited  partner 

weaver  v.  Slagle,  64  Md,  465,  54  Am.  v.   Slagle,  64  Md.  465,  54  Am.  Rep. 

Rep.  775;   Pierce  v.  Bryant,  5  Allen  775;   Haggerty  v.   Foster,    103   Mass. 

(Mass.)    91;    Hotopp   v.   Huber,    160  17;  Pierce  v.  Bryant,  5  Allen  (Mass.) 

N.  Y.  524 ;   Patterson  v.  Youngs,  72  91 ;    Maginn  v.   Lawrence,   45    N.    Y. 

Misc.  91,  129  N.  Y.  S.  673 ;  Robinson  Super.    Ct.   235 ;    White  v.    Eiseman, 

V.  Mcintosh,  3  E.  D.  Smith  (N.  Y.)  134  N.  Y.  101,  31  N.  E.  276;  Metro- 

221 ;  Lee  v.  Burnley,  195  Pa.  St.  58,  politan  Nat.  Bank  v.  Sirret,  97  N.  Y. 

45  Atl.  668;  Hill  v.  Stetler,  127  Pa.  320,    15    Abb.    N.    Cas.    318;    Durant 

St.   145,   10  Sad.  90,   13  Atl.  306,   17  v.  Abendroth,  69  N.  Y.  148,  25  Am. 

Atl.    887;    Patterson    v.    Holland,    7  Rep.    158;    Van    Ingen    v.    Whitman, 

Grant  Ch.    (U.   C.)    1.     The  liability  62  N.  Y.  513;  Hill  v.  Stetler,  127  Pa. 

of   a   limited   partner   when    for   any  St.    145,    10    Sad.    (Pa.)    90,    13    Atl. 

cause  he  becomes  a  general  partner  306,  17  Atl.  887 ;  Richardson  v.  Hogg, 

exists   even  after   his   death   and   his  38  Pa.  St.  153. 

estate  may  be  forced  to  discharge  It.  ''^  Chick  v.  Robinson,  95  Fed.  619, 

First   Nat.   Bank  v.   Huber,   75   Hun  37  C.  C.  A.  205,  52  L.  R.  A.  833. 

80,  26  N.  Y.  S.  961,  58  N.  Y.  St.  158.  "  Blumenthal  v.  Whitaker,  170  Pa. 

70  De  Lizardi  v.  Gossett,  1  La.  Ann.  St.  309,  33  Atl.  103 ;  Vandike  v.  Ross- 
138;  Bodey  v.  Cooper,  82  Md.  625,  kam,  67  Pa.  St.  330;  Reynolds  v. 
34  Atl.  362 ;  Deckert  v.  Chesapeake  Creveling,  4  Pa.  Dist.  419 ;  Siegel  v. 
&c.  Co.,  101  Va.  804,  45  S.  E.  799.  Wood,   3   Pa.   Dist.   463 ;   Rehfuss   v. 

71  In  re  Merrill,  12  Blatchf.  (U.  S.)  Moore,  26  Wkly.  N.  Cas.  (Pa.)  105 
221,  Fed.  Cas.  No.  9467;  Lineweaver 


§    1017  LAW    OF    TARTNERSHIP  1392 

must  be  made  in  good  faith  and  unconditionally  and  must  be 
placed  in  the  hands  of  the  general  partners  and  entirely  out  of 
and  beyond  the  control  of  the  contributor.'*  Whether  a  contribu- 
tion has  been  paid  in  good  faith  or  only  paid  conditionally  is  un- 
der proper  issues  formed  a  question  of  fact  for  the  jury  to  deter- 
mine.^" His  contribution  must  be  made  in  good  faith,  for  if  it 
is  made  under  arrangements  with  the  general  partners  by  which 
it  is  to  be  handed  back  to  him  after  the  partnership  is  formed  he 
will  become  a  general  partner  and  will  not  be  within  the  statute 
aimed  to  protect  limited  partners  from  general  liability.''''' 

§  1017.  Infant  as  partner. — One  who  is  an  infant  may  be 
a  limited  partner/*^  and  the  fact  that  one  of  the  general  partners 
is  an  infant,  where  it  does  not  appear  that  he  has  attempted  to 
avoid  his  obligations  as  a  partner  because  of  his  infancy,  will 
not  have  the  effect  to  make  the  limited  partners  liable  as  general 
partners. '^^ 

§  1018.  Use  of  the  word  "limited,"  etc. — It  is  provided  by 
the  statutes  of  some  of  the  states  that  the  word  "limited"  shall 
be  used  following  the  last  word  of  the  firm  name,  and  the  courts 
have  held  that  an  abbreviation  of  the  Word  will  suffice,^"  and  in 
some  states  the  words  "and  Company"  or  "and  Co."  are  prohib- 
ited as  a  part  of  the  firm  name.*^  In  other  states  the  use  of  such 

"^^  Lineweaver  v.  Slagle,  64  Md.  465,  tan   Nat.    Bank   v.    Sirret,   97    N.    Y. 

54   Am.    Rep.   775;    Madison    County  320,  15  Abb.  N.  Cas.  318;  Lawrence 

Bank  V.  Gould,  5  Hill    (N.  Y.)    309.  v.  Merrifield,  42  N.  Y.  Super,  Ct.  36. 

"Manhattan    Co.    v.    Phillips,    109  78 jonau  v.  Blanchard,  2  Rob.  (La.) 

N.  Y.  383,  17  N.  E.  129;   Becker  v.  513. 

Koch,   104  N.  Y.  394,   10  N.  E.  701,  ^9  Continental  Nat.  Bank  v.  Strauss, 

58  Am.  Rep.  515;  Metropolitan  Nat.  137  N.  Y.  553,  32  N.  E.  1066. 

Bank  v.  Sirret,  97  N.  Y.  320,  15  Abb.  «<>  Barnard    &    Leas    Mfg.    Co.    v. 

N.  Cas.  318;  Metropolitan  Nat.  Bank  Packard,  28  U.   S.  App.  84,  64  Fed. 

V.   Palmer,  56  Hun  641,  9  N.  Y.   S.  309;  Sellersville  Nat.  Bank  v.  Banks, 

239,  30  N.  Y.  St.  509 ;  Hanover  Nat.  9  Pa.  County  Ct.  92. 

Bank  V.  Sirret,  15  Abb.  N.  Cas.   (N.  si  Tracy  v.   Tuffly,    134  U.   S.   206, 

Y.)  334.  33  L.  ed.  879,  10  Sup.  Ct.  527;  Mar- 

76  In    re    Thayer.    Fed.    Cas.    No.  shall  v.  Lambeth,  7  Rob.    (La.)   471; 

13867,   7    Am.    L.   Rev.    177;    Hotopp  Ward   v.   Newell,  42   Barb.    (N.   Y.) 

V.  Huber,  160  N.  Y.  524;  Metropoli-  482,  28  How.  Pr.   102;  Hogg  v.  Or- 


1393  LIMITED    PARTNERSHIPS  §     1019 

words  as  a  part  of  the  partnership  name  is  allowed  and  even 
required.^^ 

§  1019.  Firm  name  and  sign. — Every  limited  partnership 
certificate  must  designate  the  name  under  which  the  partner- 
ship when  formed  will  conduct  its  business;^ "  but  only  the  names 
of  the  general  partners  or  some  of  them  are  permitted  to  appear 
in  the  partnership  name;^*  and  in  the  absence  of  a  statute  per- 
mitting it,  if  the  name  of  a  limited  partner  forms  a  part  of  the 
firm  name  with  his  consent  or  knowledge,  it  has  been  held  that 
he  will  become  liable  as  a  general  partner.^^  However,  this  is 
not  true  where  the  statute  authorizes  the  name  of  a  limited  part- 
ner to  be  used  as  a  part  of  the  firm  name.®'^  In  some  jurisdic- 
tions the  statutes  provide  that  a  sign  shall  be  placed  in  a  con- 
spicuous place  in  front  of  the  partnership  place  of  business  and 
on  it  shall  be  transcribed  the  names  of  all  the  partners,  desig- 
nating who  are  general  and  who  are  limited  partners.^"  Where 
the  statute  requires  it  the  sign  of  the  firm,  on  which  the  names 
of  the  partners  must  appear,  must  be  placed  in  a  conspicuous 
place  in  front  of  the  firm's  place  of  business  and  it  is  held  that 

gill,    34    Pa.    St.    344 ;    Andrews    v.  ding  v.  Black,  22  Kans.  55 ;  Andrews 

Schott,  10  Pa.  St.  47;  Vilas  Bank  v.  v.  Schott,  10  Pa.  St.  47;  Vilas  Bank 

Bullock,  10  Phila.    (Pa.)   309.  v.  Bullock,  10  Phila.  (Pa.)  309. 

82  Hubbard  v.  Morgan,  Fed.  Cas.  s^  Tracy  v.  Tuffly,  134  U.  S.  206, 
No.  6817;  Buck  v.  Alley,  145  N.  Y.  33  L.  ed.  879,  10  Sup.  Ct.  527;  Groves 
488,  40  N.  E.  236.  v.  Wilson,   168  Mass.  370,  47  N.  E. 

83  Tracy  v.  Tuffly,  134  U.  S.  206,  100;  Buck  v.  Alley,  145  N.  Y.  488, 
33  L.  ed.  879,  10  Sup.  Ct.  527;  Pfir-  40  N.  E.  236;  Van  Ingen  v.  Whit- 
mann  v.  Henkel,  1  111.  App.  145;  man,  62  N.  Y.  513 ;  Andrews  v.  Schott, 
Hardt  v.  Levy,  72  Hun  225,  55  N.  Y.  10  Pa.  St.  47 ;  Ussery  v.  Crusman 
St.  706,  25  N.  Y.  S.  248;  Fifth  Ave.  (Tenn.),  47  S.  W.  567. 

Bank  v.   Colgate,   120  N.  Y.  381,  24  sg  Groves  v.  Wilson,  168  Mass.  370, 

N.   E.   799,  8  L.   R.  A.   712,   4   Silv.  47  N.  E.  100;  Buck  v.  Alley,  145  N. 

Ct.   App.  544 ;    Blumenthal   v.   Whit-  Y.  488,  40  N.  E.  236. 

aker,    170   Pa.   St.   309,   33   Atl.    103;  87  Rotchild    v.    Hoge,   43    Fed.   97; 

Hogg  V.  Argill,  34  Pa.  St.  344 ;  Ussery  Buck  v.  Alley,  145  N.  Y.  488,  40  N. 

v.  Crusman    (Tenn.),  47  S.  W.  567;  E.  236;   Gearing  v.   Carroll,   151    Pa. 

Whittemore  v.   Macdonnell,  6  U.   C.  St.  79,  24  Atl.  1045 ;  Vandike  v.  Ross- 

C.    P.   547.  kam,  67   Pa.   St.  330;  Vilas  Bank  v. 

8*  Tracy  v.   Tuffly,    134  U.    S.   206,  Bullock,    10    Phila.    (Pa.)    309;    Vir- 

33  L.  ed.  879,  10  Sup.  Ct.  527 ;  Spal-  ginia  Code  1904,  §  2871. 


§     1020  LAW    OF    PARTNERSHIP  1394 

"conspicuous"  means  plain  to  the  eye  and  easily  to  be  seen.^^ 
Restrictions  are  placed  upon  the  firm  name  in  order  that  persons 
dealing  with  the  firm  may  not  be  misled  thereby.  Massachusetts 
courts  have  construed  its  Public  Statutes,  chapter  75,  section  3, 
making  a  special  partner  generally  liable  if  his  name  is  used  in 
the  firm  name,  as  not  applying  where  a  limited  partnership  suc- 
ceeds to  a  general  partnership  composed  of  the  same  persons, 
and  the  new  partnership  retains,  as  authorized  by  Statute  1887, 
chapter  248,  section  1,  the  name  of  the  old  partnership,  which 
contained  that  of  one  who  is  a  limited  partner  in  the  new  part- 
nership.^^ 

§  1020.  Liability  of  partners  on  contracts. — The  liability 
of  a  general  partner  in  a  limited  partnership  is  just  the  same  as 
his  liability  would  be  if  it  were  a  general  and  not  a  limited  part- 
nership;''" but  as  to  the  liability  of  a  limited  partner,  ordinarily, 
compliance  with  the  statutory  requirements  exempts  him  from 
liability  on  firm  contracts  in  excess  of  the  amount  required  to 
be  contributed  by  him,''^  but  where  material  requirements  of  the 
statute  have  not  been  complied  with,  a  limited  partner  will  lose 
the  protection  of  the  statute  and  his  liability  will  be  the  same  as 

88  R.  S.  Oglesby  Co.  v.  Lindsey,  (La.)  172;  Safe-Deposit  &c.  Co.  v. 
112  Va.  767,  72  S.  E.  672,  Ann.  Cas.  Calm,  102  Md.  530,  62  Atl.  819;  Sny- 
1913  B,  913n.  der  v.   Leland,    127  Mass.  291;  Jaffe 

89  Groves  v.  Wilson,  168  Mass.  370,  v.  Krum,  88  Mo.  669 ;  George  v. 
47  N.  E.  100.  Grant,  97  N.  Y.  262;   Van  Riper  v. 

9f>  Emery  v.  Kalamazoo  &c.  Constr.  Poppenhausen,    43    N.    Y.    68 ;    Levy 

Co.,    132    Mich.    560,   94    N.   W.    19;  v.  Lock,  5  Daly  (N.  Y.)  46,  47  How. 

Van   Dolsen  v.   Abendroth,   1    N.   Y.  Pr.  394;  Jacquin  v.  Buisson,  11  How. 

City  Ct.  R.  469.  Pr.    (N.    Y.)    385;    Madison    County 

91  In  re  Merrill,  12  Blatchf.  (U.  S.)  Bank  v.  Gould,  5  Hill   (N.  Y.)   309; 

221,    Fed.    Cas.    No.    9467;    Tracy   v.  Bell  v.   Merrifield,  28  Hun    (N.   Y.) 

Tuffly,  134  U.  S.  206,  33  L.  ed.  879,  219;  First  Nat.  Bank  v.  Whitney,  4 

10  Sup.  Ct.  527;  Webster  v.  Lanum,  Lans.    (N.  Y.)    34;    Singer  v.   Kelly, 

137  Fed.  376,  70  C.  C.  A.  56;  Clapp  44  Pa.  St.  145;  California  Civ.  Code, 

V.  Lacey,  35   Conn.  463 ;   Richardson  §  2501 ;  Whittemore  v.  Macdonnell,  6 

V.  Carlton,  109  Iowa  515,  80  N.  W.  U.  C.  C.  P.  547;  Patterson  v.  Hol- 

532;  Spalding  v.  Black,  22  Kans.  55;  land,  7  Grant  Ch.   (U.   C.)    1.   Com- 

Burt  V.  Laplace,  114  La.  489,  38  So.  pare   In   re   Dunn,   115   La.   1084,   40 

429;   Ulman  v.   Briggs,   32  La.   Ann.  So.  466. 
655;  Lachomette  v.  Thomas,  5  Rob. 


1395  LIMITED    PARTNERSHIPS  §     1020 

a  general  partner."-  This  must  not  be  construed  to  mean  that 
the  Hmited  partner  on  that  account  becomes  a  general  one;  the 
noncompliance  does  not  necessarily  change  his  status,  but  only 
enlarges  his  liability."^  As  far  as  the  partners  themselves  are 
concerned,  they  remain  bound  by  the  terms  of  the  articles  of 

f'2  Abendroth    v.    Van    Dolsen,    131     509,  9  N.  Y.  S.  239 ;  First  Nat.  Bank 
U.    S.  66,  33   L.   ed.  57,   9   Sup.   Ct.     v.   Huber,   75    Hun    (N.   Y.)    80,   58 
619;    In    re   Thayer,    Fed.    Cas.    No.     N.    Y.    St.    158,    26    N.    Y.    S.    961; 
13867,  7  Am.  L.  Rev.  177;  McGehee     Loomis  v.  Hoyt,  52  N.  Y.  Super.  Ct. 
V.  Powell,  8  Ala.  827 ;  Crouch  v.  First     287 ;    Outcalt    v.    Burnet,     1     Handy 
Nat.    Bank,    156    III.    342,    40    N.    E.     (Ohio)   404,   12  Ohio  Dec.  207;   Lee 
974;  Adam  v.   Musson,  37  111.  App.     v.   Burnley,    195    Pa.   St.  58,   45   Atl. 
501 ;  Columbia  Land  &c.  Co.  v.  Daly,     668 ;  Fourth  St.  Nat.  Bank  v.  Whit- 
46   Kans.   504,  26   Pac.   1042;   Rayne    aker,    170   Pa.   St.  297,   33   Atl.    100; 
V.    Terrell,    33   La.   Ann.    812;    Line-     Haslet   v.    Kent,    160   Pa.    St.   85,   28 
weaver  v.  Slagle,  64  Md.  465,  2  Atl.     Atl.  501 ;  Cock  v.  Bailey,  146  Pa.  St. 
693,  54  Am.  Rep.  775 ;  Groves  v.  Wil-     328,   23   Atl.   370 ;    Sheble  v.    Strong, 
son,    168   Mass.   370,   47   N.    E.   100;     128   Pa.   St.   315,    18  Atl.  397;   Van- 
Farnsworth  v.  Boardman,  131  Mass.    horn  v.  Corcoran,  127  Pa.  St.  255,  18 
115;    Locke   v.    Lewis,    124    Mass.    1,     Atl.  16,  4  L.  R.  A.  386;  Haddock  v. 
26  Am.  Rep.  631,  L.  R.  A.   1915  A,     Grinnell  Mfg.  Corp.,  109  Pa.  St.  372, 
738;     Pierce     v.     Bryant,     5     Allen     1    Atl.    174;    Guillou   v.    Peterson,   89 
(Mass.)    91;   Lancaster  v.   Choate,   5     Pa.    St.    163;    Vandike    v.    Rosskam, 
Allen  (Mass.)  530;  Sarmiento  v.  The    67   Pa.   St.   330;    Hogg  v.   Orgill,   34 
Catherine  Co.,   110  Mich.   120,  67  N.     Pa.   St.  344;   Chatham  Nat.   Bank  v. 
W.  1085;  Fox  v.  Graham,  Howell  N.     Gardner,  31  Pa.  Super.  Ct.  135;  Ab- 
P.  (Mich.)  90;  In  re  Allen,  41  Minn,     ington  Dairy  Co.  v.  Reynolds,  24  Pa. 
430,   43    N.   W.   382;    Perth    Amboy     Super.   Ct.  632;   Hill  v.   Stetler,    127 
Mfg.  Co.  V.  Condit,  21  N.  J.  L.  659;     Pa.    St.    145,    10    Sad.    (Pa.)    90,    13 
Buck  V.  Alley,  145  N.  Y.  488,  40  N.     Atl.   306,    17   Atl.   887;    Bergner   &c. 
E.  236;  Fifth  Ave.  Bank  v.  Colgate,     Brew   Co.   v.   Cobb,    12    Pa.    Co.   Ct. 
120   N.    Y.   381,  24  N.   E.  799,   8   L.     460;  Savage  v.  Carney   (Tenn.  Ch.), 
R.    A.    712,    4    Silv.    Ct.    App.    544 ;    47  S.  W.  571 ;  Benedict  v.  Van  Allen, 
Manhattan   Co.  v.  Laimbeer,   108  N,     17   U.    C.    Q.    B.   234;    Patterson    v. 
Y.  578,  15  N.  E.  712;  Beers  v.  Reyn-     Holland,    7    Grant    Ch.    (U.    C.)     1. 
olds,    11    N.    Y.    97;    Van    Ingen    v.     Compare  Rothchild  v.  Hoge,  43  Fed. 
Whitman,    62    N.    Y.    513;    Hartford    97;  De  Lizardi  v.  Gossett,  1  La.  Ann. 
Nat.  Bank  v.  Beinecke,  80  App.  Div.     138;  Deckert  v.  Chesapeake  Western 
(N.  Y.)  546,  80  N.  Y.  S.  803;  Havi-     Co.,  101  Va.  804,  45  S.  E.  799. 
land    V.    Chace,    39    Barb.     (N.    Y.)         93  Abendroth    v.    Van    Dolsen,    131 
283;  Bell  v.  Merrifield,  28  Hun    (N.     U.  S.  66,  33  L.  ed.  57,  9  Sup.  Ct.  619. 
Y.)   219;   Metropolitan   Nat.   Bank  v.     But  see  Hutchins  v.  Page,  204  Mass. 
Palmer,   56   Hun  641,   30   N.   Y.   St.    284,  90  N.  E.  565,  134  Am.  St.  656. 


§     1021  LAW    OF    PARTNERSHIP  1396 

association.^*  But  it  has  been  held  that  the  purchaser  of  the 
interest  of  a  limited  partner  in  a  firm,  all  of  whose  members 
were,  through  failure  to  comply  with  the  statutes,  liable  as  gen- 
eral partners,  became  himself  thus  liable,  even  in  the  absence  of 
all  intention  on  his  part  to  incur  such  liability.^^ 

§  1021.  Effect  of  non-compliance  with  statute. — Where 
the  formation  of  a  limited  partnership  is  attempted  and  the 
statutes  governing  are  not  fully  complied  with,  the  limited  part- 
ners become  liable  as  general  partners.^*'  But  on  the  question 
as  to  whether  there  has  been  a  compliance  with  the  statute,  and 
the  limited  partner  been  thereby  relieved  from  general  liability, 
it  has  been  held  that  it  is  immaterial  that  such  limited  partner 
has  lost  all  the  money  he  put  into  the  concern,  and  has  never 
received  any  dividends  from  the  business. °^  Moreover,  it  has 
been  held  that  where  the  statutes  providing  for  the  creation  of 
limited  partnerships  have  not  been  followed,  inequality  of  inter- 
est in  the  firm  does  not  affect  the  rights  of  partnership  creditors 
in  the  matter  of  the  enforcement  of  their  claims.''^  While  by 
noncompliance  with  the  statute  in  the  organization  of  a  limited 
partnership  or  by  his  conduct,  a  limited  partner  as  to  third  per- 
sons dealing  with  the  firm,  may  become  liable  as  a  general  part- 
ner, his  liability  as  between  himself  and  partners  is  not  changed, 
for  it  must  be  determined  by  the  partnership  agreement  entered 
into  by  all  the  partners. 

§  1022.  Estoppel. — Where  a  limited  partner  represents 
himself  to  be  a  general  partner  he  will  be  bound  as  such  and 
will  be  held  estopped  from  asserting  that  he  is  a  limited  part- 
ner.°^      The  law  apparently  penalizes  the  act  of  a  limited  part- 

94  Waters  v.  Harris,  60  N.  Y.  Super.  Carroll,  151   Pa.  St.  79,  24  Atl.  1045. 

Ct.  192,  28  Abb.  N.  C.  89,  43  N.  Y.  ^^  r.  s.  Oglesby  Co.  v.  Lindsey,  112 

St.  62,  17  N.  Y.  S.  370.  Va.  IQ,  72  S.  E.  672,  Ann.  Cas.  1913 

35  Strang  v.  Thomas,  114  Wis.  599,  B,  913n. 

91  N.  W.  237.  "^  Peabody  v.  Oleson,  15  Colo.  App. 

»<5  Manhattan  Brass  Co.  v.  Allin,  35  346,  62  Pac.  234 ;  Lancaster  v.  Choate, 

111.    App.    336;    Haslet   v.    Kent,    160  5  Allen    (Mass.)    530. 

Pa.   St.  85,  28  Atl.  501;   Gearing  v.  ^^  Barrows  v.  Downs,  9  R.  I.  446, 


1397  LIMITED  PARTNERSHIPS  §  1022 

ner  in  representing  himself  as  a  general  partner  by  rendering 
him  hable  as  such/  A  partner  may  be  estopped  from  claiming 
that  the  partnership  was  not  legally  formed  and  where  the  rights 
of  third  persons  are  not  involved  in  a  controversy  between  the 
partners  themselves  the  members  are  estopped  from  asserting 
that  the  limited  partnership  is  not  valid  because  of  the  statutes 
not  having  been  followed  and  hence  that  the  limited  members 
are  liable  as  general  partners.^  While  it  is  held  in  some  states 
that  persons  dealing  with  a  firm  as  a  limited  partnership  will  not 
be  permitted  to  deny  the  validity  of  the  formation  of  the  part- 
nership,^ it  is  generally  held  that  persons  not  members  of  the 
firm  who  have  not  induced  the  partners  to  conduct  their  busi- 
ness in  an  irregular  manner,  or  have  not  actually  agreed  to  the 
limited  liability  of  a  partner,  are  generally  not  held  estopped 
from  asserting  that  all  tlie  partners  are  liable  as  general  part- 
ners.* Under  the  statutes  of  most  of  the  states  if  a  limited 
partner  assists  in  or  has  anything  to  do  with  the  conduct  or 
management  of  the  partnership  business  or  acts  as  agent  of  the 
firm  he  will  lose  the  protection  by  the  statute  and  become  liable 
as  a  general  partner.  But  it  has  been  held  that  a  limited  part- 
ner does  "not  transact  an}^  partnership  business,  nor  act  as  agent 
for  that  purpose,"  by  merel}^  looking  over  the  business,  examin- 
ing the  books,  and  stating  that  he  expected  to  close  out  the  busi- 

11  Am.  Rep.  283;  Watts  v.  Taft,  16  33  L.  ed.  879,  10  Sup.  Ct.  527;  Staver 

U.  C.  Q.  B.  256.  &c.  Mfg.  Co.  v.  Blake,  111  Mich.  282, 

1  Barrows  v.  Downs,  9  R.  I.  446,  69  N.  W.  308,  38  L.  R.  A.  798 ;  Car- 
11  Am.  Rep.  283.  See  also  Watts  v.  hart  v.  Killough,  1  White  &  W.  Tex. 
Taft,  16  U.  C.  Q.  B.  256.     Compare  App.  Civ.  Cas.,  §  112. 

Marshall  v.  Lambeth,   7   Rob.    (La.)  ^  Manhattan  Brass  Co.  v.  Allin,  35 

471;   Taylor  v.   Rasch,    1    Flipp.    (U.  III.   App.  336;   Imperial   Shale   Brick 

S.)  385,  Fed.  Cas.  No.  13800,  11  Nat.  Co.  v.  Jewett,  169  N.  Y.  143,  62  N. 

Bank.  Reg.  91.  E.    167;    Benedict    &c.    Mfg.    Co.    v. 

2  Casola  V.  Vasquez,  164  N.  Y.  608,  Hutchinson,  1  N.  Y.  St.  234,  53  N. 
58  N.  E.  1085;  Sturgeon  v.  Apollo  Y.  Super.  Ct.  486;  Allegheny  Nat. 
Oil  &c.  Co.,  203  Pa.  St.  369,  53  Atl.  Bank  v.  Bailey,  147  Pa.  St.  Ill,  23 
189.  But  see  Hardt  v.  Levy,  72  Hun  Atl.  439;  Sheble  v.  Strong,  128  Pa. 
(N.  Y.)  225,  25  N.  Y.  S.  248,  55  N.  St.  315,  18  Atl.  397;  Hess  v.  Werts, 
Y.  St.  706.  4  Serg.  &  R.  (Pa.)  356. 

3  Tracy   v.    Tuffly,    134    U.    S.    206, 


§     1023  LAW    OF    TARTNERSHIP  1398 

ness  in  order  to  pay  creditors,  at  a  time  when  the  general  part- 
ner is  ill.^  Moreover,  the  act  of  a  limited  partner  in  loaning 
money,  on  security  or  otherwise,  to  the  firm  for  partnership 
purposes,  or  to  enable  it  to  carry  on  the  business  on  a  more 
extended  scale,  does  not  render  him  liable  as  a  general  partner 
under  a  statute  imposing  such  liability  upon  the  alteration  of 
the  nature  of  the  business,  capital  or  shares  contributed.*^  It 
has  been  held  that  the  principles  of  estoppel  will  operate  to  pre- 
vent persons  who  agree  to  create  a  limited  partnership,  and 
who  conduct  their  business  as  such  from  asserting,  one  against 
the  other,  that,  by  reason  of  the  fact  that  statutory  requirements 
have  not  been  literally  met,  a  complete  formation  of  such  part- 
nership has  not  been  accomplished.'^  But  it  seems  that  where 
the  remedies  against  the  surviving  partners  have  been  exhausted, 
or  such  survivors  are  insolvent,  recourse  may  be  had  to  the 
estate  of  the  deceased  limited  partner  to  whom  general  liability 
has  attached.^  While  limited  partners  may,  by  their  con- 
duct, or  by  failure  to  comply  with  the  statute  in  the  formation 
of  the  partnership,  become  liable  to  third  persons  as  general 
partners,  it  does  not  follow  that  they  become  such  as  to  copart- 
ners for  their  rights  as  to  them  will  be  measured  by  the  partner- 
ship contract.^ 

§  1023.  Insolvency  of  partnership. — When  a  limited  part- 
nership becomes  insolvent,  the  statutes  prohibit  it  from  creating 
liens  on  its  property  or  confessing  judgments  against  it  in  order 
to  prefer  any  creditor  or  creditors.  Neither  is  it  permitted 
to  transfer   its  property.^*^      Its  assets  under  such  conditions 

5  Cropper  v.  Illinois  Sew.  Mach.  §  Hotopp  v.  Huber,  160  N.  Y.  524, 
Co.,  100  Miss.  127,  54  So.  849.  55   N.   E.  206.     See  also  Richter  v. 

6  Walkenshaw  v.    Perzel,   32   How.     Poppenhausen,  42  N.  Y.  ZIZ. 

Pr.  233,  27  N.  Y.  Super.  Ct.  426.    See  » Lancaster     v.     Choate,     5     Allen 

also      Metropolitan     Nat.     Bank     v.  (Mass.)   530. 

Palmer,   56  Hun   641,   30   N.   Y.   St.  lo  Crouch  v.  First  Nat.  Bank,   156 

509,  9  N.  Y.  S.  239.  111.  342,  40  N.  E.  974 ;  Green  v.  Hood, 

7  Casola  V.  Vasquez,  164  N.  Y.  608,  42  111.  App.  652 ;  Batchelder  v.  Alt- 
58  N.  E.  1085 ;  Casola  v.  Kugelman,  heimer,  10  Mo.  App.  181.  See  statutes 
54  N.  Y.  S.  89,  23  App.  Div.  428.  of  particular  state. 


1399  LIMITED    PARTNERSHIPS  §     1024 

become  as  trust  funds  for  all  the  creditors.'^  When  it  has  become 
insolvent  or  has  attempted  to  prefer  certain  creditors  or  has 
transferred  its  property,  a  creditor  may  upon  petition  have  a 
receiver  appointed  and  in  the  same  proceeding  have  such  prefer- 
ence or  transfer  set  aside/"  and  ^vhere  the  action  of  the  part- 
nership in  transferring  its  property  or  preferring  certain  cred- 
itors has  been  agreed  to  by  a  limited  partner  he  will  become 
liable  as  a  general  partner. ^^  Such  statutes  will  not  prevent  a 
limited  partnership  from  making  an  assignment  for  the  benefit 
of  all  its  creditors  or  from  making  a  sale  of  all  its  property  to 
a  bona-fide  purchaser/*  and  it  may,  in  a  proper  case,  permit 
judgment  by  default  to  be  taken  against  it  without  violating  such 
statutes/^  It  has  been  held  that  where  a  limited  partnership  is, 
before  the  expiration  of  its  terms,  dissolved  by  insolvency,  gen- 
eral liability  is  not  thereby  imposed  upon  the  limited  partner/'^ 

§  1024.  Assets  applied  to  liabilities. — The  property  of  a 
limited  partnership  may  be  levied  upon  at  any  time  in  a  proper 
case  by  a  judgment  creditor  before  any  receiver  has  been  ap- 
pointed whether  the  partnership  is  insolvent  or  not,^"  but  one 
holding  a  judgment  against  a  limited  partner  only  can  not  levy 
on  the  partnership  property.^*  Whether  a  creditor  of  the  lim- 
ited partnership  w'ho  is  also  a  limited  partner  can  be  permitted 

11  Baily  V.  Hornthal,  154  N.  Y.  648,  33  L.  eel.  879,  10  Sup.  Ct.  527 ; 
49  N.  E.  56,  61  Am.  St.  645 ;  George  Schwartz  v.  Soutter,  103  N.  Y.  683, 
V.  Grant,  97  N.  Y.  262 ;  Mattison  v.  9  N.  E.  448,  1  Silvernail  Ct.  App.  237 ; 
Demarest,  4  Rob.  (N.  Y.)  161;  Mc-  State  Bank  v.  Blanchard,  90  Va.  22, 
Arthur  v.  Chase,  13  Grat.  (Va.)  683.  17  S.  E.  742. 

12  Crouch  V.  First  Nat.  Bank,  156  is  Hall  v.  Glessner,  100  Mo.  15S. 
III.  342,  40  N.  E.  974;  Innes  v.  Lan-  13  S.  W.  349;  Greene  v.  Breck,  32 
sing,  7  Paige  (N.  Y.)  583.  Barb.    (N.   Y.)    73.    But  see  Jackson 

isLineweaver    v.     Slagle,    64    Md.  v.  Sheldon,  9  Abb.  Pr.    (N.  Y.)    127. 

465,    2   Atl.   693,    54   Am.    Rep.    775 ;  i''  Continental  Nat.  Bank  v.  Strauss. 

Farnsworth  v.   Boardman,   131   Mass.  60  N.  Y.  Super.  Ct.  151,  43  N.  Y.  St. 

115;   Casola  v.   Kugelman,  33  N.  Y.  68,  17  N.  Y.  S.  188. 

App.   Div.  428,  54  N.  Y.   Suppl.  89;  "Van  Alstyne  v.   Cook,  25   N.  Y. 

McArthur  v.   Chase,   13   Grat.    (Va.)  489. 

683.  18  Harris  v.  Murray,  28  X.  Y.  574, 

1*  Tracy  v.   Tuffly,    134   U.    S.   206,  86  Am.  Dec.  268. 

38 — Row.  ON  Partn. — Vol.  2 


§     1025  LAW    OF    PARTNERSHIP  1400 

to  share  equally  with  other  creditors  of  the  partnership  will 
depend  upon  the  statutes  of  the  state  where  the  question  arises. ^° 

§  1025.     Dealings  between  general  and  limited  partners. — 

Any  dealings  between  a  limited  partner  and  the  general  partner- 
ship must  be  entirely  fair  to  the  partnership  or  they  will  be  held 
to  be  invalid;  for  the  interests  of  the  limited  partner  can  not  be 
allowed  to  be  enhanced  because  of  his  influence  with  the  general 
partnership.  The  utmost  good  faith  must  be  shown  and  the 
transactions  be  fair  to  the  partnership  or  they  will  be  declared 
invalid,  but  it  has  been  held  that  the  purchase  by  a  limited  part- 
ner of  property  pledged  with  the  firm,^"  or  of  discounted  claims 
against  the  latter  is  not  ipso  facto  invalid.^^  Further,  the  lim- 
ited partner's  joinder  in,  assent  to,^^  or  ratification  of^^  an  as- 
signment for  the  benefit  of  creditors,  not  authorized  by  the 
original  agreement  to  be  executed  by  the  general  partners  alone,"* 
appears,  in  general,  to  be  necessary,-^  and  such  acts  will  not 
render  a  limited  partner  liable. 

§  1026.     Renewal   of  limited   partnership. — Generally   the 
statutes  authorizing  the  formation  of  limited  partnerships  also 

19  See  the  statutes  of  particular  22  Rothchild  v.  Hoge,  43  Fed.  97 ; 
state.  In  the  following  cases  such  In  re  Allen,  41  Minn.  430,  43  N.  W. 
limited  partner  was  allowed  the  same  382 ;  Robinson  v.  Mcintosh,  3  E.  D. 
rights  as  other  creditors.  Clapp  v.  Smith  (N.  Y.)  221;  Scliulten  v.  Lord, 
Lacey,  35  Conn.  463;  Rayne  v.  Ter-  4  E.  D.  Smith  (N.  Y.)  206;  Mills 
rell,  23  La.  Ann.  812;  Metropolitan  v.  Argall,  6  Paige  (N.  Y.)  577; 
Nat.  Bank  v.  Sirret,  97  N.  Y.  320,  Deming  v.  Colt,  3  Sandf.  (N.  Y.) 
15  Abb.  N.  Cas.  318;  Hayes  v.  Heyer,  284;  Darrow  v.  Bruff,  36  How.  Pr. 
35  N.  Y.  326.  In  the  following  cases  (N.  Y.)  479;  Waters  v.  Harris,  60 
he  was  not  permitted  to  share  with  N.  Y.  Super.  Ct.  192,  28  Abb.  N.  C. 
other  creditors.  Jaffe  v.  Krum,  88  (N.  Y.)  89,  43  N.  Y.  St.  62,  17  N.  Y. 
Mo.  669;  Hayes  v.  Bement,  3  Sandf.  S.  370;  Singer  v.  Kelly,  44  Pa.  St. 
(N.  Y.)  394;  Coffin's  Appeal,  106  Pa.  145. 

St.    280;    Dunning's    Appeal,    44    Pa.  23  Deming  v.  Colt,  3  Sandf.  (N.  Y.) 

St.  150;  Purdy  v.  Lacock,  6  Pa.   St.  284. 

490.  24  Mills  V.  Argall,  6  Paige  (N.  Y.) 

20  Lewis  V.  Graham,  4  Abb.  Pr.  (N.  577. 

Y.)    106.  25  Schulten  v.  Lord,  4  E.  D.  Smith 

21  Allison  V.  Abendroth,  108  N.  Y.  (N.  Y.)  206.  See  further  Mills  v. 
470,   15   N.  E.  606.  Argall,  6  Paige   (N.  Y.)   577;  Walk- 


1401  LIMITED  PARTNERSHIPS  §  1026 

provide  for  the  renewal  and  continuation  thereof  after  the  term 
for  which  they  have  been  formed  expires,  such  renewals  being 
for  a  stated  period  of  time.  It  is  provided  that  a  new  certificate 
must  be  executed,  acknowledged,  recorded  and  published  and 
that  proof  by  an  affidavit  of  a  general  partner  shall  be  made 
and  filed  similar  to  the  affidavit  in  the  original  formation  of  the 
partnership  show'ing  who  are  general  and  who  are  limited  mem- 
bers and  the  amount  contributed  by  each  of  the  limited  members, 
etc.'*^  There  must  be  just  as  strict  compliance  with  the  statute 
in  the  renewal  certificate  as  in  the  original  certificate  and  all  the 
requirements  of  the  statute  must  be  followed  or  the  limited  mem- 
bers wnll  be  held  to  be  liable  as  general  partners,-'  and  if  the 
partnership  continues  to  do  business  after  the  expiration  of  the 
period  for  which  it  was  formed  without  being  renewed  all  the 
partners  become  as  general  partners  with  unlimited  liability."^ 
There  can  be  no  renewal  unless  there  is  an  original  valid  limited 
partnership;-^  and  where  there  is  no  valid  original  partnership 
there  is  nothing  to  renew,  but  the  partners  may  form  a  new 
partnership  by  complying  with  the  statutes.^"      No  new  capital 

enshaw  v.   Perzel,  32  How.   Pr.    (N.  3  Pa.  Dist.  437;  Ussery  v.  Crusman 

Y.)    233,   27   N.   Y.    Super.    Ct.   426.  (Tenn.),  47  S.  W.  567. 

And   compare   Waters   v.   Harris,  60  27  Durgin    v.    Colburn,     176    Mass. 

N.  Y.  Super.  Ct.  192,  28  Abb.  N.  C.  110,  57  N.  E.  213;  Haddock  v.  Grin- 

89,  43  N.  Y.  St.  62,  17  N.  Y.  S.  370;  nell   Mfg.   Corp,   109  Pa.   St.  372,   1 

Tracy   v.    Tuffly,    134    U.    S.   206,    33  Atl.  174. 

L.  ed.  879,  10  Sup.  Ct.  527.  28  Lancaster     v.     Choate,     5     Allen 

2GHogan  V.  Hadzsits,  113  Mich.  568,  (Mass.)      530;      Sarmiento     v.     The 

71   N.  W.   1092;   Fifth  Ave.  Bank  v.  Catherine    C,    110   Mich.    120,   67    N. 

Colgate,  120  N.  Y.  381,  24  N.  E.  799,  W.   1085 ;   Buck  v.  Alley,   145   N.  Y. 

8  L.  R.  A.  712,  4  Silvernail  Ct.  App.  488,   40   N.    E.  236;    Columbia    Bank 

544;  Metropolitan  Nat.  Bank  v.  Sir-  v.  Berolzheimer,  33  N.  Y.  App.  Div. 

ret,  97  N.  Y.  320,   15  Abb.   N.   Cas.  235,  53  N.  Y.  S.  417;  Tindel  v.  Park, 

318;    First   Nat.    Bank  v.   Huber,    75  154  Pa.   St.  36;   Guillou  v.  Peterson, 

Hun   (N.  Y.)   80,  26  N.  Y.  S.  96,  58  89  Pa.  St.  163. 

N.   Y.    St.    158;    Haviland   v.    Chace,  2a  Hardt  v.   Levy,  72   Hun  225,  25 

39   Barb.    (N.   Y.)    283;    Fourth    St.  N.   Y.  248,   55   N.   Y.   St.   Rep.   706; 

Nat.   Bank  v.  Whitaker,   170  Pa.   St.  Blumenthal  v.  Whitaker,  170  Pa.  St. 

302,  33  Atl.  100 ;  Haddock  v.  Grinnell  309,  33  Atl.  103. 

Mfg.   Corp.,    109   Pa.    St.   372,    1   Atl.  so  First    Nat.    Bank    v.    Huber.    75 

174;   Guillou  v.  Peterson,  89  Pa.   St.  Hun  80,  26  N.  Y.  S.  96,  58  N.  Y.  St. 

163;  Fourth  St.  Nat.  Bank  v.  Haines,  15S. 


1027 


LAW    OF    TARTNERSHIP 


1402 


is  required  to  renew  a  partnership,  but  the  capital  contributed 
by  limited  partners  to  the  original  partnership  must  be  shown 
to  be  intact  and  be  in  condition  so  that  creditors  dealing  with 
the  firm  may  not  be  deceived  as  to  the  firm's  assets.^^  If  false 
statements  are  made  either  in  the  original  or  renewal  certifi- 
cate, the  limited  members  of  the  partnership  as  to  persons  deal- 
ing with  it  will  be  liable  the  same  as  general  partners  f~  and  the 
fact  that  a  limited  partner  has  no  knowledge  of  the  falseness 
of  statements  contained  in  the  certificate  will  not  excuse  him 
and  he  will  become  liable  as  a  general  partner  just  the  same  as 
if  he  had  made  the  false  statements  himself. ^^  If  a  statement 
is  made  in  a  renewal  certificate  not  required  to  be  made  by  the 
statute,  then  its  falsity  will  not  render  limited  partners  liable 
as  general  partners.^* 

§  1027.     Change  of  membership  or  nature  of  business  con- 
ducted.— For  the  protection  of  persons  dealing  with  a  limited 


31  Durgin  v.  Colburn,  176  Mass. 
110,  57  N.  E.  213;  Patterson  v. 
Youngs,  154  App.  Div.  536,  139  N.  Y. 
S.  670 ;  Patterson  v.  Youngs,  72  Misc. 
91,  129  N.  Y.  S.  673 ;  Lee  v.  Burnley, 
195  Pa.  St.  58,  45  Atl.  668;  Reitzel 
V.  Whitaker,  170  Pa.  St.  306,  33  Atl. 
103 ;  Haddock  v.  Grinnell  Mfg.  Corp., 
109  Pa.  St.  372,  1  Atl.  174.  But  see 
Fifth  Ave.  Bank  v.  Colgate,  120  N.  Y. 
381,  24  N.  E.  799,  8  L.  R.  A.  712, 
4  Silvernail  Ct.  App.  544,  where  it 
was  held  that  a  renewal  certificate 
and  affidavit  to  renew  a  limited  part- 
nership need  not  state  that  the  orig- 
inal capital  contributed  by  limited 
members  was  at  the  date  of  the  re- 
newal intact,  and  that  where  such  a 
statement  is  contained  in  the  affidavit 
it  is  mere  surplusage  and  even  if 
untrue  it  would  not  render  the  lim- 
ited partners  liable  as  general  part- 
ners. That  the  contribution  must  be 
made  at  the  formation  of  the  limited 
partnership    and    if    made    then    no 


statement  is  required  to  be  made  in 
a  renewal  certificate  that  it  is  still 
intact.  See  also  Fourth  St.  Nat.  Bank 
V.  Whitaker,  170  Pa.  St.  302,  33  Atl. 
100;  Reitzel  v.  Haines,  3  Pa.  Dist.  523. 
It  was  held  in  New  York  in  a  few 
cases  that  there  might  be  a  renewal 
even  where  the  contributions  of  the 
limited  partners  to  the  original  part- 
nership were  impaired.  Arnold  v. 
Danziger,  30  Fed.  898 ;  Hardt  v.  Levy, 
72  Hun  225,  25  N.  Y.  S.  248,  55  N.  Y. 
St.  706;  Fifth  Ave.  Bank  v.  Colgate, 
120  N.  Y.  381,  24  N.  E.  799,  8  L.  R. 
A.  712,  4  Silvernail  Ct.  App.  544. 

32Hogan  V.  Hadzsits,  113  Mich.  568, 
71  N.  W.  1092;  Reitzel  v.  Whitaker, 
170  Pa.  St.  306,  33  Atl.  103;  Fourth 
St.  Nat.  Bank  v.  Whitaker,  170  Pa.  St. 
302,  33  Atl.  100. 

33  Fourth  St.  Nat.  Bank  v.  Whit- 
aker, 170  Pa.  St.  302,  33  Atl.  100. 

3*  Fifth  Ave.  Bank  v.  Colgate,  120 
N.  Y.  381,  24  N.  E.  799,  8  L.  R.  A. 
712,  4  Silvernail  Ct.  App.  544. 


1403  LIMITED    rARTXERSIIIPS  §     1027 

partnership  the  statutes  provide  that  the  certificate  and  published 
notice  should  acquaint  the  public  with  the  nature  of  the  business 
the  firm  intends  to  conduct  and  who  its  members  are,  hence  it 
follows  that  in  the  absence  of  a  statute  permitting  it,  if  a  change 
is  made  in  the  nature  of  the  business  conducted  or  in  the  mem- 
bership of  the  partnership,  the  public  dealing  with  it  may  be  de- 
ceived, accordingly  the  courts  hold  that  such  an  alteration  will 
dissolve  the  partnership,  but  under  the  statutes  of  Pennsylvania 
it  was  held  that  one  of  the  three  shareholders  of  a  limited 
partnership  might  transfer  all  his  shares  immediately  after 
the  partnership  was  organized  without  working  a  dissolution 
of  the  partnership.^^  Generally  it  is  held  that  when  such  an 
alteration  in  membership  or  nature  of  the  business  conducted 
by  the  partnership  takes  place  with  the  consent  of  a  limited 
or  special  partner  he  will  become  liable  as  a  general  partner 
in  transactions  of  the  firm  thereafter,^^  but  it  is  held  that 
the  mere  loaning  of  money  to  the  partnership  by  a  limited 
partner  does  not  constitute  such  an  alteration  in  the  business 
as  would  make  the  limited  partner  liable  as  a  general  part- 
ner.^^  The  removal  of  the  business  of  the  partnership  to  a 
county  other  than  where  organized  has  been  held  to  be  such  an 
alteration  as  will  render  a  limited  partner  liable  as  a  general  part- 
ner when  he  consents  to  such  removal. ^^  As  a  rule  every  altera- 
tion made  in  the  nature  of  the  business  of  the  firm,  in  the  names 
of  the  partners,  or  in  any  other  matter  specified  in  the  original 

35  In  re  Globe  Refining  Co.,  151  Pa.  ^^  Walkenshaw  v.  Perzel,  4  Rob. 
St.  558,  25  Atl.  128.  (N.  Y.)  426,  32  How.  Pr.  233;  Metro- 

36  Pierce  v.  Bryant,  5  Allen  (Mass.)  politan  Nat.  Bank  v.  Palmer,  56  Hun 
91;  Fox  V.  Graham,  How.  N.  P.  641,  9  N..  Y.  S.  239,  30  N.  Y.  St.  509 ; 
(Mich.)  90;  Perth  Amboy  Mfg.  Co.  Haddock  v.  Grinnell  Mfg.  Corp.,  109 
V.  Condit,  21  N.  J.  L.  659 ;  Smith  v.  Pa.  St.  372,  1  Atl.  174. 

Argall,  6  Hill  (N.  Y.)  479;  Ames  v.  ss  pjrst  Nat.  Bank  of  Galesburg  v. 

Downing,    1    Bradf.    Sur.     (N.    Y.)  Clark,  143  111.  83,  32  N.  E.  255 ;  Van 

321 ;  Lachaise  v.  Marks,  4  E.  D.  Smith  Riper  v.  Poppenhausen,  43  N.  Y.  68 ; 

(N.   Y.)    610;    Buckley  v.    Dingman,  Loomis  v.  Hoyt,  52  N.  Y.  Super.  Ct. 

11  Barb.  (N.  Y.)  289;  Beers  v.  Reyn-  287;  Madison  County  Bank  v.  Gould, 

olds,  11  N.  Y.  97;  Andrews  v.  Schott,  5  Hill  (N.  Y.)  309;  Singer  v.  Macal- 

10  Pa.  St.  47;  Singer  v.  Macalester,  ester,  4  Phila.    (Pa.)    312;   Singer  v. 

4  Phila.  (Pa.)  312.  Kelly,  44  Pa.  St.  145. 


§     1028  LAW    OF    PARTNERSHIP  1404 

certificate,  which  is  required  by  law,  is  deemed  a  dissolution  of 
the  hmited  partnership  and  converts  it  into  a  general  partner- 
ship, which,  if  desired,  can  usually  be  again  converted  into  a 
limited  partnership  by  filing  certificate  and  other  requirements 
for  originally  forming  a  limited  partnership. 

§  1028.  Impairment  of  capital. — Generally  the  statutes 
prohibit  the  withdrawal  by  a  limited  partner  of  any  part  of  the 
capital  he  has  contributed  and  this  is  true  whether  the  money 
is  withdrawn  in  the  form  of  pretended  dividends  or  profits  or 
any  other  form  of  deception.^''  It  is  not  a  violation  of  the  stat- 
ute for  a  limited  partner  to  receive  interest  on  profits  on  his 
investment  so  long  as  the  original  contribution  to  the  capital 
is  not  impaired.'^**  In  some  of  the  states  the  withdrawal  by  a 
limited  partner  of  any  part  of  his  contributed  capital  will  render 
him  liable  as  a  general  partner,*^  while  in  others  his  liability  is 
only  to  repay  the  cash  thus  withdrawn,  except  in  cases  where 
under  the  statutes  such  a  withdrawal  is  an  alteration  of  the  capi- 
tal of  the  partnership,  when  his  liability  for  future  debts  of  the 
firm  will  become  that  of  a  general  partner/^  In  the  some- 
what recent  case^^  it  is  held  that  a  limited  partner  who  has 
withdrawn  interest  on  the  sum  contributed  by  him  to  the  part- 
nership is  not  liable  to  creditors  to  the  amount  so  withdrawn 

39  Bailey  v.  Hornthal,  154  N.  Y.  kota  Rev.  Codes,  §§  4430,  4435 ;  South 
648,  49  N.  E.  56,  61  Am.  St.  645;  Dakota  Rev.  Civ.  Code,  §§  1782,  1787; 
Lachaise  v.  Marks,  4  E,  D.  Smith  Wyoming  Rev.  Stats.,  §  2504. 
(N.  Y.)  610;  Coffin's  Appeal,  106  Pa.  42 Tracy  v.  Tuffly,  134  U.  S.  206,  33 
St.  280;  Hogg  v.  Orgill,  34  Pa.  St.  L.  ed.  879,  10  Sup.  Ct.  527;  Hampden 
344,  where  it  was  held  that  borrow-  Bank  v.  Morgan,  Fed.  Cas.  No.  6008 ; 
ing  money  from  the  partnership  and  Clapp  v.  Lacey,  35  Conn.  463 ;  La- 
repaying  it  was  not  a  violation  of  the  Chomette  v.  Thomas,  1  La.  Ann.  120; 
law.  Hogan  v.  Hadzsits,  113  Mich.  568,  71 

40Hogan    v.    Hadzsits,    113    Mich.  N.   W.    1092;    Bell   v.    Merrifield,   28 

568,  71  N.  W.  1092.  Hun    (N.  Y.)   219;   Madison   County 

"Durgin  v.  Colburn,  176  Mass.  110,  Bank  v.  Gould,  5  Hill  (N.  Y.)   309; 

57  N.  E.  213;  California  Civ.  Code,  Coffin's    Appeal,    106    Pa.    St.    280; 

§§   2495,  2501;   Missouri   Rev.   Stats.  Singer  v.  Kelly,  44  Pa.  St.  145. 

1899,    §§    4442,    7207;    Montana    Civ.  43 Hogan    v.    Hadzsits,    113    Mich. 

Code,  §§  3314,  3331;  New  Hampshire  568,  71  N.  W.  1092. 
Pub.  Laws,  ch.  122,  §  7;  North  Da- 


1405  LIMITED    PARTNERSHIPS  §     1030 

where  the  capital  is  not  impaired  and  the  assets  are  sufficient 
to  pay  the  partnership  debts. 

§  1029.  Changing  general  to  limited  partnership. — A  gen- 
eral partnership  may  be  changed  into  a  Hmited  one/*  but  assets 
of  the  old  firm  can  not  be  turned  over  to  the  new  organization 
in  place  of  the  cash  required  to  be  contributed  by  a  person  de- 
siring to  become  a  limited  partner/^  In  order  to  change  an 
existing  general  partnership  into  a  limited  one  substantially  the 
same  steps  must  be  taken  as  are  required  at  the  formation  of  an 
original  limited  partnership;  however,  the  new  firm  wdien  duly 
organized  may  purchase  the  assets  of  the  old  general  partner- 
ship and  pay  therefor  with  cash  contributed  by  a  subscribing 
limited  member,  but  good  faith  must  characterize  the  transac- 
tion/' 

§  1030.  Actions  by  or  against  partnership. — Since  the 
limited  partners  have  no  part  in  the  management  of  the  partner- 
ship's business,  they  are  not  known  in  the  firm's  litigation  and 
so  long  as  the  partnership  is  a  going  concern  all  actions  at  law 
are  to  be  brought  by  or  against  the  general  partners  only/^  If 
the  limited  partners  have  become  general  partners  in  liability 
because  the  partnership  has  not  followed  the  requirements  of  the 
statute  under  which  it  was  organized  and  is  therefore  not  a  lim- 
ited partnership  except  in  name,  all  partners  who  are  liable  as  gen- 

44  Anderson  v.  Stone,  24  Ill.'App.  47  in  re  Dunn,  115  La.  1084,  40  So. 
342;  Metropolitan  Nat.  Bank  v.  Sir-  466;  City  Safe-Deposit  &c.  Co.  v. 
ret,  97  N.  Y.  320,  15  Abb.  N.  Cas.  Cahn,  102  Md.  530,  62  Atl.  819;  Law- 
318.  rence   v.   Batcheller,    131    Mass.   504; 

45  Van  Ingen  v.  Whitman,  62  N.  Y.  Perth  Amboy  Mfg.  Co.  v.  Condit,  21 
513;  Maginn  v.  Lawrence,  45  N.  Y.  N.  J.  L.  659 ;  Artisans' Bank  v.  Tread- 
Super.  Ct.  235;  Eliot  v.  Himrod,  108  well,  34  Barb.  (N.  Y.)  553;  Schulten 
Pa.  St.  569;  Kohler  v.  Lindenmyer,  v.  Lord,  4  E.  D.  Smith  (N.  Y.)  206; 
129  N.  Y.  498,  29  N.  E.  957.  See  Richter  v.  Poppenhausen,  42  N.  Y. 
also  Brown  v.  Davis,  6  Duer  (N.  Y.)  273,  9  Abb.  Pr.  (N.  S.)  263,  57  Barb. 
549.  309,   39  How.   Pr.  82;   Hunt  v.   Joy, 

46  Metropolitan    Nat.   Bank  v.    Sir-  1  Wkly.  Notes  Cas.  (Pa.)  219;  Weth- 
ret,  97  N.  Y.  320,   15   Abb.   N.   Cas.  erill  v.  McCloskey,  28  W.  Va.  195. 
318 ;    Lawrence   v.    Merrifield,   42    N. 

Y.  Super  Ct.  26. 


§     1030  LAW    OF    TARTNERSHIP  1406 

era!  partners  should  join  as  plaintiffs  or  be  made  defendants;*^ 
and  where  a  creditor  has  obtained  a  judgment  against  the  gen- 
eral partners  and  then  ascertained  facts  to  show  that  the  limited 
partner  is  liable  as  a  general  partner,  he  may  bring  his  action 
against  the  limited  partner.*^  Actions  to  settle  up  the  affairs 
of  the  partnership  and  for  the  appointment  of  receivers  may 
include  limited  partners  as  parties. ^^  When  in  a  suit  on  a  part- 
nership debt  a  defense  is  set  up  that  certain  of  the  defendants 
are  limited  partners  and  hence  not  liable,  it  is  not  incumbent 
upon  the  plaintiff  to  show  that  he  has  sustained  any  loss  by  the 
defendant's  failure  to  comply  with  the  law  governing  the  crea- 
tion of  a  limited  partnership,  and  the  fact  that  plaintiff  had 
knowledge  of  who  was  claimed  to  be  general  and  who  limited 
members  of  the  partnership  at  the  time  he  became  a  creditor 
will  not  estop  him  from  relying  upon  the  illegality  of  the  part- 
nership's formation  to  overcome  the  defense  that  some  of  the 
defendants  were  limited  partners  only.^^  In  such  a  case  the 
only  issue  is  as  to  whether  the  statutes  under  which  the  limited 
partnership  was  claimed  to  have  been  formed  were  complied 
with  so  as  to  avoid  general  liability.^^  In  general,  suits  re- 
specting the  business  of  a  limited  partnership  should  be  against 
the  general  partners  only,  except  when  otherwise  provided  by 
statute.  In  Maryland  this  has  been  interpreted  as  applying  to 
suits  respecting  the  partnership  business  while  the  firm  is  a  going 
concern,  and  to  suits  after  its  dissolution  while  the  special  part- 
ner's cash  contribution  forms  a  part  of  the  assets  or  has  been 
absorbed  in  liquidating  debts,  but  does  not  apply  to  a  case  when 

4s  Sarmiento   v.   The   Catherine   C,  426;   Greene  v.  Breck,  32   Barb.    (N. 

110  Mich.  120,  €]  N.  W.  1085;  City  Y.)  1Z. 

Safe-Deposit    &c.    Co.    v.    Cahn,    102  ^i  R.  S.  Oglesby  Co.  v.  Lindsey,  112 

Md.    530,    62    Atl.    819 ;    Hotopp    v.  Va.  IQ,  72  S.  E.  672,  Ann.  Cas.  1913 

Huber,  160  N.  Y.  524,  55  N.  E.  206.  B,  913n. 

49  Durant  v.  Abendroth,  97   N.  Y.  ^2  Patterson    v.    Youngs,    154    App. 

132;    McArthur    v.    Chase,    13    Grat.  Div.    536,    139   N.   Y.    S.    670;    R.    S. 

(Va.)  683.  Oglesby  Co.  v.  Lindsey,  112  Va.  767, 

soWalkenshaw  v.  Perzel,  32  How.  72  S.  E.  672,  Ann.  Cas.  1913  B,  913n. 
Pr.  (N.  Y.)  233,  27  N.  Y.  Super.  Ct. 


1407  LIMITED  PARTNERSHIPS  §  1031 

the  partnership  has  been  dissolved  and  the  special  partner  has 
been  repaid  his  cash  contribution,  leaving  firm  debts  unpaid.''"' 

§  1031.  Injunction — Receiver,  pleadings  and  trial. — An 
injunction  may  be  had  against  a  limited  partnership  under  the 
same  conditions  as  against  a  general  partnership.  It  may  be 
had  and  a  receiver  may  be  named  at  the  suit  of  a  creditor  when- 
ever the  partnership  becomes  insolvent  or  is  in  imminent  danger 
of  becoming  insolvent.^*  The  pleadings  need  not  aver  the  effort 
and  faikire  to  form  a  limited  partnership.-  It  may  proceed 
against  both  the  general  and  limited  partners  and  the  plaintiff 
may  prove  under  these  averments  that  all  of  them  are  liable  as 
general  partners. °^  A  limited  partner  who  is  sued  as  a  general 
partner  should  plead  by  way  of  answer  averring  compliance  with 
the  statute  if  he  desires  to  defend  upon  the  validity  of  the  forma- 
tion and  conduct  of  the  limited  partnership.^*'  One  who  brings 
an  action  on  an  obligation  of  a  partnership  assumes  the  burden 
of  establishing  the  existence  of  the  partnership.^^  When  he 
avers  that  a  defendant  partnership  was  organized  as  a  limited 
partnership  but  has  become  a  general  one,  or  facts  showing  that 
a  limited  partner  has  become  •  liable  as  a  general  one,  he  must 
bear  the  burden  of  proving  his  allegations  or  he  can  not  recover. 
A  partnership  formed  as  a  limited  one  will  be  presumed  to  be 
valid  until  the  contrary  is  shown. ^^ 

^3  Safe-Deposit    &     Trust     Co.     v.  Bank  v.  Strauss,  60  N.  Y.  Super.  Ct. 

Cahn,  102  Md.  530,  62  Atl.  819.  151,  43  N.  Y.  St.  68,  17  N.  Y.  S.  188 ; 

s*  American     Box     Mach.     Co.     v.  Merchants'  &c.  Bank  v.  Gardner,  31 

Crosman,   61   Fed.  888,   10  C.  C.  A.  Pa.  Super.  Ct.  143. 

146 ;  Batchelder  v.  Altheimer,  10  Mo.  ^e  Abendroth    v.    Van    Dolsen,    131 

App.  181 ;  Whitewright  v.  Stimpson,  U.  S.  66,  33  L.  ed.  57,  9  Sup.  Ct.  619 ; 

2   Barb.    (N.   Y.)    379;   Whitcomb  v.  Rawitzer  v.  Wyatt,  4i  Fed.  287;  Hen- 

Fowle,   10  Daly   (N.  Y.)   23,  7  Abb.  kel  v.  Heyman,  91   111.  96;   Blumen- 

N.  Cas.  295,  56  How.  Pr.  365 ;  Blay-  thai  v.  Whitaker,  170  Pa.  St.  309,  33 

lock's   Appeal,   73   Pa.   St.   146.     See  Atl.  103 ;  Siegel  v.  Wood,  3  Pa.  Dist. 

also  LaChaise  v.  Lord,  1  Abb.  Pr.  (N.  463. 

Y.)  213,  10  How.  Pr.  461.  57  Prjnce  v.  Lamb,  128  Cal.  120,  60 

55  Pierce  V.  Bryant,  5  Allen  (Mass.)  Pac.  689;   Fox  v.  Graham,  How.  N. 

91;   Sharp  v.  Hutchinson,   100  N.  Y.  P.  (Mich.)  90. 

533,  3   N.   E.   500;   Continental   Nat.  ss  Booth    v.    Hunt,    69   Fed.    220; 


§     1032  LAW    OF    rARTNERSIIIP  1408 

§  1032.  Rights  of  creditors  of  limited  partnership. — When 
a  limited  partnership  becomes  insolvent  a  creditor  of  the  firm 
may  maintain  a  suit  against  it  to  wind  up  its  business  and  have 
its  assets  distributed  among  its  creditors  f°  or  a  member  of  the 
firm  may  file  a  suit  for  the  same  purpose  and  have  a  receiver 
appointed  to  preserve  the  assets  and  have  distribution  made 
among  creditors.*'"  A  creditor  without  security  may  sue  to  set 
aside  confessions  of  judgments  and  fraudulent  conveyances f^ 
and  when  such  a  suit  is  successful  it  will  not  give  him  a  prefer- 
ence over  other  creditors  of  the  firm,  but  will  be  for  the  benefit 
of  all.''"  While  the  assets  of  a  limited  partnership  constitute  a 
fund  for  the  benefit  of  creditors  and  the  firm  can  not  by  assign- 
ment or  otherwise  voluntarily  prefer  some  creditors  over  others, 
still  the  law  will  favor  the  diligent  creditor  and  if  he  by  prompt 
suit  procures  a  judgment  and  upon  sale  thereunder  of  the  part- 
nership property  collects  his  debt,  such  sale  will  be  valid  even 
though  it  has  the  effect  of  giving  him  a  preference  over  other 
creditors.     It  is  only  voluntary  preferences  that  are  prohibited 

Continental  Nat.  Bank  v.  Strauss,  137  1    Abb.    Pr.    (N.    Y.)    213,    10    How. 

N.  Y.  553,  32  N.  E.  1066;  Van  Ingen  Pr.  461. 

V.  Whitman,  62  N.  Y.  513.     See  also  go  Bell  v.   Merrifield,   28   Hun    (N. 

Madison    County    Bank   v.    Gould,    5  Y.)    219;    Continental    Nat.    Bank    v. 

Hill  (N.  Y.)  309;  Hotopp  v.  Huber,  Strauss,  60  N.  Y.  Super.  Ct.  151,  43 

160  N.  Y.  524,  55  N.  E.  206.  N.  Y.  St.  68,  17  N.  Y.  S.  188.     But 

59  Corbin    v.    Boies,    34    Fed.    692 ;  see  Snyder  v.  Leland,  127  Mass.  291. 

Crouch  V.  Chicago  First  Nat.  Bank,  See   also    Van    Alstyne   v.    Cook,    25 

156  111.  342,  40  N.  E.  974 ;  Batchelder  N.  Y.  489 ;  Walkenshaw  v.  Perzel,  32 

V.  Altheimer,  10  Mo.  App.  181 ;  Walk-  How.    Pr.    (N.    Y.)    233,    27    N.    Y. 

cnshaw  v.  Perzel,  27  N.  Y.  Super.  Ct.  Super.  Ct.  426. 

426,  32  How.  Pr.   (N.  Y.)  233;  Van  "  Corbin    v.    Boies,    34    Fed.    692; 

Alstyne  v.  Cook,  25  N.  Y.  489;  Arti-  Crouch  v.  Chicago  First  Nat.  Bank, 

sans'    Bank    v.    Treadwell,    34    Barb.  156  111.  342,  40  N.  E.  974 ;  Whitcomb 

(N.  Y.)  553;  Haggerty  v.  Taylor,  10  v.   Fowle,   7  Abb.   N.    Cas.    (N.   Y.) 

Paige    (N.   Y.)    261;   Bell  v.   Merri-  295,  10  Daly  23,  56  How.  Prac.  365; 

field,    28    Hun     (N.    Y.)    219;    Con-  George   v.    Grant,   20   Hun    (N.    Y.) 

tinental  Nat.  Bank  v.  Strauss,  17  N.  372.      See   also    Jackson    v.    Sheldon, 

Y.  S.  188,  43  N.  Y.  St.  68,  60  N.  Y.  9  Abb.   Pr.    (N.  Y.)    127. 

Super.    Ct.    151;    Lachaise    v.    Lord,  c2Rothchild  v.  Hoge,  43  Fed.  ^1. 


1409  LIMITED    PARTNERSHIPS  §     1033 

by  the  statutes.®^  However,  a  creditor  by  such  a  suit  will  not 
prevail  where  the  firm's  assets  have  been  taken  in  a  suit  for 
settlement  of  its  affairs  for  the  benefit  of  all  the  creditors  or 
where  by  voluntary  action  by  the  partnership  by  assignment  or 
otherwise  its  assets  have  been  placed  in  course  of  distribution 
for  the  benefit  of  all  the  creditors;  for  by  such  course  the  assets 
have  become  trust  funds  for  all  and  it  is  then  too  late  to  seek  a 
preference  through  judgment  and  sale.*'* 

§  1033.  Assignment  for  benefit  of  creditors. — While  a 
limited  partnership  in  failing  circumstances  is  prohibited  from 
preferring  a  part  of  its  creditors,  it  is  not  prohibited  from  mak- 
ing an  assignment  of  its  property  for  the  benefit  of  all  its  cred- 
itors. When,  however,  it  desires  to  do  so  all  the  partners,  both 
general  and  limited,  must  join  in  it  or  assent  to  such  action.*'^ 
But  it  is  held  that  a  partner  who  has  not  assented  to  an  assign- 
ment may  ratify  the  action  taken  by  his  partners.*'*'  In  the  ab- 
sence of  a  statute  or  provision  in  the  certificate  of  partnership 
pursuant  to  a  statute  authorizing  them  to  do  so,  the  general 
partners  alone  have  no  authority  to  make  an  assignment  of  the 

^^  Crouch    V.    Chicago    First    Nat.  tion  has  been  taken  to  seize  the  assets 

Bank,  156  111.  342,  40  N.  E.  974;  Hall  for   the   benefit   of    all.     Jackson    v. 

V.   Glessner,   100  Mo.   155,   13   S.  W.  Sheldon,   9   Abb.    Pr.    (N.    Y.)    127; 

349;   Innes  v.  Lansing,   7  Paige    (N.  Innes   v.   Lansing,   7   Paige    (N.   Y.) 

Y.)    583;   Greene  v.   Breck,  32  Barb.  583;     Whitewright     v.     Stimpson,     2 

(N.  Y.)   73;  Hardt  v.  Levy,  72  Hun  Barb.    (N.  Y.)   379;  Deming  v.  Colt, 

(N.  Y.)   225,  25  N.  Y.  S.  248,  55  N.  3  Sandf.  (N.  Y.)  284. 

Y.    St.    706;    Van    Alstyne   v.    Cook,  65  Rothchild  v.   Hoge,  43  Fed.  97; 

25    N.    Y.    489;    Artisans'    Bank    v.  Mills    v.    Argall,    6    Paige    (N.    Y.) 

Treadwell,  34  Barb.  (N.  Y.)  553.  577;  Darrow  v.  Bruff,  36  How.  Pr. 

«•*  Batchelder  v.  Altheimer,  10  Mo.  (N.   Y.)    479;   Waters   v.   Harris,    17 

App.  181 ;  Greene  v.  Breck,  32  Barb.  N.  Y.  S.  370,  28  Abb.   N.  C.  89,  43 

(N.   Y.)    73;   Van  Alstyne  v.   Cook,  N.   Y.    St.   62,  60   N.   Y.   Super.   Ct. 

25  N.  Y.  489 ;  Hardt  v.  Levy,  72  Hun  192 ;  Deming  v.  Colt,  3  Sandf.  (N.  Y.) 

(N.  Y.)  225,  25  N.  Y.  S.  248,  55  N.  284;  Singer  v.  Kelly,  44  Pa.  St.  145. 

Y.   St.   706.     It   has,   however,   been  But  see  Robinson  v.  Mcintosh,  3  E. 

held    in   a    few   cases   that   the   trust  D.  Smith  (N.  Y.)  221. 

attaches  upon  insolvency  of  the  firm  •"' j^g^ning    v.    Colt,    3    Sandf.     (K. 

and   a   creditors'    suit   will   not   avail  Y.)   284;   Darrow  v.  Bruff,  36  How. 

after  insolvency,  even  though  no  ac-  Pr.    (N.  Y.)   479. 


§     1034  LAW    OF    TARTNERSHIP  1410 

partnership  property  for  the  benefit  of  creditors.®^  It  is  gen- 
erally held  that  any  preferences  given  by  such  assignment  are 
void  and  an  attempt  to  give  such  preferences  will  enlarge  the 
liability  of  limited  partners  to  that  of  general  ones.**^  Any  at- 
tempt to  prefer  a  limited  partner  in  a  partnership  assignment 
is  void."^  In  an  assignment  for  the  benefit  of  creditors  the  indi- 
vidual property  of  limited  partners  should  not  be  scheduled,  since 
the  property  of  such  members  is  not  liable  for  the  partnership 
debts. '^^  Only  an  insolvent  limited  partnership  can  legally  make 
an  assignment  for  the  benefit  of  its  creditors,  for  if  it  is  not  in- 
solvent such  assignment  would  hinder  and  delay  its  creditors 
rather  than  benefit  them/^ 

§  1034.  Limited  partner  as  creditor. — If  a  limited  partner 
is  to  be  regarded  as  a  creditor  of  the  partnership  it  is  very  gen- 
erally provided  by  the  statutes  that  in  case  of  partnership  in- 
solvency his  claim  can  not  be  paid  or  he  be  allowed  to  assert  any 
lien  on  the  partnership  assets  until  the  general  creditors  are 
satisfied/"  Some  states  have  by  statute  provided  that  a  limited 
partner  as  to  debts  due  him  from  the  partnership  may  have  the 

67  Schulten  v.  Lord,  4  E.  D.  Smith  56,  61  Am.  St.  645 ;  Mills  v.  Argall, 
(N.   Y.)    206;    Havens  v.   Hussey,   5     6  Paige  (N.  Y.)  577. 

Paige    (N.   Y.)    30;    Mills  v.   Argall,  ^o Tracy  v.   Tuffly,    134  U.    S.  206, 

6  Paige   (N.  Y.)   577.     It  has,  how-  33  L.  ed.  879,  10  Sup.  Ct.  527.   Under 

ever,  been  held  that  a  general  part-  a  statute  of  Minnesota  it  is  held  such 

ner    in    Texas    may    make    such    an  an  assignment  must  also  include  the 

assignment.     Graves  v.  Hall,  32  Tex.  individual   property   of    limited   part- 

665.     See  also  Waters  v.  Harris,   17  ners.     May  v.  Walker,  35  Minn.  194, 

N.  Y.  S.  370,  28  Abb.  N.  C.  89,  43  28  N.  W.  252;  In  re  Allen,  41  Minn. 

N.   Y.    St.   62,   60   N.   Y.   Super.   Ct.  430,  43  N.  W.  382. 

192;  Tracy  v.  Tuffly,  134  U.  S.  206,  ^i  Deming   v.    Colt,    3    Sandf.    (N. 

33  L.  ed.  879,  10  Sup.  Ct.  527.  Y.)  284. 

68  Lineweaver  v.  Slagle,  64  Md.  465,  ^2  Tracy  v.  Tuffly,  134  U.  S.  206, 
54  Am.  Rep.  775 ;  Hardt  v.  Levy,  72  33  L.  ed.  879,  10  Sup.  Ct.  527 ;  Clapp 
Hun  (N.  Y.)  226;  Durant  v.  Aben-  v.  Lacey,  35  Conn.  463 ;  Jaffe  v.  Krum, 
droth,  97  N.  Y.  132;  Bowen  v.  Ar-  88  Mo.  669;  Bowen  v.  Argall,  24 
gall,  24  Wend.  (N.  Y.)  496;  Singer  Wend.  (N.  Y.)  496;  Ward  v.  Newell, 
v.  Kelly,  44  Pa.  St.  145.  42  Barb.   (N.  Y.)  482,  28  How.  Prac. 

69  Tracy  v.  Tuffly,  134  U.  S.  206,  102 ;  George  v.  Carpenter,  73  Hun  (N. 
33  L.  ed.  879,  10  Sup.  Ct.  527;  Baily  Y.)  225;  Dunning's  Appeal,  44  Pa. 
V.  Hornthal,  154  N.  Y.  648,  49  N.  E.  St.     150 ;     McGeorge     v.     Harrison 


1411  LIMITED  PARTNERSHIPS  §  1035 

same  rights  and  remedies  given  to  other  general  creditors/^  In 
Tennessee  under  a  statute  which  provided  that  a  limited  or 
special  partner,  in  case  of  insolvency  of  the  partnership,  should 
not  be  allowed  to  claim  as  a  creditor  until  the  claims  of  all  other 
creditors  were  paid,  it  was  held  that  a  debt  from  the  firm  to 
one  who  unsuccessfully  attempted  to  become  a  limited  partner 
could  not  be  set  off  against  an  individual  liability  to  contribute 
to  the  firm  debts  as  a  general  partner."^* 

§  1035.  Causes  for  dissolution. — The  same  causes  which 
will  force  the  dissolution  of  a  general  partnership  will  be  ground 
for  dissolving  a  limited  partnership.'^^  It  may  result  from  a 
fraud  practiced  on  the  limited  partners  by  the  general  partners/" 
It  may  be  caused  by  the  abandonment  of  the  business  by  the 
general  partners/^  A  limited  partnership  desiring  to  wind  up 
its  affairs  before  the  expiration  of  the  term  must  dissolve  the 
relationship  in  the  manner  provided  by  statute  i"*^  and  the  part- 
nership will,  as  far  as  creditors  are  concerned,  continue  to  exist, 
unless  the  certificate  of  dissolution  meets  the  requirements  of  the 
statute."''  As  in  the  case  of  general  partnerships,  it  has  been 
held  that  the  death  of  a  member  of  a  limited  partnership  dis- 
solves the  firm.^**      So  also  a  change  in  the  membership  of  the 

Chemical  Mfg.  Co.,  141  Pa.  St.  575,  Huber,  44  N.  Y.  S.  617,  160  N.  Y. 

21  Atl.  671;  McArthur  v.  Chase,  13  524,   55  N.  E.  206.     See  Ohio   Code, 

Grat.   (Va.)  683;  Ussery  v.  Crusman  §  8055. 

(TeiKi.),   47   S.   W.   567;    Savage   v.  ^5  Continental  Nat.  Bank  v.  Strauss, 

Carney   (Tenn.),  47  S.  W.  571.  137  N.  Y.  148,  32  N.  E.  1066. 

'■^  Walkenshaw  v.  Perzel,  Zl  How.  '^^  Tournade  v.   Methfessel,   3   Hun 

Pr.  (N.  Y.)  233,  27  N.  Y.  Super.  Ct.  (N.   Y.)    144;    Outcalt  v.    Burnet,    1 

426;   Casola  v.  Kugelman,  Z2>  N.  Y.  Handy  (Ohio)  404,  12  Ohio  Dec.  207. 

App.  Div.  428,  54  N.  Y.  S.  89 ;  White  "  Andrews  v.  Schott,  10  Pa.  St.  47. 

V.  Hackett,  20  N.  Y.  178 ;  McArthur  ^s  Emery  v.  Kalamazoo  &c.   Const. 

V.  Chase,   13  Grat.    ( Va.)   683 ;   Cali-  Co.,  132  Mich.  560,  94  N.  W.  19. 

fornia   Civ.   Code,    §   2490.     See  the  "  !„  re  Terry,  5  Biss.  (U.  S.)  110, 

statutes  of  particular  state.     See  also  Fed.  Gas.  No.  13836.     See  also  Beers 

McGeorge  v.  Harrison  Chemical  Mfg.  v.  Reynolds,  11  N.  Y.  97. 

Co.,  141  Pa.  St.  575,  21  Atl.  671.  sojacquin  v.  Buicson,  11  TTo-.v.  Pr. 

7* Ussery  v.   Crusman    (Tenn.),  47  (N.    Y.)    385.        See    also    Ames    v. 

S.    W.    567.      See    also    Hotopp    v.  Downing,  1  Bradf.  Sur.  (N.  Y.)  321. 


§     1035  LAW    OF    PARTNERSHIP  1412 

firm  has  been  held  to  work  a  dissoUition  thereof/''^  Moreover, 
where  the  statute  provides  that  every  alteration  which  is  made 
in  the  names  of  the  partners,  the  nature  of  the  business,  or  any 
other  matter  specified  in  the  original  certificate,  must  be  deemed 
a  dissolution  of  the  partnership,  the  abandonment  of  the  busi- 
ness by  the  general  partners  and  their  departure  from  the  state, 
whereby  the  special  partner  is  left  to  settle  the  partnership  affairs, 
has  been  held  to  dissolve  the  firm.^^  Notwithstanding  ground 
for  dissolution  is  contained  in  the  act  of  a  general  partner  in 
engaging  in  a  competing  business  without  the  consent  or  over  the 
objections  of  his  limited  copartner,  the  latter  may,  in  the  absence 
of  statutory  provisions  to  the  contrary,  engage  in  such  business 
without  thereby  incurring  the  penalty  of  dissolution.^^  Although 
a  limited  partner  became  such  in  order  that  there  might  be  the 
three  persons  necessary  to  form  a  limited  partnership,  this  will 
not  deprive  him  of  his  right  to  share  in  the  profits  of  the  firm 
upon  dissolution.^*  When  a  limited  partnership  is  dissolved  be- 
cause of  the  expiration  of  the  term  for  which  it  was  organized, 
no  notice  need  be  given  as  required  in  the  dissolution  of  a  general 
partnership;  for  the  certificate  on  file  and  recorded  sufficiently 
notifies  the  public  of  when  the  partnership  will  terminate.^'' 
But  where  by  mutual  consent  of  all  the  partners  it  is  desired  t.o 
dissolve  the  partnership  prior  to  the  termination  of  the  period 
for  which  it  was  formed,  the  statutes  generally  provide  that  a 
notice  of  its  intention  to  dissolve  shall  be  filed  and  recorded 
where  the  certificate  is  recorded  and  that  such  notice  be  also  pub- 
lished in  a  paper  of  a  designated  kind  for  a  period  of  time 
named.®®  Where  an  attempt  was  made  to  dissolve  a  limited  part- 
si  Outcalt  V.  Burnet,  1  Handy  (La.)  471;  Haggerty  v.  Taylor,  10 
404,  12  Ohio  Dec.  207.  Paige  (N.  Y.)  262. 

52  Andrews  v.  Schott,  10  Pa.  St.  47.         sg  in  re  King,  Fed.  Cas.  No.  7779 ; 

53  Skolny  v.  Ricliter,  139  App.  Div.     Emery  v.  Kalamazoo  &c.  Const.  Co., 
(N.  Y.)  534,  124  N.  Y.  S.  152.  132  Mich.  560,  94  N.  W.   19;   Beers 

84  Sturgeon  v.  Apollo  Oil  &c.   Co.,     v.  Reynolds,  11  N.  Y.  97;  Fanshawe 
203  Pa.  369.  53  Atl.   189.  v.   Lane,    16  Abb.   Pr.    (N.   Y.)    71; 

85  Marshall     v.     Lambeth,     7     Rob.     Bulkley  v.   Marks,   15  Abb.   Pr.    (N. 

Y.)   454. 


1413  LIMITED    PARTXERSIIIPS  |     1036 

nership,  and  two  months  before  the  end  of  the  term  of  the  hm- 
ited  partnership,  on  notice  to  members  of  a  meeting  for  consid- 
eration of  a  final  settlement  of  the  partnership  affairs  and  dis- 
tribution of  its  assets,  a  resolution  was  passed  for  exchange  of  its 
property  for  the  stock  of  a  corporation  and  division  of  the  stock 
among  its  members,  the  court  held  that  this  was  not  a  termina- 
tion of  its  business  at  the  end  of  its  term,  but  a  vokmtary  wind- 
ing up  of  its  affairs,  which  the  law  provided  should  be  done  in 
another  way.^'^ 

§  1036.  Rights  and  liabilities  of  partners. — The  liabilities 
of  the  general  members  of  a  limited  partnership  as  well  as  their 
rights  as  partners  are  governed  by  the  common  law  except  where 
the  statutes  have  changed  the  common  law.®®  Since  the  liability 
of  the  general  members  of  a  limited  partnership  are  in  the  main 
the  same  as  those  in  general  partnerships  nothing  more  need  now 
be  said  as  to  them;  but  the  rights  and  duties  of  the  general  part- 
ners in  a  limited  partnership  are  not  the  same  as  those  in  a  gen- 
eral partnership.  The  general  partners  in  a  limited  partnership 
have  the  exclusive  right  and  are,  by  the  relationship  In  which 
they  find  themselves,  bound  to  manage  the  partnership  business 
without  the  aid  of  limited  partners  who  have  contributed  to  the 
partnership  capital.®^  Generally  the  statutes  provide  that  if  the 
limited  members  of  the  firm  have  anything  to  do  wnth  managing 
the  partnership  business  the  partnership  becomes  a  general  one 
and  they  become  liable  as  general  partners. °°  The  general  part- 
ners having  the  exclusive  management  of  the  partnership's  busi- 
ness, are  in  duty  bound  to  account  to  the  limited  members  of  the 

s"  Emery  v.  Kalamazoo  &  H.  Const.  ^^  Richardson  v.  Carlton,  109  Iowa 

Co.,  132  Mich.  560,  94  N.  W.  19.  515,  80   N.   W.  532 ;    Columbia   Land 

S8  Jemison  v.  Bearing,  41  Ala.  283 ;  &c.  Co.  v.  Daly,  46  Kans.  504,  26  Pac. 
Spalding  v.  Black,  22  Kans.  55;  Nut-  1042;    Ussery    v.    Crusman     (Tenn.), 
ting  V.  Ashcroft,  101  Mass.  300 ;  Lan-  47   S.  W.  567 ;   Whittemore  v.    Mac- 
caster    V.    Choate,    5    Allen    (Mass.)  donnell.  6  U.  C.  C.  P.  547. 
530;  Jafife  v.  Krum,  80  Mo.  670;  Con-  9°  Hogg  v.  Ellis,  8  How.   Pr.    (N. 
tinental  Nat.  Bank  v.  Strauss,  60  N.  Y.)  473. 
Y.   Super.   Ct.   151,  43  N.  Y.  St.  68, 
17  N.  Y.  S.  188. 


§    1036  LAW    OF    PARTNERSHIP  1414 

firm  and  to  each  other  the  same  as  partners  are  required  to  do  in 
an  ordinary  general  partnership.''^  The  general  partners  in  such 
a  partnership  are  hable  for  all  of  the  firm's  debts  and  obhgations 
the  same  as  are  the  members  of  a  general  partnership,  without 
any  reference  to  what  amount  of  interest  they  hold  in  it.^"  And 
the  limited  partners  are  not  liable  for  any  of  such  debts  or  obli- 
gations, provided  the  statute  has  been  complied  with  and  they 
be  not  estopped  by  their  conduct  to  claim  the  protection  of  the 
statutes  under  which  the  partnership  was  formed. ^^  If  a  lim- 
ited partner  for  any  reason  has  become  liable  as  a  general  part- 
ner, his  liability  will  continue  notwithstanding  his  death,  and  the 
creditors  may  collect  thereon  from  his  estate.^*  And  it  is  held 
that  even  if  a  limited  partnership  has  been  through  bankruptcy 
and  secured  its  discharge  and  the  discharge  of  the  general  part- 
ners in  whose  names  the  firm  business  was  transacted,  still  a 
creditor  may  pursue  a  limited  partner  who  has  for  any  reason 
become  liable  as  a  general  partner.''^  Even  though  the  statute 
has  not  been  complied  with,  resulting  in  the  limited  partner  be- 
coming liable  with  the  general  partners  for  firm  debts  and  obliga- 
tions, still  he  is  not  liable  for  torts  committed  by  the  general 
partners  where  the  commission  of  these  torts  has  no  connection 
with  the  noncompliance  in  the  statute.^^     The  general  partners 

SI  Continental  Nat.  Bank  v.  Strauss,  Briggs,  32  La.  Ann.  655 ;    Snyder  v. 

60  N.  Y.  Super.  Ct.  151,  43  N.  Y.  St.  Leland,  127  Mass.  291 ;  Jaffe  v.  Krum, 

68,  17  N.  Y.  S.  188;  Hogg  v.  Ellis,  88   Mo.  670;   Madison   County   Bank 

8  How.  Pr.    (N.   Y.)    473;   Ames  v.  v.  Gould,  5  Hill   (N.  Y.)   309;  First 

Downing,  1  Bradf.  Sur.  (N.  Y.)  321.  Nat.  Bank  v.  Whitney,  4  Lans.    (N. 

92Selden  v.  Hall,  21  Mo.  App.  452;  Y.)   38;   George  v.   Grant,  97  N.   Y. 

Andrews    v.    Schott,    10    Pa.    St.   47 ;  262 ;  Van  Riper  v.  Poppenhausen,  43 

Pope   Mfg.   Co.   V.   Charleston   Cycle  N.  Y.  68;  Singer  v.  Kelly,  44  Pa.  St. 

Co.,   55   S.   Car.   528,  33   S.  E.  787;  145. 

Patterson    v.    Holland,    7    Grant    Ch.  s*  Jersey   City   First   Nat.   Bank  v. 

(U.  C.)  1.  Huber,  75   Hun    (N.  Y.)    80;   Watts 

93  Tracy  v.   Tuffly,   134  U.   S.  206,  v.  Taft,  16  U.  C.  Q.  B.  256. 

33  L.  ed.  879,  10  Sup.  Ct.  527;  In  re  o^  Abendroth    v.    Van    Dolsen,    131 

Merrill,  12  Blatchf.  (U.  S.)  221,  Fed.  U.   S.   66,   33   L.   ed.   57,   9   Sup.   Ct. 

Cas.    No.    9467;    Clapp   v.    Lacey,    35  619. 

Conn.  463 ;  Richardson  v.  Carlton,  109  ^e  McKnight  v.  Ratcliff,  44  Pa.  St. 

Iowa   515,   80   N.   W.   532 ;    Spalding  156.     But  see  Guillou  v.  Peterson,  89 

V.    Black,    22    Kans.    55;    Ulman    v.  Pa.  St.  163. 


1415  LIMITED    PARTNERSHIPS  §    1037 

charged  with  the  conduct  of  the  partnership  business  have  no 
authority  where  it  is  not  expressly  conferred  upon  them,  to  bind 
the  limited  partners  by  acts  not  within  the  scope  of  the  business  as 
shown  by  the  certificate  filed  and  recorded.®^  When  a  limited  part- 
ner has  not  consented  to  a  change  of  the  scope  of  the  partnership 
business  from  that  shown  in  the  certificate  of  partnership,  even  a 
continued  departure  from  the  scope  of  business  by  the  general 
partners  will  not  have  the  legal  effect  to  change  the  scope  of  busi- 
ness which  the  partnership  is  authorized  to  do.^^  In  case  a  creditor 
seizes  the  partnership  assets  in  his  attempt  to  cohect  an  individual 
debt  due  him  from  a  general  partner  a  limited  partner  has  all 
the  rights  of  a  general  partner  to  prevent  the  whole  of  the  prop- 
erty from  being  taken  to  satisfy  such  a  debt,  and  he  may  bring 
an  action  against  the  person  or  officer  on  account  of  such  tres- 
pass.°^  The  limited  partner  may  by  proper  proceedings  force 
the  general  partners  or  those  in  control  of  the  business  to  con- 
form to  the  partnership  article  or  to  secure  an  accounting  from 
them  and  a  dissolution  of  the  firm. 

§  1037.  Rights  of  partners  on  dissolution. — When  a  lim- 
ited partnership  is  dissolved  its  general  partners  are  charged 
with  the  duty  of  winding  up  its  business  affairs,  but  they  can 
not  bind  the  limited  partners  by  incurring  new  obligations  in  the 
absence  of  their  assent  thereto/  Upon  the  dissolution  of  the 
partnership  where  the  general  partner  or  partners  are  unwilling 
or  unable  to  wind  up  the  affairs  of  the  firm  a  limited  partner  may 
do  so  without  making  himself  liable  for  the  debts,  for  he  is  not 
thereby  conducting  the  firm  business,  but  only  winding  up  the 
business  and  causing  the  assets  to  -be  applied  to  its  obligations 

97  Taylor  V.  Rasch,  1  FHpp.  (U.  S.)  Abb.  Pr.  (N.  S.)  263,  57  Barb.  309, 
385 ;  Lawrence  v.  Batchelder,  131  39  How.  Pr.  82 ;  Waters  v.  Harris, 
Mass.  504.  17  N.  Y.  S.  370,  28  Abb.  N.  C.  89,  43 

98  Taylor  v.  Rasch,  1  Flipp.  (U.  S.)  N.  Y.  St.  62,  60  N.  Y.  Super.  Ct. 
385.  192;  Pusey  v.  Dusenbury,  75  Pa.  St. 

99  Spalding  V.  Black,  22  Kans.  55.        437 ;  Singer  v.  Kelly,  44  Pa.  St.  145 ; 
1  Slocomb    V.    De    Lizardi,    21    La.     Farmers'     Bank    v.    Ritter,     12    Atl. 

Ann.  355,  99  Arn.  Dec.  740;  Ricbter  659,  9  Sad.  (Pa.)  433,  22  Wkly.  Notes 
V.    Poppenhausen,    42    N.    Y.    Z73,    9     Cas.  (Pa.)   128. 

39 — Row.  ON  Partn. — Vol.  2 


§     1037  LAW    OF    PARTNERSHIP  1416 

and  effecting  a  distribution  of  such  assets  among  the  partners 
entitled  thereto."  In  the  absence  of  a  statute  changing  the  rule, 
upon  dissolution  of  a  limited  partnership  the  assets  are  to  be 
distributed  the  same  as  in  case  of  the  dissolution  of  a  general 
partnership.^  An  action  for  an  accounting  and  for  dissolution 
of  a  limited  partnership  is  governed  by  the  same  rules  as  an 
action  for  a  similar  purpose  against  a  general  partnership.  Upon 
winding  up  the  business  of  a  limited  partnership  at  the  end  of 
the  period  for  which  it  was  formed  or  sooner  by  operation  of 
law,  a  limited  member,  after  the  debts  of  the  firm  are  paid,  is 
entitled  to  receive  the  amount  of  his  contribution  with  the  inter- 
est thereon  together  with  his  share  of  the  profits  of  the  partner- 
ship business.*  But  where  general  partners  are  intending  to  con- 
tinue the  business  after  dissolution,  it  will  not  be  presumed  in 
the  absence  of  proof,  that  a  limited  partner  whose  name  in  the 
conduct  of  the  partnership  business  has  not  been  used,  is  entitled 
as  a  matter  of  course  to  any  payment  on  account  of  the  good  will 
of  the  business.^ 

2  Spalding  v.  Black,  22  Kans.  55.  *  Artisans'   Bank  v.   Treadwell,   34 

3  Emery  v.  Kalamazoo  &c.  Const.  Barb.  (N.  Y.)  553;  Harris  v.  Alur- 
Co.,  132  Mich.  560,  94  N.  W.  19;  ray,  28  N.  Y.  574.  86  Am.  Dec.  268. 
Tillinghast  v.  Walton,  4  N.  Y.  St.  35 ;  ^  Ryan  v.  Franklin,  199  N.  Y.  347, 
Sturgeon  v.  Apollo  Oil  &c.  Co.,  203  116  N.  Y.  S.  1146,  92  N.  E.  61 Z. 

Pa.  St.  369,  53  Atl.  189. 


CHAPTER  XXXII 


JOINT    STOCK    COMPANIES 


SECTION 

1045.  Definition  and  general  nature. 

1046.  Distinguished      from      corpora- 

tions. 

1047.  Distinguished      from      ordinary- 

partnerships. 

1048.  Distinguished  from  mining  com- 

panies. 

1049.  Legal  status. 

1050.  Taxation. 

1051.  Statutory  provisions. 

1052.  Articles  of  association  or  con- 

stitution and  by-laws. 


SECTION 

1053.  Membership  and  its  incidents. 

1054.  Organization  —  Meetings     and 

election. 

1055.  Capital  stock — Issue  and  trans- 

fer of  certificates,  etc. 

1056.  Property  and  funds. 

1057.  Power  to  make  contracts. 

1058.  Actions    by    and    against    joint 

stock  companies. 

1059.  Dissolution. 


§  1045.  Definition  and  general  nature. — A  joint  stock 
company  may  be  defined  as  an  unincorporated  and  voluntary  asso- 
ciation formed  for  the  purpose  of  profit,  liaving  a  common  name, 
possessing  a  common  capital  contributed  by  the  persons  compos- 
ing it,  which  capital  is  divided  or  agreed  to  be  divided  into  shares 
of  which  each  member  possesses  one  or  more,  and  which  repre- 
sent the  interests  of  the  members,  and  are  transferable  by  the 
owner  without  the  express  consent  of  the  other  members  or  the 
creditors  of  the  association.^  "Joi^^t  stock  companies  may  be  cited 
as  quasi  corporations  of  a  private  character.  They  are  associa- 
tions having  some  of  the  features  of  an  ordinary  common-law 
copartnership,  and  some  of  the  features  of  a  private  corpora- 


1  Cyc,  Joint  Stock  Companies ; 
Bradford  v.  National  Benefit  Associ- 
ation, 26  App.  D.  C.  268;  Kossa- 
kowski  V.  People,  177  111.  563,  53  N. 
E.  115;  Adams  Express  Co.  v.  Scho- 
field,  111  Ky.  832,  64  S.  W.  903,  23 
Ky.  L.  1120;  Oliver  v.  Liverpool  & 
London  Life  &c.  Ins.  Co.,  100  Mass. 

1417 


531 ;  Pennsylvania  Ins.  Co.  v.  Mur- 
phy, 5  Minn.  36 ;  Lane  v.  Albertson, 
78  App.  Div.  607,  79  N.  Y.  S.  947; 
Hedge's  Appeal,  63  Pa.  St.  273 ;  Allen 
v.  Long,  80  Tex.  261,  16  S.  W.  43, 
26  Am.  St.  735;  Willis  v.  Chapman, 
68  Vt.  459,  35  Atl.  459. 


§     1045  LAW    OF    PARTNERSHIP  1418 

tion."^  Those  definitions  in  which  a  joint  stock  company  is  de- 
nominated a  partnership,  contemplate  the  individual  liability  to 
third  persons  imposed  by  the  law  upon  the  members  of  the  associ- 
ation, rather  than  the  nature  of  the  company  in  respect  to  its 
formation,  the  management  of  its  affairs,  its  duration  and  dis- 
solution which  are  among  its  distinctive  characteristics.  The  law 
is  well  and  uniformly  settled  that  persons  who  as  between  them- 
selves have  not  entered  into  a  partnership  agreement  may  still 
as  to  other  persons  incur  liabilities  as  if  they  were  in  fact  part- 
ners.^ And  upon  the  same  principle  though  the  members  of  a 
joint  stock  association  may  be  regarded  as  partners  in  respect  to 
third  persons,  still  the  association  is  not  an  agreement  by  a  number 
of  persons  that  they  will  be  copartners;  but  it  is  an  agreement 
between  the  owners  of  shares  of  capital  invested  in  a  common 
enterprise  for  the  purpose  of  profit  that  they  or  their  duly  recog- 
nized assigns,  the  owners  of  the  shares  for  the  time  being,  who- 
ever they  may  be,  shall  carry  on  and  continue  an  association  to- 
gether, sharing  profits  and  bearing  losses.*  From  the  preceding 
definitions  we  may  deduce  the  following  observations  concerning 
the  general  nature  of  joint  stock  companies :  (a)  Such  a  company 
owes  its  existence  to  the  contracts  of  its  members  as  set  forth  in 
the  articles  of  association  by  virtue  of  which  it  has  a  valid  legal 
entity  under  the  common  law,  with  a  right  to  extend  its  existence 
as  the  parties  forming  it  may  see  fit  to  provide  in  such  agree- 
ment.^ But  as  hereinafter  shown  they  are  largely  regulated  by 
statute  in  many  jurisdictions.  The  real  character  of  the  associa- 
tion must  in  each  case  be  determined  by  the  laws  and  the  articles 
of  agreement  under  which  it  is  formed,  and  courts  reading  such 
articles  in  the  light  of  conditions  existing  at  the  time  they  were 
made  will,  as  far  as  possible,  give  effect  to  the  same  among  the 
members  themselves  when  they  themselves  only  are  interested,*' 

2  1  Morawetz  Corp..  §  6.  *  Baird's  Case,  L.  R.  5  Ch.  725,  23 

3  Wadsworth    v.    Duncan,    164    111.     L.  T.  424,  18  W.  R.  1094. 

360,  45  N.  E.  132 ;  Hodgson  v.  Bald-  ^  Spraker  v.   Piatt,    158   App.   Div. 

win,  65  111.  532 ;  Pettus  v.  Atkins.  60  Zll,  143  N.  Y.  S.  440 ;  Hibbs  v.  Brown, 

111.  454;  Ashley  v.  Bowling,  203  Mass.  190  N.  Y.  167,  82  N.  E.  1108. 

311,  89  N.  E.  434.  °  Robbins   v.    Butler,    24    111.    387; 


1419  JOINT    STOCK    COMPANIES  §    1045 

and  for  the  purpose  of  determining  the  fiduciary  relations  exist- 
ing between  the  association  and  its  members,  the  association  itself 
through  all  the  changes  in  its  membership,  may  be  regarded  at 
least  in  equity,  as  an  ideal  separate  entity  involving  and  possess- 
ing equitable  rights  and  relations/  (b)  Since  the  association  is 
based  solely  upon  the  common-law  right  of  the  members  to  con- 
tract with  each  other,  there  seems  to  be  no  reason  why  they  may 
not  legally  do  all  the  things  they  usually  undertake  to  do,  nor  why 
the  courts  may  not  apply  to  them  the  same  principles  which  per- 
mit parties  to  agree  upon  such  forms  of  association  as  they  may 
choose  and  hold  these  terms  to  be  binding  upon  all  who  agree 
to  them  expressly  or  impliedly,  but  upon  no  other  persons.^  As 
between  themselves,  therefore,  each  member  of  an  unincorpo- 
rated association,  after  all  the  assets  of  the  company  are  ex- 
hausted, is  bound  to  pay  his  proportion  of  the  debts  of  the  con- 
cern; but  as  to  the  creditors  each  member  is  liable  for  all  such 
debts,°  no  matter  what  the  private  arrangements  among  the 
members  may  be.  They  might  stipulate  with  each  other  in  the 
articles  of  association  that  they  shall  not  be  responsible  other 
than  out  of  joint  funds,  yet  as  to  the  rest  of  the  Avorld  it  is  clear 
that  each  is  liable  to  the  whole  amount  of  debts  contracted,  nor 
can  this  liability  be  shifted  except  by  a  transfer  of  shares  in  the 
exact  mode  prescribed  by  the  articles  of  association."  (c)  The 
association  has  a  common  name,  which  is  usually  descriptive  of 
the  business  for  which  it  is  formed  and  does  not  consist  of  the 
names  of  persons.  In  this  name  it  may  enter  into  contracts  in 
the  manner  prescribed  by  the  articles  of  association,  and  may 
generally  sue  and  be  sued  under  that  name,  (d)  The  capital  of 
the  company  Is  divided  into  shares,  and  the  number  of  shares 

Ashley    v.    Bowling,    203    Mass.    311,  » Hodgson  v.  Baldwin,  65  111.  532; 

89  N.  E.  434.  Henkel  v.  Heyman,  91  111.  96;  Lewis 

7  McDowell  V.   Joice,    149  111.   124,  v.  Tilton,  64  Iowa  220,  19  N.  W.  911 ; 
36  N.  E.  1012.  Bodey  v.  Cooper,  82  Md.  625,  34  Atl. 

8  Pennsylvania  Ins.  Co.  v.  Murphy,  362 ;  Cutler  v.  Thomas,  25  Vt.  73. 

5  Minn.  56;  Henry  v.  Jackson,  ol  Vt.  lo  Lyon  v.  Denison,  80  Mich.  371, 
431.  45  N.  W.  358,  8  L.  R.  A.  358. 


§     1046  LAW    OF    PARTNERSHIP  1420 

held  by  each  member  determines  his  interest  and  the  extent  of 
his  control  of  the  management,  and  as  between  the  members 
themselves  fixes  his  proportion  of  liability  for  debts  of  the  asso- 
ciation. Ordinarily  these  shares  represent  a  certain  amount  of 
money,  or  the  value  of  property  transferred  to  the  company  by 
the  shareholders ;  but  it  seems  that  such  payment  or  transfer  is 
not  an  indispensable  requisite.  As  where  certain  owners  in  sev- 
eralty of  adjacent  parts  of  a  tract  of  land  laid  the  same  off  into 
a  town  site,  and  organized  a  company  to  sell  the  lots,  and  there 
was  no  conveyance  to  the  company  of  the  Interests  of  the  several 
owners,  but  each  shareholder  received  his  quota  of  stock,  and 
the  articles  of  association  provided  that  deeds  for  lots  sold  were 
to  be  executed  by  the  president  and  secretary,  it  was  held  that 
the  organization  was  a  joint  stock  company  and  that  the  lots 
became  in  fact  the  property  of  the  association  from  the  proceeds 
of  the  sale  of  which  each  holder  of  shares  received  his  propor- 
tion.^^ (e)  The  shares  are  transferable  at  the  will  of  the  owner, 
or  at  his  death  become  assets  of  the  estate  in  the  hands  of  his 
personal  representative.  That  the  shares  are  transferable  is  evi- 
dence of  the  intent  that  such  death  or  transfer  shall  not  result 
in  the  dissolution  of  the  company  and  gives  it  the  quality  of  per- 
petual succession. ^^  The  transfer  of  shares  must  be  made  in  con- 
formity with  the  articles  of  association,  for  by  these  the  share- 
holders have  themselves  provided,  the  means  by  which  their 
interests,  rights  and  liabilities  in  the  company  may  be  made  to 
devolve  upon  others  and  to  these  they  must  be  held. 

§  1046.  Distinguished  from  corporations. — The  funda- 
mental distinction  between  a  joint  stock  company  and  a  corpora- 
tion is  the  manner  in  which  each  is  formed.  The  corporation 
owes  its  existence  to  a  grant  of  authority  by  the  sovereign  power 
of  the  state,  being  created  by  a  special  act  or  receiving  its  author- 
it}'-  by  compliance  with  a  general  law  providing  for  such  organiza- 
tions, under  such  a  grant  of  privileges  as  secures  a  succession  of 

^^  Batty  V.  Adams,  16  Nebr.  44,  20  i^jjossack  v.  Ottawa  Development 
X.  W.  15.  Co.,  244  III.  274,  91  N.  E.  439. 


1421  JOINT    STOCK    COMPANIES  §    1046 

members  without  changing  its  identity;  while  a  joint  stock  com- 
pany is  formed  by  the  agreement  of  the  individuals  comprising 
it,  and  their  relation  to  each  other  is  the  product  of  such  agree- 
ment and  does  not  depend  upon  any  grant  of  authority  from  the 
state  but  upon  the  legal  right  and  capacity  of  the  parties  to  form 
the  contract  of  association.  The  special  act,  or  the  certificate 
issued  under  the  general  law,  creating  the  corporation  is  its  char- 
ter and  its  effect  in  creating  the  artificial  person  possessing  legal 
capacity^^  is  to  merge  the  individual  rights  in  the  artificial  body 
and  to  eliminate  the  individual  liability  of  its  members  for  cor- 
porate acts  under  some  part  of  such  liability  is  expressly  pre- 
served by  constitutional  or  statutory  provision/'^  "The  distinc- 
tion between  a  corporation  and  a  joint  stock  association  as  con- 
cerns the  point  for  decision,  is  that  a  corporation  is  an  artificial 
entity  existing  in  contemplation  of  law  in  the  state  of  its  creation. 
It  can  have  no  existence  elsewhere  and  is  recognized  in  other 
jurisdictions  only  by  comity.  It  is  a  citizen  within  the  meaning 
of  certain  provisions  of  the  Federal  Constitution.  Whereas  a 
joint  stock  association,  though  it  have  some  of  the  rights  of  a 
corporation  and  may  sue  and  be  sued  in  the  name  of  its  president, 
still  does  not  exist  as  an  entity  distinct  from  its  members.  *  *  * 
Even,  if,  unlike  a  partnership,  which  it  really  is,  it  can  be  said 
to  exist  as  an  artificial  being,  it  owes  its  existence  not  to  the 
state,  but  to  the  contract  of  its  members,  and  may  therefore  be 
said  to  exist  wherever  it  does  business  or  owns  property.  In 
that  sense  its  analogy  to  a  corporation  is  to  one  organized  under 
the  laws  of  two  or  more  states. "^^  It  has  been  said  that  a  joint 
stock  company  is  a  partnership  with  some  of  the  powers  of  a 
corporation."  The  articles  of  association  bear  the  same  relation 
to  the  joint  stock  company  as  the  charter  does  to  a  corporation 
in  regulating  the  duties  and  obligations  of  the  members  among 

13  People    V.    Assessors    of    Water-  ^^  In    re    Willmer,    153    App.    Div. 

town,  1  Hill  (N.  Y.)  616.  804,  138  N.  Y.  S.  649. 

1*  Liverpool  Ins.  Co.  v.  Massachu-  ^'^  People  v.  Coleman,  133  N.  Y.  279, 

setts,    10   Wall.    (U.    S.)    566,    19   L.  31   N.  E.  96.   16  L.  R.  A.  183:  Van 

ed.   1029;   Niagara  v.   People,   7  Hill  Aernam   v.   Blustein,    102   N.   Y.  355, 

(N.  Y.)  504.  7  N.  E.  537. 


§     1046  LAW    OF    PARTNERSHIP  1422 

themselves,  but  as  they  are  of  a  contractual  nature,  the  individ- 
ual personal  liability  of  the  members  to  persons  not  parties  to 
such  agreement  remains  in  full  force  unless  there  is  some  express 
statutory  provision  limiting  the  same."  Though  the  company 
has  a  recognized  entity  possessing  certain  legal  capacities  such  is 
not  wholly  distinct  from  that  of  the  individuals  composing  it, 
and  whatever  name  it  may  assume  and  use  in  the  transaction  of 
its  business  it  is  not  a  corporate  designation/^  The  essential  dis- 
tinction as  to  the  formation  of  the  company  and  its  legal  entity 
is  not  changed  by  the  fact  that  its  capital  is  represented  by  cer- 
tificates transferable  without  working  its  dissolution;"  nor  that 
it  is  controlled  by  a  board  of  directors  and  that  individual  mem- 
bers can  not  as  such  make  contracts  in  its  behalf ;-°  nor  that  under 
modern  legislation  it  may  possess  other  powers  formerly  consid- 
ered as  conferred  only  upon  corporations  by  reason  of  which  the 
distinction  between  them  is  in  many  cases  rendered  obscure.^^ 
A  joint  stock  company,  like  a  corporation,  usually  transacts  its 
business  by  a  board  of  directors  or  trustees,  and  sues  and  is  sued 
as  an  individual,  but  its  members,  like  partners,  are  personally 
liable.^-  Some  joint  stock  companies  resemble  corporations  in 
that  they  have  a  capital  stock  divided  into  shares,  and  do  business 

17  Gittord    V.    Livingston,    2    Denio  v.  Liverpool  &c.  Co.,  100  Mass.  531 ; 
(N.  Y.)  380.  Dow  V.  Sayward,  12  N.  H.  271;  Bray 

18  Williams   v.    Bank   of    Michigan,  v.  Farwell,  81  N.  Y.  600;  Livingston 
7  Wend.   (N.  Y.)   540.  v.  Lynch,  4  Johns.  Ch.  (N.  Y.)  573; 

19  Oak  Ridge  Coal  Co.  v.  Rogers,  Warner  v.  Beers,  23  Wend.  (N.  Y.) 
108  Pa.  St.  147.  103,    196;    Townsend   v.    Goewey,    19 

20 Bank   of   Topeka  v.   Eaton,    107  Wend.    (N.    Y.)    424,   32    Am.    Dec. 

Fed.  1003.  514;  Williams  v.  Bank  of  Michigan, 

21  People  V.   Rose,   219   111.   46,   Id  7  Wend.   (N.  Y.)   539;  In  re  Gibbs, 

N.  E.  42 ;  People  v.  Coleman,  133  N.  157  Pa.  St.  59,  27  Atl.  383,  22  L.  R. 

Y.  279,  31  N.  E.  96,  16  L.  R.  A.  183 ;  A.  276n ;  Burnes  v.  Pennell.  2  H.  L. 

People  v.  Wemple,  117  N.  Y.  136,  22  Cas.  497;  Wormwell  v.  Hailstone,  6 

N.  E.  1046,  6  L.  R.  A.  303.  Bing.  668,  4   M.   &   P.   512,   8   L.   J. 


(O.  S.)  C.  P.  264;  Harrison  v.  Tim- 
mins,  4  M.  &  W.  510,  7  D.  P.  C.  28, 
8  L.  J.  Ex.  94;  Cape's  Executors' 
Taft  V.  Ward,  106  Mass.  518;  Hoad-  Case,  2  DeG.,  M.  &  G.  573;  Bartlett 
ley  V.  Essex,  105  Mass.  519;  Oliver    v.  Pentland,  1  B.  &  Ad.  704. 


22  Frost  V.  Walker,  60  Maine  468 
Whitman  v.  Porter,  107  Mass.  522 
Bodwell  V.  Eastman,  106  Mass.  525 


1423  JOINT    STOCK    COMPANIES  §    1046 

under  a  corporate  name  and  through  a  common  agency."^  "Joint 
stock  company"  in  early  Massachusetts  statutes  was  equivalent 
to  corporation  organized  under  general  laws."^  A  corporation 
being  an  artificial  legal  entity  existing  in  contemplation  of  law  in 
the  state  where  it  is  created,  it  can  have  no  existence  elsewhere 
and  is  recognized  in  other  jurisdictions  only  by  comity.  It  is 
therefore  considered  a  citizen  of  that  state  for  the  purpose  of 
giving  jurisdiction  to  the  federal  courts  in  controversies  between 
citizens  of  different  states.  It  was  formerly  held  that  a  joint  stock 
company  having  practically  all  the  powers  and  attributes  of  a 
corporation,  must  also  be  considered  as  an  artificial  citizen  for 
jurisdictional  purposes  without  regard  to  the  citizenship  of  its 
members,  but  it  is  now  well  settled  that  it  is  necessary  to  set  up 
the  citizenship  of  the  individual  members  for  this  purpose,^^  for 
though  it  has  some  of  the  rights  of  a  corporation  still  it  does  not 
exist  as  an  entity  distinct  from  its  members.""  And  in  the  matter 
of  taxation  joint  stock  companies  differ  from  corporations  in  sev- 
eral particulars ;  their  capital  stock  is  not  taxable  unless  they  are 
expressly  included  in  the  terms  of  the  statute;"^  their  personal 
property  is  taxable  where  the  business  is  carried  on,  since  the 
company,  being  the  creature  of  the  contract  of  its  members,  may 

23  Boston  &  Albany  R.  Co.  v.  Pear-  24  Attorney   General   v.    Mercantile 

son,  128  Mass.  445 ;  Tappan  v.  Bailey,  Co.,  121  Mass.  524. 

4  Mete.    (Mass.)    529;   Edgeworth  v.  25  Qreat  Southern  &c.  Hotel  Co.  v. 

Wood,  58  N.  J.  L.  463,  33  Atl.  940;  Jones,  177  U.  S.  449,  44  L.  ed.  482, 

People  V.  Wemple,  117  N.  Y.  136,  22  20  Sup.  Ct.  690;   Grace  v.  American 

N.  E.  1046,  6  L.  R.  A.  303n;  People  Cent.  Ins.   Co.,   109  U.   S.  278    (and 

V.  Coleman,  133  N.  Y.  279,  31  N.  E.  cases  cited  there),  27  L.  ed.  932;  La- 

96,  16  L.  R.  A.  183 ;  McCabe  v.  Good-  fayette  Ins.  Co.  v.  French,  18  How. 

fellow,  133  N.  Y.  89,  30  N.  E.  728,  17  (U.  S.)  404,  15  L.  ed.  451. 

L.  R.  A.  204n ;  Van  Aernam  v.  Blu-  26  Chapman   v.    Barney,    129   U.    S. 

stein,  102  N.  Y.  355,  7  N.  E.  537,  2  677,  32  L.  ed.  800,  9  Sup.  Ct.  426.  "An 

N.   Y.    St.   470;   Wells   v.    Gates,    18  artificial  person  called  a  joint  stock 

Barb.  (N.  Y.)  554;  Opdyke  v.  Marble,  association  having  some  of  the  char- 

18  Abb.  Pr.   (N.  Y.)  266;  Barndollar  acteristics  of  a  partnership  and  some 

V.   DeBois,    142   Pa.    St.   565,   21    Atl.  of  a  corporation."   Hill  v.  Stetler,  127 

988;  Willis  v.  Chapman,  68  Vt.  459,  Pa.  St.  145,  13  Atl.  306. 

35  Atl.  459.  27  People    v.    Coleman,    133    N.    Y. 

279,  31  N.  E.  96,  16  L.  R.  A.  183. 


§     1046  LAW    OF    PARTNERSHIP  1424 

be  said  to  exist  wherever  it  does  business  or  owns  property  f^  the 
members  are  taxable  as  partners  and  not  as  stockholders,  and 
therefore  the  shares  are  not  taxable  under  a  statute  as  stocks  in  a 
moneyed  corporation.-''  But  a  joint  stock  company  organized  in 
one  state  or  country  which  possesses  all  the  other  attributes  of  a 
corporation  may  be  taxed  upon  business  done  in  another  state 
under  a  statute  imposing  such  a  tax  on  foreign  corporations  do- 
ing business  within  the  state.  Where  a  foreign  joint  stock  asso- 
ciation organized  in  England  which  by  deed  of  settlement  under 
certain  acts  of  parliament  possessed  a  distinct  artificial  name  by 
which  it  could  make  contracts,  a  statutory  authority  to  sue  and 
be  sued  in  the  name  of  its  officers  as  representing  the  association, 
a  statutory  recognition  as  an  entity  distinct  from  its  members  by 
allowing  them  to  sue  it  and  be  sued  by  it,  and  a  provision  for  its 
perpetuity  by  transfer  of  shares  so  as  to  secure  a  succession  of 
membership  it  was  held  to  be  a  corporation  for  the  purpose  of 
taxation  within  the  meaning  of  an  act  taxing- corporations  in  that 
name,  upon  the  ground  that  "when  by  legislative  sanction  an 
association  is  formed  capable  of  acting  independently  of  the  rules 
and  principles  that  govern  a  simple  partnership  it  is  so  far  clothed 
with  corporate  powers  that  it  may  be  treated  for  the  purposes  of 
taxation  as  an  artificial  body  subject  to  the  jurisdiction  of  the 
government  under  which  it  undertakes  to  act  in  its  associated 
capacity.^''  And  it  appears  that  in  some  instances  the  word  "cor- 
poration" is  by  constitutional  or  statutory  provisions  to  be  con- 
strued to  include  joint  stock  associations  so  as  to  have  service 
of  process  upon  an  officer  or  other  representative  of  the  company. 
Though  considered  in  this  respect  as  a  quasi  corporation,  such  a 
company  does  not  lose  its  distinctive  character  as  a  partnership.^^ 

2S  In  re  Wilmer,  153  App.  Div.  804,  ^i  Adams  Express  Co.  v.  Schofield, 

138  N.  Y.  S.  649.  Ill   Ky.  833,  64  S.  W.  903,  23   Ky. 

29  Hoadley  v.  Essex,  105  Mass.  519.  L.  1120;  State  v.  Adams  Express  Co., 

30  Liverpool  Ins.  Co.  v.  Massachu-  66  Minn.  271,  68  N.  W.  1085,  38  L. 
setts,  10  Wall.  (U.  S.)  566,  19  L.  ed.  R.  A.  225 ;  Express  Co.  v.  State,  55 
1029;  Oliver  v.  Insurance  Co.,  100  Ohio  St.  69,  44  N.  E.  506;  Piatt  v. 
Mass.  531 ;  People  v.  Coleman.  133  N.  Colvin,  50  Ohio  St.  703,  36  N.  E.  735. 
Y.  279,  31  N.  E.  96,  16  L.  R.  A.  183. 


1425  JOINT    STOCK    COMPANIES  §     1047 

An  agreement  whereby  many  persons  are  brought  into  one  arti- 
ficial body,  and  in  the  same  instrument  proposing  to  conduct  its 
affairs  by  the  power  given  to  it  in  the  mode  prescribed  by  the 
legislature,  will  be  deemed  to  be  incorporated — that  is,  formed  or 
united  under  the  law  of  the  state,  whether  the  artificial  body  be 
termed  a  corporation,  a  joint  stock  company  or  association.^- 

§  1047.     Distinguished  from  ordinary  partnerships. — The 

essential  mark  of  distinction  between  a  joint  stock  company  and 
an  ordinary  partnership  is  the  right  of  the  holder  of  any  interest 
in  the  former  whether  great  or  small  to  transfer  such  interest  to 
a  stranger  without  the  consent  of  his  co-owners.^^  By  this  the 
membership  is  subject  to  changes  at  the  will  of  individual  share- 
holders and  the  company  is  capable  of  perpetual  continuance. 
There  is  no  right  of  the  members  of  a  joint  stock  company  to 
decide  what  new  partners  shall  be  admitted  to  the  firm.  Such  a 
right  is  called  delectus  personse  and  is  an  inherent  quality  of  an 
ordinary  partnership.^*  The  reason  is  that  a  joint  stock  company 
usually  consists  of  a  large  number  of  persons  among  whom  there 
is  no  special  bond  of  confidence  and  friendship,  it  is  a  matter  of 
comparative  indifference  who  compose  it,  and  the  retirement  or 
the  death  of  a  member  is  no  cause  for  its  dissolution.  A  partner- 
ship, on  the  other  hand,  though  it  may  consist  of  any  number 
of  persons,  is  generally  composed  of  a  few,  attracted  to  each  other 
by  mutual  confidence,  which  is  such  an  element  of  their  associa- 
tion that  neither  is  at  liberty  to  retire  and  substitute  others  as 
partners,  and  the  decease  of  one  member  should  and  does  work 

32Edgeworth  v.  Wood,  58  N.  J.  L.  Joseph  v.  Davenport,   116  Iowa,  268, 

463,  33  Atl.  940;  People  v.  Wemple,  89  N.  W.   1081;  Ashley  v.  Bowling, 

117  N.  Y.  136,  22  N.  E.  761,  6  L.  R.  203  Mass.  311,  89  N.  E.  434,  133  Am. 

A.  303n;  Fargo  v.  McVIcker,  55  Barb.  St.  296;   Phillips  v.   Blatchford,    137 

(N.  Y.)  437.  Mass.   510;   Oak   Ridge   Coal   Co.   v. 

33  Cincinnati,  N.  O.  &  T.  P.  R.  Co.  Rogers,  108  Pa.  St.  147 ;  Hedge's  Ap- 

V.  Citizens'  Nat.  Bank,  11  Ohio  Dec.  peal,  63   Pa.   St.  273;   Carter  v.   Mc- 

50;   Hedge's  Appeal,  63  Pa.   St.    (13  Chire,  98  Tenn.   109,  38   S.   W.   585. 

P.  F.  Smith)  273.  60  Am.  St.  842,  36  L.  R.  A.  282;  In- 

3*  Taylor    v.    Castle,    42    Cal.    367 ;  dustrial   Lumber   Co.   v.   Texas    Pine 

Spotswood  V.   Morris,   12  Idaho  360,  Land  Assn.,  31  Tex.  Civ.  App.  375,  72 

85  Pac.  1094,  6  L.  R.  A.  (N.  S.)  665;  S.  W.  875;  Story  Partnership,  §  5. 


§     1047  LAW    OF    PARTNERSHIP  1426 

a  complete  dissolution  of  the  firm.^'"'  It  is  an  unvarying  rule  of 
law  that  to  form  a  partnership,  at  least  so  far  as  the  parties 
themselves  are  concerned,  the  consent  of  both  the  contracting 
parties  is  required. ^°  The  consent  to  receive  a  new  partner  must 
therefore  be  unanimous.^''  This  doctrine  excludes  even  executors 
and  representatives  of  partners  succeeding  their  decedent  in  the 
state  and  condition  of  partners.^*  Though  the  English  courts 
have  given  some  recognition  to  the  theory  that  there  Is  nothing 
inconsistent  with  the  association  being  a  partnership  in  the  fact 
that  the  partners'  interests  are  transferable,  such  a  doctrine  is 
generally  rejected  by  our  courts.^^  Another  characteristic  of  a 
joint  stock  company  which  distinguishes  it  from  a  partnership  is 
that  the  authority  to  manage  the  business  is  conferred  upon  the 
directors  or  other  designated  officers  of  the  association,  and  a 
shareholder  as  such  has  no  power  to  contract  for  the  company. 
There  is  no  implied  authority  for  a  member  of  the  company  to 
act  as  its  representative.  Where  the  articles  of  association  pro- 
vided for  a  choice  of  officers,  and  that  the  president  and  directors 
should  have  the  exclusive  direction  of  all  the  concerns  of  the 
company,  they  were  held  to  create  a  joint  stock  company  rather 
than  a  partnership  and  the  members  are  tenants  in  common  of 
the  property  belonging  to  the  company.*"  In  the  absence  of  ex- 
press provisions,  or  statutory  regulation,  the  rights  and  liabilities 
of  the  members  of  a  joint  stock  company  are  to  be  determined 
by  substantially  the  same  rules  as  those  governing  members  of  a 
commercial  partnership/^ 

3!5  Joseph   V.    Davenport,    116   Iowa  3^  Solomon  v.  Kirkwood,  55   Mich. 

268,    89  N.  W.  1081;  Carter  v.  Mc-  256,  21  N.  W.  336. 

Clure,  98  Tenn.   109,   38  S.  W.  585,  ^o  Taylor    v.    Castle,    42    Cal.    367; 

36   L.   R.   A.   282,   60   Am.    St.   842;  Jones  v.  Clark,  42  Cal.  180;  McCon- 

Willis    V.    Chapman,    68    Vt.    459,    35  nell  v.  Denver,  35   Cal.  365,  95  Am. 

Atl.  459.  Dec.  107;  Hossack  v.  Ottawa  Devel- 

36  Bennett  v.   PuIIiam,   3   111.   App.  opment  Assn.,  244  111.  274,  91  N.  E. 

185.  439;  Cox  v.  Bodfish,  35  Maine  302; 

37Meaher    v.    Cox.    Zl    Ala.    201;  Livingston  v.  Lynch,  4  Johns.  Ch.  (N. 

Burnett  v.  Snyder,  76  N.  Y.  344.  Y.)    573;   Irvine  v.  Forbes,   11   Barb. 

38  Kingman     v.     Spurr,     7     Pick.  (N.  Y.)    587. 

(Mass.)   235.  ^i  Clagett  v.  Kilbourne,  1  Black  (U. 


1427  JOINT    STOCK    COMPANIES  §     1048 

§  1048.  Distinguished  from  mining  companies. — Mining 
companies  or  mining  partnerships  as  they  are  commonly  termed, 
constitute  another  class  of  associations  for  profit,  from  which 
joint  stock  companies  must  be  distinguished.  The  origin  of  this 
species  of  partnerships  in  this  country  is  traceable  to  the  early 
periods  of  mining  in  the  west.  Settlements  were  made  in  the 
mining  regions  before  there  was  an  established  government  there. 
Under  these  conditions  transactions  among  the  settlers  in  respect 
to  the  acquisition  and  development  of  mining  properties  rested 
upon  the  usages  and  customs  which  grew  up  among  them.  In 
some  localities  these  accepted  usages  were  reduced  to  writing  and 
adopted  by  the  communities,  which  by  virtue  of  their  fair  and 
equitable  character  were  after  the  organization  of  government, 
recognized  and  sanctioned  by  the  courts,  and  much  of  the  subse- 
quent legislation  upon  mining  partnerships  has  been  declaratory 
of  this  "common  law  of  mines."'*"  A  mining  partnership  is  like 
a  joint  stock  company  in  that  there  is  no  delectus  personse.  The 
transfer  of  an  interest  does  not  dissolve  the  partnership,  but  the 
purchaser  becomes  a  partner,  nor  does  the  death  of  a  member 
work  a  dissolution.  It  is  not  created  by  written  articles  of 
agreement  as  a  joint  stock  company  is,  but  arises  when  two  or 
more  persons  own  or  acquire  a  mining  claim  for  the  purpose  of 
working  it  and  extracting  the  minerals  therefrom  and  actually 
engage  in  mining  the  sanie.*^  It  does  not  arise  from  a  mere  co- 
tenancy, but  from  such  ownership  and  the  joint  working  of  the 
mine,  and  if  there  are  a  number  of  cotenants  and  any  two  of 
them  join  in  extracting  the  minerals  a  mining  partnership  exists 
as  to  them,  though  there  be  no  express  agreement  to  become  part- 
ners or  to  share  in  the  profits.**   Since  the  joint  working  of  the 

S.)    346,    17   L.   ed.  213;    Phillips   v.  ^3  Marks   v.   Gates,   2   Alaska  519; 

Blatchford,    137    Mass.    510;    Butter-  Ferris  v.  Baker,  127  Cal.  520,  59  Pac. 

field  V.  Beardsley,  28  Mich.  412 ;  Wells  937 ;  Stuart  v.  Adams,  89  Cal.  367,  26 

V.  Gates,  18  Barb.  (N.  Y.)  544;  Mc-  Pac.  970;  Decker  v.  Howell,  42  Cal. 

Fadden  v.  Leeka,  48  Ohio  St.  513,  28  636;  Skillman  v.  Lachman,  23  Cal.  198, 

N.   E.  874;   Hedge's   Appeal,  63   Pa.  83   Am.   Dec.   96;    Higgins   v.   Arm- 

St.  273.  strong,  9  Colo.  38,  10  Pac.  232 ;  Free- 

*2Kahn  V.  Central  Smelting  Co.,  102  man  v.  Hemenway.  75  Mo.  App.  611. 

U.  S.  641,  26  L.  ed.  266.  **  Alader  v.  Norman,  13  Idaho  585, 


§     1048  LAW    OF    PARTNERSHIP  1428 

mine  is  basis  of  the  partnership  a  cessation  of  such  work  without 
an  agreement  to  resume  dissolves  the  relation  and  the  parties 
again  become  mere  tenants  in  common  of  the  property  owned/^ 
These  propositions,  however,  do  not  preclude  the  issuance  of 
stock  representing  the  interest  held  by  the  owners  in  different 
proportions  which  are  transferable  at  the  will  of  the  owner. 
These  associations  differ  from  joint  stock  companies  also  in  re- 
spect to  the  conduct  of  the  business.  It  does  not  require  the  con- 
sent of  all  members  of  the  partnership  as  in  joint  stock  com- 
panies, but  is  controlled  by  the  decision  of  those  owning  a  ma- 
jority of  the  shares;  but  if  these  attempt  to  exercise  powers  not 
necessary  and  proper  for  the  success  of  the  enterprise  a  minority 
may  resort  to  the  courts  for  partition  and  redress.^^  Each  mem- 
ber of  a  mining  company  is  in  a  limited  sense  the  agent  of  the 
others  by  virtue  of  their  relationship.  The  rule  as  stated  by 
Bainbridge,  page  589,  is  that  "the  limit  of  such  agency  must  be 
determined  by  the  general  usages  of  trade  applicable  to  the  par- 
ticular branch  of  industry  in  which  the  society  is  engaged.  The 
authority  of  one  partner  to  bind  another  will  in  all  cases  be  pre- 
sumed to  exist  so  far  as  by  the  general  usage  of  persons  engaged 
in  similar  pursuits  it  has  been  determined  to  be  necessary  for 
effectually  conducting  the  business.  In  the  absence  of  a  particular 
practice  established  by  usage  it  will  be  referred  to  the  general 
principle  upon  which  customs  are  founded,  viz :  whether  the  act 
can  be  considered  necessary  for  the  efficient  management  of  the 
concern."  Under  such  a  rule  it  appears  that  one  member  may 
bind  others  by  dealing  on  credit  for  the  purpose  of  working  the 
mines  if  it  is  necessary  or  usual  in  the  course  of  such  work,  hir- 
ing employes  and  purchasing  supplies;  but  he  has  no  authority  to 
borrow  money  or  bind  the  partnership  by  a  promissory  note,  and 
even  though  one  be  designated  as  managing  agent  or  managing 

92  Pac.  572;  Dale  v.  Hodge,  110  Mo.  ^s  Settembre  v.  Putnam,  30  Cal.  490 ; 

App,   317,  85    S.   W.   929;   Anaconda  Mcintosh  v.    Perkins,    13    Mont.    143, 

Copper  Min.  Co.  v.  Butte  &  Boston  32  Pac.  653. 

Min.  Co.,  17  Mont.  519,  43  Pac.  924 ;  ^^  Dougherty  v.  Creary,  30  Cal.  290, 

Bentley  v.  Brossard,  33  Utah  396,  94  89  Am.  Dec.  116. 

Pac.  736. 


1429  JOINT    STOCK    COMTANIES  §     1049 

superintendent  he  has  no  other  authority  to  bind  the  partnership 
than  such  as  is  conferred  expressly  or  by  necessary  implication 
from  his  acts  recognized  by  the  company  with  full  knowledge  of 
their  nature  and  scope,  except  upon  such  contracts  as  are  usual 
and  necessary  in  the  ordinary  prosecution  of  the  work/^  Each 
member  has  a  lien  upon  the  partnership  property  for  debts  due 
the  creditors  and  for  money  advanced  for  the  use  of  the  company 
which  he  may  enforce  in  equity  even  though  there  has  been  no 
agreement  that  such  lien  shall  not  exist/®  While  each  partner  is 
under  no  legal  obligation  to  consult  with  the  others  in  the  dis- 
posal of  his  own  interest  or  the. purchase  of  another's  Interest, 
an  incoming  partner  takes  subject  to  the  payment  of  antecedent 
partnership  debts  out  of  the  partnership  property,  though  he  may 
not  be  held  liable  personally  for  such  debts  as  in  the  case  of  an 
Incoming  member  of  a  joint  stock  company;  and  a  retiring  part- 
ner by  the  transfer  of  his  interest  parts  with  his  equitable  Hen 
upon  the  partnership  property,  but  his  personal  liability  to  exist- 
ing creditors  continues'*^  until  he  gives  them  actual  personal  no- 
tice of  his  retirement,  and  a  mere  silent  withdrawal  will  not  re- 
lieve such  partner  from  liability  in  favor  of  persons  subsequently 
dealing  with  the  partnership.®"  It  is  therefore  clear  that  while  a 
mining  partnership  differs  in  a  number  of  important  particulars 
from  a  joint  stock  company,  the  only  characteristics  that  distin- 
guish it  from  an  ordinary  commercial  partnership  are  such  as 
result  from  the  doctrine  of  delectus  personse  inherent  in  the  lat- 
ter,®^ and  it  is  of  course  competent  for  a  general  partnership  to 
be  formed  by  agreement  of  parties  for  the  purpose  of  acquiring 
and  working  mines. 

§  1049.     Legal  status. — At  common  law  all  associations  for 
commercial  profit  were  either  corporations  created  by  a  royal  char- 

^^Congdon  v.  Olds,   18  Mont.  487,         soDellapiazza    v.    Foley,    112    Cal. 

46  Pac.  261.  380,  44  Pac.  727. 

48  Childers  v.  Neely,  47  W.  Va.  70,        si  Patrick  v.  Weston,  22  Colo.  45, 
34  S.  E.  828,  49  L.  R.  A.  468,  81  Am.  43  Pac.  446. 

St.  m. 

49  Jones  V.  Clark,  42  Cal.  180. 


§     1049  LAW    OF    PARTNERSHIP  1430 

ter  or  partnerships  formed  by  the  agreement  of  the  parties  com- 
posing them.  The  corporation  usually  embraced  a  large  number 
of  persons;  the  partnership  but  few;  the  former  conducted  its 
business  through  its  officers  or  board  of  directors,  in  the  latter 
the  members  of  the  firm  as  individuals  acting  together  controlled 
all  its  affairs;  the  capital  of  the  corporation  was  represented  by 
shares  transferable  at  the  will  of  the  owner  and  the  members 
were  relieved  from  individual  liability  beyond  the  corporate  as- 
sets, that  of  the  partnership  was  not  so  transferable  and  each 
partner  was  personally  responsible  for  the  whole  of  the  partner- 
ship debts.  About  the  beginning  of  the  eighteenth  century  the 
opening  of  new  fields  of  commercial  enterprise  gave  rise  to  the 
organization  of  joint  stock  companies  partaking  of  the  nature 
of  corporations  in  the  number  of  persons  associated  and  the  trans- 
ferability of  interests,  and  of  partnerships  in  their  contractual 
character.  The  disastrous  results  of  many  speculative  enterprises 
in  which  these  companies  engaged  led  to  much  controversy  as  to 
their  status  under  the  common  law.  The  conflicting  arguments 
concerning  their  legality  at  common  law  as  stated  in  Lindley  on 
Partnership  were  in  substance  as  follows :  On  the  one  side  it  was 
contended  that  they  were  illegal  because  the  privilege  to  have 
transferable  shares  could  only  be  acquired  by  royal  charter;  and 
because  they  were  dangerous  and  mischievous  and  hence  con- 
trary to  public  policy.  To  the  first  it  was  replied  that  no  case 
could  be  found  holding  that  a  joint  stock  company  having  trans- 
ferable shares  was  illegal  at  common  law  simply  because  it  was 
unincorporated,  nor  was  such  a  claim  tenable  on  good  reason. 
For  it  is  not  illegal  for  persons,  however  numerous,  to  enter  into 
an  ordinary  contract  of  partnership;  nor  for  them  to  agree  when 
forming  such  partnership  that  any  one  of  them  may  retire  and 
introduce  in  his  place  any  person  selected  by  himself,  nor  for 
the  retiring  partner  and  his  successor  to  agree  upon  the  terms  of 
such  retirement  and  succession  provided  such  terms  are  not  in 
themselves  illegal ;  nor  for  the  membership  of  a  partnership  to 
assume  a  name  and  agree  that  its  affairs  shall  be  entrusted  to  a 
select  few  who  shall  have  power  to  make  rules  which  all  shall 


1431  JOINT    STOCK    COMPANIES  §    1049 

obey.  These  propositions  being  assented  to,  establish  the  le- 
gahty  at  common  law  of  unincorporated  joint  stock  companies 
with  transferable  shares.  The  claim  that  they  were  mischievous 
was  said  to  rest  upon  a  merely  technical  rule  of  pleading  which 
required  all  the  members  of  a  partnership  to  be  made  defendants 
in  an  action  against  the  firm.  But  a  contract  which  imposes  a 
liability  upon  a  large  number  of  persons  is  not  invalid  for  that 
reason  alone,  and  the  rule  of  pleading  which  causes  inconvenience 
in  the  enforcement  of  the  contract  should  yield.^^  These  argu- 
ments in  favor  of  their  legality  prevailed  and,  though  some  ad- 
verse laws  were  enacted,  legislation  concerning  joint  stock  com- 
panies assumed  the  form  of  measures  declaratory  of  their  power 
and  liabilities,  and  recognizing  them  as  legal.  The  culmination 
of  such  legislation  was  reached  in  the  Companies  Act  of  1862, 
which,  with  its  amendments,  constitutes  a  complete  system  of 
laws  upon  this  subject  and  as  incorporation  in  England  is  difficult 
and  expensive,  unincorporated  joint  stock  companies  are  a  very 
common  form  of  commercial  associations.  In  this  country  joint 
stock  companies  are  less  frequently  found,  as  the  provisions  for 
incorporation  under  general  laws  are  such  that  parties  may 
readily  comply  therewith  and  for  the  additional  reason  that  lim- 
ited partnerships  may  be  formed  so  as  to  protect  from  indefinite 
loss.  A  joint  stock  company  can  not  by  its  articles  of  association 
limit  its  own  liabilities  or  those  of  its  members  to  the  rest  of  the 
world  and  become  a  corporation  or  a  limited  partnership  by  its 
own  act  and  without  regard  to  the  formalities  of  the  law,  for 
the  articles  being  a  contract  their  terms  can  bind  only  parties 
thereto.  These  associations  are  as  a  general  rule  considered  as 
being  in  the  nature  of  partnerships  and  in  the  absence  of  express 
provisions  are,  in  the  main,  governed  by  the  same  rules  and  prin- 
ciples which  regulate  ordinary  general  partnerships,^^  unless  by 

52  Lindley     Partnership     (2d     Eng.  Edwards  v.  Warren  Linoline  Works, 
ed.),  pp.  189-198.  168  Mass.  564,  47   N.   E.  502,  38  L. 

53  Clagett    V.    Kilbourne,    1     Black  R.   A.  791 ;   Butterfield  v.   Beardsley, 
(U.  S.)   346,  17  L.  ed.  213 ;  Bullard  28  Mich.  412 ;  McFadden  v.  Leeka,  48 
V.  Kinney,  10  Cal.  60;  Wadsworth  v.  Ohio  St.  513,  28  N.  E.  874. 
Duncan,   164  111.  360,  45  N.  E.   132; 

40 — Row.  ON  Partn. — Vol.  2 


§    1049  LAW    OF    TARTNERSITIP  1432 

compliance  with  statutes  regulating  the  formation  of  limited  part- 
nerships they  bring  themselves  clearly  within  this  class.  Their 
common-law  character  and  status  is  generally  recognized  since 
there  can  be  no  wrong  to  the  public  resulting  from  it,  and  as  to 
the  shareholders  if  they  choose  to  purchase  stock  in  a  partner- 
ship with  unlimited  personal  liability  this  is  a  privilege  with 
which  the  law  will  not  interfere. °*  A  voluntary  unincorporated 
association  of  individuals  for  pecuniary  profit,  whose  propor- 
tions of  ownership  in  the  assets  are  represented  by  certificates 
similar  to  issues  of  corporate  stock,  is  a  partnership  notwithstand- 
ing a  rule  limiting  the  distribution  of  profits  among  the  certifi- 
cate holders  to  a  certain  per  cent.,  and  such  rule  can  not  have  the 
effect  to  relieve  the  shareholders  from  any  part  of  their  partner- 
ship liability  to  the  firm's  creditors. ^^  Where  a  development  cor- 
poration organized  not  for  profit  but  to  aid  in  the  development 
of  a  city  was  not  authorized  to  purchase  land  to  be  sold  and  used 
as  a  bonus  to  induce  the  location  of  manufacturing  industries, 
the  members  of  the  association  formed  among  themselves  a  syn- 
dicate to  hold  title  to  such  property  through  a  trustee  and  to  use, 
improve  and  dispose  of  the  lands  for  the  development  of  the  city 
and  to  provide  a  fund  to  secure  the  location  of  a  factory,  and 
upon  the  failure  of  the  latter  purpose  the  land  was  sold  to  a 
Chautauqua  association  and  to  a  corporation  owning  adjoining 
property  from  which  the  subscribers  realized  a  profit,  it  was  held 
that  the  formation  of  the  syndicate  was  not  contrary  to  public 
policy,  that  its  purpose  was  not  limited  to  the  establishment  of 
manufacturing  industries  by  making  donations  of  land,  but  it  had 
the  power  to  use  its  assets  generally  for  the  improvement  of  the 
city  and  that  the  members  of  the  syndicate  were  partners.^^  So 
where  members   of  an   unincorporated   joint   stock   association 

54  Phillips  V.  Blatchford,  137  Mass.  sg  Donald  v.  Guy,  127  Fed..  228 ; 
510.  Hossack     v.     Ottawa      Development 

55  Ashley  v.  Dowling,  203  Mass.  311,  Assn.,  244  111.  274,  91  N.  E.  439;  Bal- 
89  N.  E.  434,  133  Am.  St.  296;  Sheble  timore  Trust  &c.  Co.  v.  Hambleton, 
V.  Strong,  128  Pa.  St.  315,  18  Atl.  84  Md.  456,  36  Atl.  597,  40  L.  R.  A. 
397;    Eliot   v.   Himrod,    108    Pa.    St.  216. 

569 


1433  JOINT    STOCK    COMPANIES  §     1050 

embarked  in  a  common  undertaking  for  their  common  profit 
which  was  sustained  and  agreed  to  be  sustained  by  money  ad- 
vanced by  each,  their  relation  is  such  as  to  justify  a  court  of 
equity,  in  order  to  settle  their  dispute  respecting  the  distribution 
of  a  common  fund,  to  treat  them  as  partners."  Where  one 
hundred  and  seven  persons  had  united  in  an  association  for  the 
purpose  of  carrying  on  a  co-operative  store  and  the  articles  of  as- 
sociation provided  that  the  business  should  be  managed  by  a  board 
of  directors,  a  president,  a  vice-president  and  a  managing  agent, 
and  that  no  goods  should  be  bought  or  sold  on  credit,  a  suit  was 
brought  against  all  the  members  of  the  association  upon  a  prom- 
issory note  signed  by  the  managing  agent  as  such  agent.  Certain 
defendants  claimed  that  the  note  given  was  for  goods  bought  on 
credit  in  violation  of  the  articles  of  association,  and  that  if  judg- 
ment was  recovered  execution  should  first  be  directed  against  the 
'property  of  the  directors.  It  was  held  that  the  relation  of  de- 
fendants was  that  of  partners  and  the  violation  of  the  articles  of 
association  was  no  defense  to  the  plaintiff's  claim. ^^ 

§  1050.  Taxation. — A  joint  stock  company  created  solely 
by  agreement  of  the  members  and  in  which  their  individual  rights 
and  liabilities  are  not  merged  as  in  the  case  of  a  corporation,  is 
not  taxable  on  its  capital  as  a  stock  corporation,^^  unless  such 
association  is  expressly  included  in  the  statute.''*^  The  members 
are  taxable  as  partners,  and  their  shares  are  not  subject  to  taxa- 
tion under  a  statute  as  "stocks  in  a  moneyed  corporation.""^  The 
personal  property  of  such  company  is  liable  to  taxation  in  the  place 
where  its  business  is  conducted  and  not,  ordinarily,  elsewhere ;"" 
but  it  has  been  held  that  such  an  association  may  be  taxed  for 
doing  business  in  a  state  other  than  that  where  it  was  organized, 
under  a  statute  imposing  a  tax  on  foreign  corporations  doing  busi- 

"  Butterfield  v.  Beardsley,  28  Mich.  ^"  People    v.    Coleman,    133    N.    Y. 

412 ;  citing  3  Kent  Commentaries,  p.  279.  31  N.  E.  96,  16  L.  R.  A.  183. 

26;    Story    Partnership,    §§    76,    164,  eo  People  v.  Wemple,  117  N.  Y.  136, 

213 ;  Brown  v.  Oilman,  4  Wheat   (U.  6  L.  R.  A.  303. 

S.)  255,  4  L.  ed.  564.  "  Hoadley  v.  Essex,  105  Mass.  519. 

58  Manning  v.  Gasharie,  27  Ind.  399.  ^'-  Hoadley  v.  Essex,  105  Mass.  519. 


§     1051  LAW    OF    PARTNERSHIP  1434 

ness  within  the  state."^  Where  the  stock  of  such  company  has  been 
taxed  once  to  the  company  under  the  provisions  of  a  statute,  a 
shareholder  can  not  be  taxed  with  so  much  of  it  as  he  owns  in- 
dividually.^^ 

§  1051.  Statutory  provisions. — In  many  of  the  states  laws 
have  been  enacted  providing  for  the  organization  of  joint  stock 
companies,  defining  their  powers  and  li-abilities.  The  purpose 
and  effect  of  compliance  with  these  statutes  is  that  the  associa- 
tions so  formed  retain  their  character  as  partnerships  though 
they  become  vested  with  some  of  the  powers  and  incidents  of 
corporations,^*'  such  as  perpetual  succession ;  an  artificial  name  in 
which  they  may  make  contracts,  and  take  and  hold  real  estate; 
a  right  to  sue  and  be  sued  in  such  name  or  the  name  of  an  officer, 
and  in  some  cases  to  have  and  use  a  common  seal.*'^  They  are 
usually  described  in  such  statutes  as  "partnership  associations" 
or  "partnership  associations  limited,"  and  are  uniformly  held 
not  to  be  true  corporations  but  rather  in  the  nature  of  partner- 
ships, notwithstanding  their  similarity  in  some  respects  to  the 
former.  In  some  states  constitutional  limitations  preclude  the 
organization  of  a  joint  stock  company  by  a  special  act  of  the 
legislature  conferring  any  powers  or  privileges  not  possessed  by 
individuals  or  partnerships,  and  unless  organized  under  the  gen- 
eral law  of  corporations  the  common-law  rule  of  liability  of  mem- 
bers prevails.^®  These  statutes  usually  fix  the  minimum  number 
of  members  varying  from  three  to  seven;  provide  for  the  trans- 
fer of  shares  and  the  succession  of  the  transferee  to  membership 
and  for  the  management  of  the  business;  prescribe  the  manner 
in  which  the  company  may  sue  and  be  sued;  authorize  the  use 

63  Liverpool  &c.  L.  &c.  Ins.  Co.  v.  ter  v.  Producers  Oil  Co.,  200  Pa.  St. 

Oliver,   10  Wall.   (U.  S.)   566,   19  L.  579,  50  Atl.  167. 

ed.  1029.  "Van  Aernam  v.  Blustein,  102  N. 

65  State  V.  Simmons,  70  Miss.  485,  Y.  355,  7  N.  E.  537,  2  N.  Y.  St.  470. 
12  So.  477.  68  Sandford    v.    Supervisors  of   N. 

66  People  v.  Coleman,  133  N.  Y.  Y.,  15  How.  Pr.  (N.  Y.)  172;  Spots- 
279,  31  N.  E.  96,  16  L.  R.  A.  183;  wood  v.  Morris,  12  Idaho  360,  85  Pac. 
Waterbury  v.  Merchants'  Union  Ex-  1094. 

press  Co.,  50  Barb.  (N.  Y.)  157;  Car- 


1435  JOINT    STOCK    COMPANIES  §    1051 

of  a  common  seal  in  executing  deeds,  bonds  and  other  instru- 
ments; and  confer  such  other  powers  and  impose  such  hmita- 
tions  as  may  be  lawful.  In  general  they  require  the  articles 
of  association  to  be  made  a  matter  of  public  record,  and  also  a 
statement  showing  the  name  of  the  company,  the  character  and 
location  of  the  business,  the  names  of  the  members,  the  amount 
of  the  capital  stock,  the  shares  held  by  each  member,  and  such 
other  facts  as  are  necessary  to  disclose  the  nature  of  the  or- 
ganization. It  is  provided  that  the  capital  shall  be  paid  in  cash 
or  property,  and  where  property  is  contributed  as  a  part  of  the 
capital  there  must  be  filed  with  the  articles  of  association  or  as 
a  part  of  the  same,  a  schedule  containing  the  names  of  those  so 
contributing  with  a  description  of  such  property  and  a  bona  fide 
valuation  upon  it  approved  by  all  the  subscribing  members.  The 
statement  must  enable  parties  to  readily  ascertain  the  kind, 
amount  and  value  of  property  contributed  and  the  terms  tipon 
which  the  association  is  formed.®*^  In  case  of  an  omission  of  a 
schedule  of  the  property  contributed  by  the  original  subscribers, 
the  contributions  can  not  be  treated  as  payments  of  capital  stock 
so  as  to  relieve  such  subscribers  from  personal  liability  to  cred- 
itors ;  and  a  false  statement  will  render  them  liable  for  fraud  and 
enable  a  subsequent  purchaser  of  stock  to  tender  a  return  of  the 
stock  and  recover  the  money  paid  for  it.^''  One  dealing  with  in- 
dividuals as  a  partnership  association  limited  is  not  estopped 
from  denying  its  existence  because  of  the  failure  to  record  the 
articles  of  association  and  may  sue  the  individuals  for  fraud  in 
inducing  him  to  subscribe  and  pay  for  stock.'^^     Another  usual 

69  Stradley  v.  Cargill  Elevator  Co.,  v.   Steytler,   146  Pa.   St.  434,  23  Atl. 

135  Mich.  367,  97  N.  W.  775;  Robins  215,  14  L.  R.  A.  690;  Appeal  of  Hite 

Electric    Co.   v.   Weber,    172    Pa.    St.  Natural  Gas  Co.,  118  Pa.  St.  436,  12 

635,  34  Atl.  116;  Haslet  v.  Kent,  160  ^  M,  267;  Appeal  of  American  Tube 

Pa.  St.  79,  28  Atl.  501.  u  Iron  Co.,  118  Pa.  St.  436,  12  Atl. 

'■o  Macomber  V.  Endion  Grape  Juice  267;    Maloney   v.    Bruce,   94    Pa.    St. 

Co.,  160  Mich.  54,  125  N.  W.  26 ;  Has-  249. 

let  V.  Kent,  160  Pa.  St.  85,  28  Atl.  501 ;  ^i  Elgin  Nat.  Watch  Co.  v.  Love- 
Gearing  V.  Carroll,  151  Pa.  St.  79,  24  land,  132  Fed.  41 ;  Nichols  v.  Buel, 
Atl.  1045;  Laflin  &  Rand  Powder  Co.  157  Mich.  609,  122  N.  W.  217;  Doyle 


§     1052  LAW    OF    TARTNERSHIP  1436 

statutory  provision  forbids  the  incurring  of  debts  on  behalf  of 
the  association  in  excess  of  a  sum  named  in  the  statute  unless 
reduced  to  writing  and  signed  by  at  least  two  managers.  An 
agreement  not  conforming  to  this  requirement  is  a  nulHty  and 
not  binding  on  either  party."  Under  these  statutes  the  personal 
liability  of  members  for  the  debts  of  the  association  can  not  be 
enforced  until  the  assets  of  the  company  are  exhausted"  and 
usually  extends  only  to  the  amount  of  unpaid  subscriptions.  In 
all  matters  pertaining  to  the  organization,  powers  and  liabilities 
of  such  an  association  and  its  members,  the  statutory  provisions 
of  the  state  where  it  is  organized  will  receive  full  recognition  in 
the  courts  of  other  states,  but  the  rules  of  procedure  in  cases  to 
which  it  is  a  party  must  be  determined  by  the  law  of  the  state 
where  the  action  is  brought.^*  The  constitutional  and  statutory 
provisions  above  referred  to  frequently  use  the  term  "corpora- 
tions" as  embracing  voluntary  associations  and  joint  stock  com- 
panies and  hence  the  courts  sometimes  speak  of  them  as  quasi 
corporations  partaking  of  the  nature  of  limited  partnerships,^^ 
but  it  seems  that  such  provisions  do  not  warrant  the  recognition 
of  any  intermediate  form  of  organization  between  a  corporation 
and  a  partnership  and  the  legal  status  of  such  associations  is 
not  materially  changed.  They  are  still  essentially  partnerships, 
though  limited.'^^ 

§  1052. — Articles  of  association  or  constitution  and  by-laws. 

— The  articles  of  association  are  on  the  one  hand  like  articles  of 
partnership,  creating  by  agreement  a  relation  between  the  par- 
ties giving  rise  to  legal  obligations  to  others  which  are  necessary 

V.  Mizner,  42  Mich.  332,  3  N.  W.  968;  74  Story  Conflict  of  Laws,   §§  556, 

Fredenburg    v.    Lyon    Lake    M.    E.  568,  and  cases  there  cited. 

Church,  Zl  Mich.  476.  "  Briar    Hill    Coal    Co.     v.     Atlas 

72  Dickinson    v.    Matheson    Motor  Works,  146  Pa.  St.  290. 

Car  Co.,  161  Fed.  874 ;  Hoyt  v.  Paw  ^g  Davison  v.  Holden,  55  Conn.  103, 

Paw  Grape  Juice  Co.,  158  Mich.  619,  10  Atl.  515,  3  Am.  St.  40;  People  v. 

123  N.  W.  529,  Empire    Insurance   Co.,    88   111.    309; 

73  Bastrop  and  Austin  Bayou  Rice  Ricker  v.  American  Loan  &  Trust  Co., 
Growers'     Assn.    v.     Cochran    (Tex.  140  Mass.  346,  5  N.  E.  284. 

Civ.  App.),  171  S.  W.  294. 


1437  JOINT    STOCK    COMPANIES  §    1052 

incidents  to  the  relation ;  and  on  the  other  hand  like  the  charter 
of  a  corporation  in  the  provisions  made  for  the  conduct  of  the 
business.  They  regulate  the  rights,  duties  and  obligations  of  the 
members  among  themselves,  specify  the  amount  of  capital  and 
the  character  of  the  contributions  thereto,  limit  the  duration  and 
define  the  business  of  the  association,  provide  for  its  internal 
organization,  prescribe  and  define  the  duties  and  powers  of  the 
officers,  and  as  touching  all  matters  of  this  character  are  conclu- 
sive upon  the  members.''^  They  may  limit  the  liability  to  be  as- 
sumed by  the  association,  provide  that  officers  shall  not  dispose  of 
any  property  of  the  association  without  concurrence  of  share- 
holders;^^ and  being  in  the  nature  of  a  contract  no  change  can 
be  made  in  them  without  the  unanimous  consent  of  the  share- 
holders/^ They  must  therefore  be  executed  or  assented  to  by 
all  the  original  members  and  a  subsequent  purchaser  of  shares  is 
bound  to  know  their  provisions  and  by  his  admission  to  member- 
ship in  the  association  becomes  a  party  thereto  acquiring  the 
rights  and  assuming  the  duties  and  obligations  created  by  them.^'' 
The  statements  in  these  articles  of  the  intention  of  the  parties  as 
to  the  legal  character  of  the  association  and  the  legal  liabilities 
which  they  intend  to  assume  as  members  are  not  conclusive/"'- 
but  the  courts  will  construe  the  articles  themselves  and  determine 
the  legal  effect.^"  The  agreement  of  the  parties  is  often  expressed 
in  the  form  of  a  constitution  and  by-laws,  the  former  being  the 
fundamental  or  primary  agreement  expressed  in  comprehensive 
terms  to  which  the  latter  are  In  a  certain  sense  auxiliary,  pro- 
viding specific  means  for  giving  effect  to  the  agreement.     It  is 

77  Bray  v.  Farwell,  81  N.  Y.  600.  94  Pac.  320.    "The  court  in  determin- 

78  Spotswood  V.  Morris,  12  Idaho  ing  whether  a  trust  or  a  partnership 
360,  85  Pac.  1094,  6  L.  R.  A.  (N.  S.)  was  created  (by  the  articles  of  agree- 
665.  ment)    will  consider  what  the  parties 

79  Livingston  v.  Lynch,  4  Johns.  Ch.  did,  and  will  not  consider  what  they 
(N.  Y.)-573.  intended    to    do,    unless    there    is    a 

80  Logan  V.  McNaugher,  88  Pa.  St.  doubt  as  to  what  they  did."  Williams 
'103.  V.    Milton,   215    Mass.    1,    102    N.    E. 

81  Beecher  v.  Bush,  45  Mich.  188,  355,  where  will  be  found  a  full  re- 
7  N.  W.  785,  40  Am.  Rep.  465.  view  of  Massachusetts  decisions. 

82  Strang  v.  Osborne,  42  Colo.  187, 


§     1053  LAW    OF    PARTNERSHIP  1438 

possible  for  the  constitution  which  has  the  unanimous  consent  of 
the  members  to  provide  for  the  exercise  of  powers  by  a  certain 
portion  of  the  membership  or  by  certain  officers,  if  such  provision 
does  not  conflict  with  any  estabhshed  rule  of  law.  The  courts 
have  declared  valid  provisions  for  the  election  of  directors  to  fill 
vacancies  by  the  board  of  directors  and  authorizing  an  election 
of  directors  by  the  stockholders  only  on  petition  therefor  signed 
by  the  holders  of  two-thirds  of  the  stock,  though  they  make  the 
board  a  self-perpetuating  body,  on  the  ground  that  they  tend  to 
secure  stability  in  the  management.*^ 

§  1053.  Membership  and  its  incidents. — When  a  question 
arises  as  to  what  constitutes  membership  in  a  joint  stock  com- 
pany it  must  be  referred  to  the  general  principles  of  partnership 
as  applied  to  the  agreement  or  relation  of  the  parties,  or  to  the 
terms  of  the  articles  themselves,  or  to  such  local  statutory  pro- 
visions as  may  exist  in  reference  to  the  organization.  Subscrib- 
ing to  the  capital  of  an  intended  company  and  even  a  payment 
of  the  first  deposit  does  not  of  itself  constitute  one  a  member  of 
a  partnership.®*  For  it  is  evident  that  when  the  first  subscriber 
signs  his  name  he  is  not  a  partner,  for  there  is  no  other  who  has 
entered  into  the  relation  with  him;  and  when  any  number  have 
so  signed,  the  relation  of  partnership  is  not  formed  until  some- 
thing is  done  to  effect  their  common  purpose.  The  contract  is 
only  executory  and  the  relation  of  partnership  is  not  established 
until  the  parties  show  the  fact  by  acts  of  mutual  participation  in 
the  undertaking.^^  And  as  the  formation  of  a  joint  stock  com- 
pany requires  a  number  of  acts  before  the  partnership  is  actually 
commenced,  such  as  publishing  notices,  holding  meetings,  paying 
deposits,  issuing  certificates,  many  acts  are  done  before  the  full 
number  of  subscribers  has  been  secured;  and  they  merely  show 
an  intention  to  form  an  association  or  at  most  are  but  steps  to- 
ward its  formation.  If,  however,  one  takes  part  in  the  transac- 
ts Spraker  V.  Piatt,  158  App.  Div.  S4  Parsons  Contracts,  ch.  11,  p.  144, 
377,  143  N.  Y.  S.  440.  and  cases  there  cited. 

85  Hedge's  Appeal,  63  Pa.  St.  273. 


1439  JOINT    STOCK    COMPANIES  §    1053 

tion  of  the  business  of  the  company,  acts  and  is  treated  by  his  as- 
sociates as  a  member,  he  is  at  common  law  to  all  intents  and 
purposes  a  memoer,  although  he  may  not  have  complied  with  the 
terms  of  the  constitution  as  by  signing  it.^°  Since  an  organization 
under  statutory  provisions  can  not  be  complete  until  all  require- 
ments have  been  complied  with,  no  valid  association  is  created 
and  there  can  be  no  membership  until  the  statutory  conditions 
are  met.  When  such  acts  are  complete  the}^  can  of  course  bind 
only  those  who  have  consented  by  participation  in  them.  So 
far  as  the  other  parties  to  the  enterprise  are  concerned,  signing 
the  subscription  to  capital  stock  may  make  one  a  partner,*^'  and 
every  subscriber  or  contributor  with  intent  to  share  in  the  profits 
is  chargeable  with  the  liabilities,  and  this  intent  may  be  shown 
by  an  unexplained  subscription  or  contribution,  serving  on  board 
of  directors,  or  taking  part  in  business  transacted  in  meetings  of 
the  company.*^  The  foregoing  statements  apply  with  especial 
force  to  original  membership.  The  relation  of  subsequent  pur- 
chasers of  stock  may  be  subject  to  other  conditions  expressed  in 
the  terms  of  the  certificate  issued  and  of  the  articles  of  associa- 
tion. Where  the  certificate  recites  that  by  its  acceptance  the 
holder  becomes  a  member  subject  to  the  terms  of  the  articles  and 
amendments  thereto,  a  purchaser  and  the  shares  so  purchased  are 
subject  to  such  provisions  as  if  he  were  one  of  the  original  meni- 
bers.^^  Where  persons  organized  a  co-operative  store,  the  shares 
of  each  being  represented  by  stock,  it  was  held  that  payment  for 
stock  made  the  purchaser  a  partner  though  he  never  received  a 
certificate,  nor  attended  a  meeting  of  the  association,  nor  had 
knowledge  of  the  firm's  business,  such  payment  being  a  sufficient 
participation  in  the  company's  affairs  to  indicate  his  assent 
thereto.^*  And  one  may,  by  holding  himself  out  as  a  member 
and  receiving  benefits  flowing  from  the  ownership  of  shares, 

S6  Tyrrell   v.    Washburn,    88    Mass.         ^^  Hunnewell     v.     Willow     Springs 
466.  Canning  Co.,  53  Mo.  App.  245. 

87  Frost  V.  Walker,  60  Maine  468;         89  Spraker  v.   Piatt,   158  App.   Div. 
Boston  &  Albany  R.  Co.  v.  Pearson,     577,  143  N.  Y.  S.  440. 
128  Mass.  445.  so  Ashley    v.    Bowling,    203    Mass. 

311,  89  N.  E.  434. 


§     1053  LAW    OF    PARTNERSHIP  1440 

make  himself  liable  for  debts  though  the  formalities  required  to 
entitle  him  to  the  rights  and  privileges  of  membership  have  not 
been  observed.  Membership  imposes  upon  the  shareholders  a 
personal  liability  as  partners  for  the  debts  of  the  association, 
either  general  or  as  limited  by  statute,  except  when  there  is  an 
agreement  with  the  creditor  for  payment  from  a  particular 
fund''^  or  the  contracts  are  drawn  so  as  to  confine  liability  to 
the  assets  of  the  association  and  thus  create  the  same  situation 
as  to  their  rights  and  liabilities  thereunder  as  if  the  joint  stock 
association  were  a  corporation  and  its  members  were  stock- 
holders.^" A  member,  therefore,  in  the  absence  of  such  limita- 
tions, paying  a  company  debt,  pays  his  own  debt  and  can  not,  by 
taking  an  assignment  to  himself,  keep  a  lien  alive,'*^  nor  make  a 
profit.^*  The  indebtedness  of  the  company  is  as  between  the 
members  chargeable  pro  rata  to  the  solvent  members^^  and  those 
paying  the  entire  indebtedness  or  amounts  in  excess  of  their  pro- 
portionate share  are  entitled  to  contribution  by  their  associates. 
Members  are,  with  the  association,  bound  by  the  acts  of  the  offi- 
cers within  the  scope  of  their  authority,^®  but  they  are  not  per- 
sonally liable  for  tortious  acts  of  the  company  or  its  officers  unless 
they  participate  in  them.*^^  Where  an  association  of  persons  hav- 
ing negotiable  shares  purchased  property  and  the  deed  was  sub- 
sequently canceled  for  fraud,  and  an  accounting  to  the  grantor 
for  the  proceeds  of  a  portion  sold  was  decreed,  all  members  at 
the  times  of  such  sales  are  such  participants  as  to  be  liable  as 
partners. ^^  The  mutual  dealings  of  the  members  are  subject  to 
close  scrutiny  by  the  courts  and  their  interests  are  carefully  pro- 
tected.   Though  each  is  bound  by  the  terms  of  the  articles  of  as- 

91  McDowell  V.  Joice,    149  III.   124,~     ^^  Cameron     v.     First     Nat.     Bank 

36  N.  E.  1012;   Baltimore  Trust  Co.  (Tex.  Civ.  App.),  34  S.  W.  178. 

V.  Hambleton,  84  Md.  456,  36  Atl.  597,  ^^  Wadsworth    v.    Duncan,    164    111. 

40  L.  R.  A.  216.  360,  45  N.  E.  132 ;  Lewis  v.  Tilton,  64 

02Hibbs   V.   Brown,    112  App.   Div.  Iowa  220,    19   N.   W.   911;    Laney  v. 

214,  98  N.  Y.  S.  353.  Fickel,  83  Mo.  App.  60. 

93  Hardy  v.   Norfolk  Mfg.   Co.,  80  ^nVhitney  v.   Backus,   149  Pa.   St. 

Va.    404.     But    see    Romona    Oolitic  29,  24  Atl.  51. 

Stone  Co.  v.  Bolger,  179  Fed.  979.  ss  Snow  v.  Hizeland,  179  Fed.  182, 

e*  Coleman  v.  Coleman,  78  Ind.  344.  102  C.  C.  A.  448. 


1441  JOINT    STOCK    COMPANIES  §     1053 

sociation  and  by-laws  he  is  not  precluded  from  enforcing  against 
his  co-members  a  just  claim.^^  An  action  at  law  can  not  be  main- 
tained by  a  member  against  others  in  respect  to  their  mutual 
rights,  but  adjustment  being  sought  in  a  court  of  equity  an  ac- 
counting or  other  relief  will  be  decreed  when  the  affairs  of  the 
company  require  it/  In  respect  to  dealings  between  the  company 
and  the  members  there  is  authority  for  the  statement  that  the 
company  can  contract  as  an  "individualized  and  tmified  party" 
with  an  individual  member  thereof  as  effectually  as  a  corporation 
can  contract  with  one  of  its  stockholders,  and  that  the  only  dif- 
ference is  a  technical  one  of  procedure."  It  is  plain  that  such 
companies  have  some  of  the  powers  and  privileges  of  corpora- 
tions and  that  the  tendency  of  statutory  regulations  is  to  confer 
upon  them  more  of  the  character  of  incorporated  bodies.^  They 
can  not,  however,  by  their  power  to  contract  with  members,  con- 
fer upon  a  shareholder  or  any  particular  class  of  shareholders 
an  advantage  over  others  in  the  distribution  of  profits  and  as- 
sets.* A  member  who  sells  property  to  the  association  at  cur- 
rent market  prices  is  not  required  to  account  for  profits  on  such 
sale ;  and  one  who  makes  advances  for  the  company  beyond  his 
agreed  contribution  is  entitled  to  interest  at  the  legal  rate.^  It 
is  the  right  of  such  shareholder  to  be  informed  of  the  condition 
of  the  company  affairs  and  he  may  obtain  authority  from  a  court 
of  equity  to  inspect  the  books  and  records  of  the  association 
when  such  examination  is  necessary  and  for  a  proper  purpose.*^ 
The  articles  of  association  or  rules  adopted  in  pursuance  of  them 
may  provide  for  the  levy  of  assessments  upon  the  shares  of  the 
members  for  purposes  necessary  for  the  proper  conduct  of  the 

59  McCarty  v.   Caledonia  Coal  Co.,  ^  Westcott  v.  Fargo,  61  N.  Y.  542, 

164  Mich.  692,  130  N.  W.  207.  19  Am.  Rep.  300. 

1  Hogg  V.  Hoag,   154  Fed.  1003,  83  *  Gardiner   v.    Gardiner,   212    Mass. 
C.  C.  A.  677;  Smith  v.  Fagan,  17  Cal.  508,  99  N.  E.  171. 

178;  Clark  v.  Reed,  11  Pick.  (Mass.)  =  Mack  v.  Engle,  165  Mich.  540,  131 

446 ;  Marston  v.  Durgin.  54  N.  H.  347 ;  N.  W.  92. 

Carter  v.  Producers  Oil  Co.,  164  Pa.  ^  in  re  Hatt,  57  Misc.  320,  108  N. 

St.  463,  30  Atl.  391.  Y.  S.  468. 

2  Walker  v.  Wait,  50  Vt.  668. 


§     1054  LAW    OF    PARTNERSHIP  1442 

business  and  the  collection  of  assessments  will  be  enforced,  but 
no  levy  can  be  made  before  the  entire  stock  is  taken  unless  the 
articles  expressly  provide  for  it/  It  may  be  stated  as  a  general 
principle  the  membership  involves  an  observance  of  all  rules 
and  regulations  legally  adopted  by  the  association,  for  to  these 
each  has  necessarily  assented  and  can  claim  no  right  or  be  sub- 
jected to  burdens  which  do  not  flow  from  his  agreement.  Mem- 
bership may  be  terminated  by  withdrawal  in  the  manner  pre- 
scribed by  the  articles  of  association.  Where  such  articles  pro- 
vided that  "the  by-laws  can  be  amended  only  by  a  two-thirds 
tiiajority  of  all  the  stock  held,"  no  member  or  members  holding 
a  less  amount  of  stock  could  withdraw  while  continuing  to  hold 
his  interest  in  the  property  which  the  company  was  organized  to 
manage,  for  this  would  abrogate  or  amend  the  articles  in  direct 
violation  of  their  provisions.^  The  sale  of  his  stock  by  a  mem- 
ber and  a  withdrawal  as  allowed  by  the  by-laws,  though  he  has 
been  unable  after  repeated  efforts  to  obtain  a  transfer  of  the 
stock  on  the  books  of  the  association,  relieves  of  all  liability  to 
other  members  by  virtue  of  their  membership  relation,  and  to  per- 
sons dealing  with  the  association  thereafter  to  whom  his  former 
connection  with  it  was  not  known  at  the  time  of  such  transac- 
tion.° 

§  1054.     Organization — Meetings  and  elections. — For  the 

complete  organization  of  the  company  provision  must  be  made 
for  meetings  of  stockholders,  the  election  of  officers  and  the 
transaction  of  the  business.  Where  these  matters  are  regulated 
by  statute  it  is  generally  provided  that  an  annual  meeting  shall 
be  held  at  such  time  and  place  as  the  by-laws  may  direct,"  and 
that  the  officers  shall  be  chosen  at  such  meetings  by  a  vote  of  the 
stockholders.  This  provision  does  not  govern  the  choice  of  the 
first  set  of  officers  whose  election  immediately  upon  the  forma- 

7  Bray  v.  Farwell,  81  N.  Y.  600.  lo  Stradley  v.  Cargill  Elevator  Co., 

8  Strang  v.   Osborne,  42   Colo.   187,  135  Mich.  367,  97  N.  W.  775 ;  Wells  v. 
94  Pac.  320.  Rodgers,  60  Mich.  525,  27  N.  W.  671 ; 

9  Norwood  V.  Francis,  25  App.  D.  Jennings   v.   Beale,   146   Pa.    St.    125, 
C  463.  27>  Atl.  225 ;  Consult  state  statutes. 


1443  JOINT    STOCK    COMPANIES  §     1055 

tion  of  the  company  is  necessary,  but  it  applies  to  all  subsequent 
elections/^  Personal  notice  in  writing  to  the  members  of  the 
time  and  place  of  such  meeting  is  required  unless  some  other 
method  is  provided  in  the  articles  or  by-laws, ^^  and  an  election 
can  not  be  legally  held  without  the  meeting  or  at  least  notice  to  all 
shareholders/^  The  law  presumes,  in  the  absence  of  any  proof 
to  the  contrary,  that  the  proper  notice  was  given,  when  a  quorum 
are  present  at  the  meeting;^*  and  the  mere  fact  that  all  of  the 
members  of  the  board  of  managers  are  not  present  at  a  special 
board  meeting  does  not  raise  a  presumption  that  the  meeting  was 
irregular/^  A  statute  securing  to  a  minority  of  the  stockholders 
of  a  corporation  the  power  to  elect  a  representative  in  the  board 
of  directors,  and  providing  for  cumulative  voting  of  stock,  is 
not  applicable  to  an  election  of  managers  of  a  joint  stock  com- 
pany, unless  it  is  made  so  in  terms.^*'  The  articles  of  association 
may  also  declare  who  may  be  eligible  to  the  offices^^  and  the  elec- 
tion of  persons  who  have  not  the  prescribed  qualifications  may 
justify  a  decree  declaring  the  election  void/^  Directors'  meet- 
ings and  special  meetings  may  be  held  at  such  times  and  upon 
such  conditions,  and  may  exercise  such  powers,  as  the  rules  of  the 
company  may  provide.  A  holder  of  shares  has  the  right  to  em- 
power, by  proxy  or  otherwise,  another  subscriber  to  cast  his  vote 
at  an  election  to  fill  a  vacancy  in  the  board  of  directors,  and  no 
statutory  authority  is  necessary/'' 

§  1055.     Capital  stock — Issue  and  transfer  of  certificates. — 

The  capital  stock  may  consist  of  contributions  of  cash  or  of  prop- 

1^  Boston  Acid  Mfg.  Co.  v.  Moring,  is  Stradley  v.  Cargill  Elevator  Co., 

81  Mass.  211.  135  Mich.  367,  97  N.  W.  775. 

12  Wiggin  V.  First  Freewill  Baptist  ^^  Attorney-General     v.     McVichie, 
Church  in  Lowell,     49     Mass.     301 ;  138  Mich.  387,  101  N.  W.  552. 
Stradley  v.  Cargill  Elevator  Co.,  135  i7  Dudley   v.    Piatt,    118    N.    Y.    S. 
Mich.  367,  97  N.  W.  775;   Irvine  v.  1058. 

Forbes,  11  Barb.  (N.  Y.)  587.  is  Spraker  v.  Piatt,  158  App.  Div. 

13  Irvine   v.    Forbes,    11    Barb.    (N.     Ill,    143    N.    Y.    S.    440;    People    v. 
Y.)  587.  Koring,  133  App.  Div.  756,  118  N.  Y. 

1*  Wells  V.  Rodgers,  60  Mich.  525,     S.  136. 
27  N.  W.  671.  19  Spraker  v.   Piatt,   158  App.  Div. 

Zn,  143  N.  Y.  S.  440. 


§    1055  LAW    OF    PARTNERSHIP  1444 

erty  at  a  fair  and  reasonable  valuation,  and  in  the  absence  of 
fraud  an  excessive  valuation  does  not  vitiate  the  organization,^" 
but  the  property  must  not  be  subject  to  indebtedness  or  liens,  for 
the  schedule  of  assets  must  inform  creditors  of  its  true  value. 
Payment  of  stock  in  the  notes  of  a  third  person  is  not  sufficient 
to  effect  a  legal  organization,  since  their  value  is  not  certain. 
The  consideration  for  the  promise  of  a  subscriber  to  the  capital 
stock  is  a  like  promise  by  other  subscribers."^     Each  subscriber 
assumes  a  several  obligation  and  is  bound  to  pay"^  unless  the 
subscription  to  the  whole  number  of  shares  is  made  a  condition 
precedent  to  such  payment."^     The  undertaking  is  trilateral  be- 
tween the  individual  subscriber,  the  company  and  the  other  sub- 
scribers, and  though  fraudulent  as  between  two  of  the  parties 
may  be  enforced  for  the  benefit  of  the  third,"*  and  if  a  subscrip- 
tion Is  made  payable  In  calls  made  by  trustees  an  action  at  law  will 
lie  to  enforce  such  promise."^    A  material  departure  from  the 
agreement  under  which  a  subscription  Is  made,  as  where  the 
majority  organize  a  corporation  Instead  of  a  joint  stock  com- 
pany, Invalidates  the  subscription  for  want  of  privity  of  con- 
tract.^®    The  subscriber  Is  not  entitled  to   rescind  because   of 
misrepresentation  as  to  the  amount  of  cash  capital  made  to  in- 
duce him  to  subscribe  when  not  relied  upon  by  him,  or  the  fact 
that  the  company  did  not  acquire  a  valid  title  to  all  the  property 
specified  In  the  articles  or  that  the  business  of  the  company  proves 
unsuccessful,^^  nor  are  the  subscriber's  individual  obligations  to 
the  company  as  a  shareholder  avoided  by  the  fact  that  after  re- 
ceiving his  certificates  he  holds  a  controlling  Interest."^     Upon 

20Rehfuss   V.    Moore,    134    Pa.    St.  20  Knottsville     Roller     Mill   Co.  v. 

462,  19  Atl.  756,  7  L.  R.  A.  663.  Mattingly,   18  Ky.   L.  246,  35   S.  W. 

21  Kimmins    v.   Wilson,    8    W.    Va.  1114;    Machias    Hotel    Co.    v.    Coyle, 
584.  35  Maine  405,  58  Am.  Dec.  712. 

22  Haynes  v.  Kent,  8  La.  Ann.  132.  27  Wright  v.   Swayne,  44   Ky.  441 ; 

23  Sandford  v.  Halsey,  2  Denio  (N.  Andrews  v.  Brace,  154  Mich.  126,  117 
Y.)    235.  N.  W.  586. 

24Altoona    Sanitary    Milk    Co.    v.         28  Hogg  v.  Hoag,  154  Fed.  1003,  83 
Armstrong,  38  Pa.  Super.  Ct.  350.  C.  C.  A.  677. 

25  Glover   v.   Tuck,   24  Wend.    (N. 
Y.)  153. 


1445  JOINT    STOCK    COMPANIES  §     1055 

compliance  with  the  conditions  imposed  by  the  articles  or  by 
statute  in  reference  to  contributions  to  capital  stock  a  sub- 
scriber is  usually  entitled  to  have  a  certificate  issued  which  rep- 
resents a  proportionate  interest  in  the  property  of  the  company 
which  equity  will  protect,  though  the  capital  be  onl}'-  nominal, 
and  which  may  be  sold  and  transferred  by  the  owner.^^  On  the 
other  hand  equity  will,  as  between  the  subscriber  and  its  pro- 
moters, cancel  a  certificate  of  stock  in  an  alleged  partnership 
association  on  the  ground  of  fraud  which  induced  its  purchase.^" 
In  the  absence  of  statutory  provisions  or  restrictions  in  the  ar- 
ticles of  association  shares  may  be  transferred  at  the  will  of  the 
holder  and  the  purchaser  succeed  to  membership  with  its  incident 
rights  and  obligations.  If  the  manner  of  transfer  is  prescribed 
there  must  be  a  compliance  therewith  before  the  assignee  may  be- 
come a  member,^^  but  the  transfer  may  entitle  him  to  such  an 
interest  in  the  property  as  the  certificates  received  represent  as 
against  the  assignor  and  his  attaching  creditors,  though  the  rules 
declare  that  no  change  of  ownership  can  be  accomplished  in  any 
other  mode  or  form  than  as  specified.^"  If  by  the  articles  of 
agreement  the  certificate  of  shares  is  to  carry  with  it  an  un- 
divided right  in  the  property  of  the  company,  a  subsequent  bona 
fide  purchaser's  right  to  a  ratable  share  of  proceeds  of  sale  of 
such  property  is  not  affected  by  the  fact  that  he  has  never  sub- 
scribed to  the  articles.^^  And  where  the  certificates  recite  that 
the  person  to  whom  they  were  issued  is  entitled  to  shares  in  "the 
equity  of  the  property  held  by  the  trustees  transferable  only  on 
the  books  of  said  trustees  on  surrender  of  this  certificate,"  a  pur- 
chaser may  compel  a  transfer  on  the  books  by  showing  affirma- 
tively a  compliance  with  the  requirements.^*     While  it  appears 

29Durkee  v.  Stringham,  8  Wis.  1.  Pa.  St.  558,  25  Atl.  128;  Tide  Water 

30  Nichols  V.  Buell,   157  Mich.  609,  Pipe  Co.  v.  Kitchenman,  108  Pa.  St. 
122  N.  W.  217.  630. 

31  Near  v.  Donnelly,  80  Mich.  130,  33  Butterfield  v.  Beardsley,  28  Mich. 
44   N.  W.   1118;   Kingman  v.    Spurr,  412. 

7  Pick.   (Mass.)  235;  Rice  v.  Rocke-  34  Rice   v.    Rockefeller,    134   N.    Y. 

feller,  134  N.  Y.  174.  31  N.  E.  407,  17  174,  31  N.  E.  407,  17  L.  R.  A.  237,  30 

L.  R.  A.  237.  30  Am.  St.  658.  Am.    St.    658;    Cushman    v.    Thayer 

32  Globe  Refining  Co.'s  Estate,  151  Mfg.  Jewelry  Co.,  16  N.  Y.  365. 


§     1055  LAW    OF    PARTNERSHIP  1446 

that  the  nonobservance  of  mere  formahties  will  not  be  permitted 
to  affect  the  substantial  property  rights  of  a  shareholder^^  a  pro- 
vision in  the  certificate  making  its  transfer  depend  upon  the  con- 
sent of  certain  officers  of  the  association  imposes  a  condition 
precedent  to  an  action  to  compel  the  company  to  account.^"  The 
effect  of  the  transfer  when  legally  completed  as  concerns  the 
company  is  to  discharge  the  assignor  from  liability  for  its  debts 
— and  this  though  the  mode  prescribed  be  not  pursued  if  the  com- 
pany recognizes  the  assignee  as  a  member  and  ceases  to  regard 
the  assignor  as  such.^'^  Mere  irregularities  if  openly  and  tacitly 
allowed  do  not  invalidate  the  transfer.  The  assignor  remains 
liable  to  creditors  for  existing  debts  of  the  company  and  the  as- 
signee becomes  liable  for  those  incurred  after  the  assignment.^^ 
A  member  who  has  in  good  faith  transferred  his  stock  and  with- 
drawn from  the  association  and  who  is  later  compelled  to  pay 
company  debts,  is  entitled  to  reimbursement  from  the  company 
and  the  new  members. ^®^  A  certificate  of  stock  may  also  be  as- 
signed and  delivered  to  pledge  the  property  thereby  represented 
as  collateral  security  for  a  debt,  and  this  delivery  effects  a  change 
of  possession  of  such  property  when  not  itself  susceptible  of  de- 
livery.^^  One  may  not  only  part  with  his  shares  by  voluntary 
transfer,  but  the  articles  or  by-laws  may  provide  conditions  upon 
which  the  company  or  its  authorized  offi,cers  may  declare  a  for- 
feiture. Provisions  of  this  character  will,  however,  be  strictly 
construed  in  favor  of  the  shareholder  and  all  conditions  precedent 
must  be  observed  or  the  forfeiture  is  void,*"  and  usually  a  mere 
declaration  of  forfeiture  by  the  board  of  directors  is  not  suffi- 
cient. If  his  shares  are  wrongfully  forfeited  he  may  sue  for 
reinstatement,  or  he  may  recover  the  value  of  his  shares  but  his 
stock  will  remain  liable  to  the  company's  debts  and  losses  until 

35  Alvord  V.  Smith,  22  Mass.  232.  39  Citizens   Bank  of    Ft.    Scott   v. 

36  Kingman     v.      Spurr,     7      Pick.  Bank  of  Commerce,  80  Kans.  205,  101 
(Mass.)  235.  Pac.  1005. 

37  Wells  V.  Wilson,  3  Ohio  425,  428.  ^o  Morris  v.  Metalline  Land  Co.  of 

38  Rianhard  v.  Hovey,  13  Ohio  300.     Lake    Superior,    166   Pa.    St.    351,    31 
38-1  Savage  v.  Putnam,  32  N.  Y.  501,     Atl.  114. 

(affg.  32  Barb.  420). 


1447  JOINT    STOCK    COMPANIES  §   .1056 

dissolution.*^  Dividends  are  not  of  the  essence  of  a  joint  stock 
company,  for  it  may  be  so  organized  that  it  is  to  continue  for  a 
designated  time,  and  upon  its  dissolution  the  entire  assets  to  be 
distributed  among  the  shareholders  in  proportion  to  their  re- 
spective interests.  When  declarations  of  dividends  are  provided 
for  and  a  dividend  is  declared  the  shareholder  is  entitled  to  pay- 
ment on  demand. ■*■  Under  authority  to  declare  dividends  out  of 
profits  the  managers  have  no  right  to  declare  dividends  out  of  all 
the  company's  assets. ^^  A  shareholder  may,  in  an  action  for  ac- 
counting, compel  a  distribution  of  net  profits  as  dividends.**  The 
company  is  bound  to  pay  dividends  to  true  owner  only,  hence  if 
an  illegal  transfer  has  been  made  upon  the  books  and  the  rightful 
owner  does  not  know  who  is  the  holder,  a  bill  for  accounting  will 
lie.*^  Unpaid  dividends  are  assets  liable  for  the  debts  of  the 
company  as  against  the  claim  of  the  shareholder.*" 

§  1056.  Property  and  funds. — There  is  no  inherent  right 
in  a  joint  stock  association  to  have,  hold,  and  convey  real  estate. 
This  power,  when  possessed,  is  conferred  by  statute  and  is 
usually  limited  to  such  realty  as  may  be  necessary  for  the  im- 
mediate needs  of  the  company  in  transacting  its  business,  and 
such  as  is  held  under  mortgage  as  security  for  loans,  and  that 
purchased  at  sales  under  judgments  and  decrees  held  by  it.*^  The 
right  of  the  company  to  hold  real  estate  conveyed  to  it  can  only 
be  questioned,  however,  by  the  state.  The  statute  of  Idaho  pro- 
vides that  a  joint  stock  company  may  be  formed  by  individuals 
for  the  purchase  of  a  single  tract  of  real  estate,  the  title  to  w^iich 
may  be  taken  in  a  trustee.*^  An  attempt  to  convey  to  an  associa- 

4iLesseps  v.  Architect  Co.,  13  La.  ^^  Southwestern    R.  Co.   v.  Thom- 

414.  ason,  40  Ga.  408. 

42  Keppel  V.  Petersburg  R.  Co.,  Fed.  ^'^  Curry  v.  Woodward,  44  Ala.  305. 
Cas.  No.  7722,  Chase  167.  48  Byam  v.  Bickford,  140  Mass.  31, 

43  Bishop  V.  Bishop,  81  Conn.  509,  2  N.  E.  687 ;  Bartlet  v.  King,  12  Mass. 
71  Atl.  583.  537,  7  Am.  Dec.  99 ;  Howell  v.  Earp, 

44Taber  v.  Breck,  192  Mass.  255,  78     21  Hun  (N.  Y.)  393. 
N.  E.  472 ;  Howe  v.  Morse,  174  Mass.         49  Spotswood   v.    Morris,    12   Idaho 
491,  55  N.  E.  213.  36,  85  Pac.  1094,  6  L.  R.  A.  (N.  S.) 

665. 

41 — Row.  ON  Partn. — Vol.  2 


§    1057  LAW    OF    TARTNERSHIP  1448 

tion  not  authorized  to  take  realty  will  vest  the  title  in  the 
grantees  named  in  the  conveyance,  who  will  hold  it  as  tenants  in 
common.^"  Where  an  association  is  organized  for  the  purpose  of 
buying  and  selling  realty  through  trustees  they  take  and  hold  the 
same  as  joint  tenants  in  trust  for  the  members^^  who,  as  individ- 
ual shareholders  and  not  as  a  collective  body,  are  entitled  in 
equity  to  the  property.^"  And  where  the  purchase-price  of  land 
is  paid  out  of  the  funds  of  the  company  the  outstanding  cer- 
tificates may  be  regarded  as  an  equitable  lien  on  the  land.^^  The 
control  of  the  property  and  funds  is  in  the  association  itself 
though  it  act  through  its  officers  or  trustees.  A  deed  executed 
by  the  association  in  a  legal  manner  or  one  executed  by  all  the 
individual  members  and  stockholders  is  equally  effective  to  con- 
vey title.^* 

§  1057. — Power  to  make  contracts. — The  capacity  to  make 
contracts  is  a  necessary  incident  of  the  legal  entity  of  the  associa- 
tion without  which  the  purpose  of  its  existence  would  be  de- 
feated. This  power  is  vested  primarily  in  the  board  of  directors 
alone,  from  whom  authority  must  be  derived.  A  member  of 
the  association  has  no  general  authority  by  virtue  of  his  mem- 
bership to  bind  the  company  by  his  contracts.^^  The  directors 
may  bind  the  company  for  a  loan  without  special  authority,  as 
this  is  a  necessary  result  of  their  power  to  make  contracts,  but 
any  other  officers  of  the  association  must  have  authority  from 
the  directors.^°     Officers  who  make  unauthorized  contracts  can 

Sf*  Bryan  v.  Bickford,  140  Mass,  31,  s*  Richmond  Cedar  Works  v.  Pin- 

2  N.  E.  687 ;  Hunt  v.  Wright,  47  N.  nix,  208  Fed.  785. 

H.  396,  93  Am.  Dec.  451.  ss  McConnell  v.  Denver,  35  Cal.  365, 

^1  Clagett    V.    Kilbourne,    1     Black  95  Am.  Dec.  107 ;  Spotswood  v.  Mor- 

(U.  S.)  346,  17  L.  ed.  213;  Barker  v.  ris,  12  Idaho  360,  85  Pac.  1094,  6  L. 

White,  58  N.  Y.  204 ;  Morris  v.  Metal-  R.  A.  (N.  S.)  665 ;  Vattier  v.  Roberts, 

line  Land  Co.,  166  Pa.  St.  351,  31  Atl.  2  Blackf.  (Ind.)  255 ;  Berry  v.  Hooper, 

114.  179  Mich.  67,  146  N.  W.  275 ;  McCain 

52  Crawford   v.   Gross,   140   Pa.   St.  v.  Smith,  172  Mich.  1,  137  N.  W.  616. 
297,  21  Atl.  356.  se  Dickinson    v.     Matheson     Motor 

53  Crawford   v.   Gross,    140   Pa.   St  Car    Co.,    161    Fed.    874;    Ashley    v. 
297,  21  Atl.  356.                                     •  Dowling,  203  Mass.  311,  89  N.  E.  434; 


1449  JOINT    STOCK    COMPANIES  §    1058 

not  ratify  them,^^  but  the  company  may  ratify  by  accepting  the 
proceeds,^^  or  bringing  suit  thereon.^^  Neither  can  officers  have 
contribution  or  indemnity  from  other  stockholders  when  in  vio- 
lation of  a  by-law  they  contract  beyond  the  available  capital.'"' 
The  power  of  directors  to  make  contracts  may  be  limited  by 
statute  or  by  the  articles  of  association.  If  so,  they  render  them- 
selves personally  liable  if  they  exceed  their  authority;  but  if  the 
other  contracting  party  has  notice  of  the  limitation  of  their  au- 
thority the  association  is  not  liable  unless  the  act  is  subsequently 
ratified."  A  director  of  a  joint  stock  company  may  make  a  valid 
contract  with  the  company  of  which  he  is  a  member,  provided 
in  doing  so,  he  deals  fairly  and  honestly  toward  the  stockholders 
who  have  appointed  him  their  agent.*'^  . 

§  1058.     Actions  by  and  against  joint  stock  companies. — 

As  a  joint  stock  company  is  usually  in  contemplation  of  law,  a 
partnership,  all  the  members  are,  in  the  absence  of  statutory  pro- 
visions, necessary  parties  to  actions  by  or  against  the  association. 
And  for  the  same  reason  a  member  can  not,  under  like  conditions, 
maintain  an  action  against  the  company  or  be  sued  by  it  in  a 
court  of  law.  The  inconvenience  and  hardship  resulting  from 
these  principles  have  led  to  their  modification  by  remedial  stat- 
utes providing  that  such  associations  may  sue  and  be  sued  in  the 
name  of  the  company  or  of  such  officer  as  may  be  designated 
by  the  statute,  who  for  the  purpose  of  the  action  is  the  repre- 
sentative of  the  whole  company  as  distinct  from  the  individuals 
composing  it.''^     These  provisions  are  permissive  only  and  do 

Wells  V.  Wilson,  3  Ohio  425 ;  Cameron  Humphreys  v.  New  York  &c.  R.  Co., 

V.  First  Nat.  Bank,  4  Tex.  Civ.  App.  121  N.  Y.  435,  24  N.  E.  695 ;  Mercan- 

309,  23  S.  W.  334.  tile  Nat.  Bank  v.  Lauth,  143  Pa.  St. 

"  Hotchin  V.  Kent,  8  Mich.  526.  53,   21    Atl.    1017 ;    Pittsburg   Melting 

58  MacGeorge  v.  Harrison  Chemical  Co.  v.  Reese,  118  Pa.  St.  355,  12  Atl, 
Alfg.  Co.,  141  Pa.  St.  575,  21  Atl.  362;  Willis  v.  Greiner  (Tex.),  26  S. 
671.  W.  858. 

59  Park  V.  Kelley  Axe  Alfg.  Co.,  49  62  Twin-Lick  Oil  Co.  v.  Marbury, 
Fed.  618,  1  C.  C.  A.  395.  91  U.  S.  587,  23  L.  ed.  328 ;  Barr  v. 

60  McFadden  v.  Leeka,  48  Ohio  St.  Pittsburg  Plate  Glass  Co.,  57  Fed. 
513,  28  N.  E.  874.  86.  6  C.  C.  A.  260. 

«i  Hotchin   v.   Kent,   8    Mich.    526;        es  Adams  Express  Co.  v.  Schofkld, 


§     1058  LAW    OF    PARTNERSHIP  1450 

not  prevent  actions  by  or  against  the  members  as  partners  and 
being  in  derogation  of  the  common  kw  must  be  strictly  con- 
strued.*'* As  procedure  in  such  actions  is  by  no  means  uniform, 
and  that  of  the  forum  must  always  be  pursued,  only  general 
statements  are  here  presented.  By  virtue  of  statutory  provisions 
in  some  jurisdictions  a  joint  stock  company  may  be  sued  by  a 
member  and  it  may  sue  a  member.  Thus  it  has  been  held  that 
the  president  of  such  company  may  maintain  a  suit  against  its 
treasurer  to  recover  the  funds  belonging  to  the  company.^^  An 
action  against  such  an  association  should  generally  be  brought 
in  the  county  where  the  principal  office  or  place  of  business 
named  in  the  articles  of  association  is  located,  and  service  of 
process  should  be  upon  the  officer  designated  by  law  (not  merely 
by  the  association  itself)  to  appear  in  its  behalf;  but  it  is  usually 
provided  that  if  such  officer  does  not  reside  in  that  county  or  is 
not  found  there  and  served  with  process  within  a  limited  time 
service  may  be  had  upon  a  clerk,  agent  or  attorney  of  the  com- 
pany found  at  such  place  of  business.  The  classification  of  a 
company  by  the  statutes  of  the  jurisdiction  in  which  it  is  or- 
ganized is  not  conclusive  in  other  states,*'"  hence  in  foreign  juris- 
dictions process  may  be  served  as  upon  a  corporation  when  the 
association  has  substantially  corporate  powers."^  The  pleadings 
should  show  affirmatively  the  representative  character  of  the  offi- 
cer maintaining  or  defending  the  action,  and  an  adverse  judgment 
will  not  be  en  forcible  against  him  personally.  The  execution 
issued  thereon  must  be  levied  on  the  property  belonging  to  the 

111  Ky.  833,  64  S.  W.  903,  23  Ky.  L.  Mfg.   Co.,   141   Pa.   St.  575,  21   Atl. 

1120;   People  v.  Wemple,   117  N.  Y.  671. 

136,  22  N.  E.  1046,  6  L.  R.  A.  303 ;  ^4  King  v.  Randlett,  33  Cal.  318. 

Van  Aernam  v.  Blustein,   102  N.  Y.  ^5  Strebe  v.  Albert,  1  City  Ct.   (N. 

355,  7  N.  E.  537,  2  N.  Y.  St.  470;  Y.)  376. 

National  Bank  v.  Van  Derwerker,  74  ^^  Liverpool  Ins.  Co.  v.  Massachu- 

N.  Y.  234;  Wescott  v.  Fargo,  61  N.  setts,  10  Wall.  (U.  S.)  566,  19  L.  ed. 

Y.   542,   19  Am.   Rep.   300;   Olery  v.  1029. 

Brown,    51    How.    Pr.    (N.    Y.)    92;  C7  State  v.  Adams  Express  Co.,  66 

Piatt  V.  Colvin,  50  Ohio  St.  703,  36  Minn.  271,  68  N.  W.  1085,  38  L.  R. 

N.    E.   735 ;    McGeorge   v.    Chemical  A.  225 ;  Express  Co.  v.  State,  55  Ohio 


1451  JOINT    STOCK    COMPANIES  §    1059 

association  or  owned  by  the  members  jointly  or  in  common/'^ 
If  the  return  of  the  execution  shows  the  judgment  remains 
wholly  or  partially  unsatisfied,  the  judgment  creditor  may  then 
maintain  an  action  against  the  members  upon  the  original  claim 
on  their  personal  liability  as  partners,  and  upon  obtaining  judg- 
ment enforce  it  against  their  individual  property. 

§  1059.  Dissolution. — A  dissolution  of  a  joint  stock  com- 
pany, the  settlement  of  its  affairs  and  distribution  of  the  assets 
may  be  effected  by  several  methods.  (1)  Being  a  creature  of 
contract,  the  association  may  be  dissolved  by  the  mutual  consent 
of  all  the  members  and  the  appointment  of  trustees  to  wind  up 
the  business.*'^  (2)  The  original  organization  may  be  dissolved 
by  the  shareholders  forming  a  corporation  in  which  they  become 
stockholders  as  their  interests  appear.  Such  reorganization  does 
not  relieve  them  from  personal  liability  for  debts  contracted  when 
they  were  a  joint  stock  company.^''  (3)  The  insolvency  of  the 
association  is  ground  for  its  dissolution  by  the  court  upon  peti- 
tion of  members  or  creditors  and  the  appointment  of  a  receiver 
to  take  charge  of  its  property  and  apply  the  same  to  the  payment 
of  debts.  He  may  maintain  actions  against  all  debtors  including 
stockholders,  but  he  can  not  call  upon  shareholders  for  unpaid 
subscriptions  until  the  court  has  determined  the  amount  of  in- 
debtedness and  fixed  the  liability  of  each  share  of  stock."  No 
creditor  who  is  a  stockholder  in  an  insolvent  joint  stock  com- 
pany can  share  in  the  distribution  until  the  other  creditors  are 
paid  in  full."  The  assets  must  be  applied  pro  rata  on  all  the  in- 
debtedness and  where  notes  given  by  the  company  are  indorsed 

St.  69,  44  N.  E.  506 ;  State  v.  United  413 ;  Frank  v.  Drinkhahn,  Id  Mo.  508 ; 

States  Express  Co.,  2  Ohio  S.  &  C.  P.  Arthur  v.  Weston,  22  Mo.  378 ;  Dur- 

Dec.  257,  1  Ohio  N.  P.  259.  ham  Fertilizer  Co.  v.   Clute,   112  N. 

68  Metropolitan  St.  R.  Co.  v.  Adams  Car.  440,  17  S.  E.  419;  Broyles  v.  Mc- 

Express  Co.   (Mo.  App.),  130  S.  W.  Coy,  5  Sneed    (Tenn.)   602. 

101.  -1  Chandler  v.   Keith,  42  Iowa  99; 

<'*>  Morris  v.  Imperial  Cap  Co.,  135  Lewis  v.  McEIvain,  16  Ohio  347. 

Mich.   476,   98    N.  W.  5;    Francis   v.  "^  g^in  v.  Clinton  Loan  Assn.,  112 

Taylor,  31  Misc.  187,  65  N.  Y.  S.  28.  N.  Car.  248,  17  S.  E.  154. 

"'^  Beaman    v.    Whitney,    20    Maine 


§     1059  LAW    OF    PARTNERSHIP  1452 

by  stockholders  and  secured  by  mortgage  on  all  the  property  of 
the  copartnership  they  must  be  treated  as  other  obhgations  are — 
receiving  their  due  share. "^  (4)  If  one  person  acquires  all  the 
stock  it  becomes  property  in  severalty  and  the  joint  ownership  is 
dissolved/*  (5)  A  court  of  equity  will,  for  cause,  decree  a  dis- 
solution and  appoint  a  receiver  upon  a  bill  presented  by  share- 
holders or  creditors.  And  in  a  suit  for  an  accounting,  if  all 
parties  in  interest  ask  for  a  dissolution  and  the  court  considers  it 
to  be  for  their  best  interests,  a  dissolution  will  be  allowed  though 
the  association  as  such  is  not  a  party  to  the  proceeding.''^  The 
willingness  of  the  officers  or  many  subscribers  to  close  out  the 
business  of  a  company  whose  articles  fix  a  definite  time  for  its 
duration  is  not  a  ground  for  dissolution  at  an  earlier  date  when 
its  continuance  will,  in  the  opinion  of  the  court,  subserve  the 
best  interests  of  the  shareholders. '^'^  Where  a  dissolution  is 
sought  on  the  ground  of  mismanagement  it  must  be  shown  that 
some  actual  loss  to  the  parties  in  interest  has  resulted  therefrom 
or  that  those  in  charge  are  acting  in  bad  faith.  Irreconcilable 
difficulties  between  stockholders  and  the  managament;  violations 
of  the  articles  by  the  directors  in  which  the  shareholders  have 
acquiesced  for  a  number  of  years;  failure  to  have  a  call  issued 
for  a  meeting  of  stockholders  where  the  articles  provided  that 
no  such  meeting  could  be  called  except  on  the  request  of  the 
holders  of  two-thirds  of  the  shares  have  been  considered  not  to  be 
grounds  for  a  dissolution  where  there  is  nothing  to  show  that  the 
association  has  suffered  from  these  acts  or  omissions."  To  war- 
rant a  dissolution  upon  the  ground  of  fraud  it  must  be  such  as 
would  defeat  the  rights  of  shareholders  in  violation  of  the  articles 
of  association,  or  when  those  in  charge  are  converting  the  assets 
or  profits  to  their  own  personal  benefit. ^^    (6)  The  affairs  of  the 

■^3  Lipsett  V.  Hassard,  158  Mich.  509,  ^e  Hossack  v.  Ottawa  Development 

122  N.  W.  1091.  Assn.,  244  111.  274,  91  N.  E.  439 

74  Butterfield  v.  Beardsley,  28  Mich.  77  Dudley  v.  Piatt,  118  N.  Y.  S.  1058. 
412 ;  Farnum  v.  Patch,  60  N.  H.  294,  ^s  Randolph  v.  Nichol,  74  Ark.  93, 
49  Am.  Rep.  313.  84  S.  W.  1037 ;  Colton  v.  Raymond,  114 

75  Mack  V.  Engel,  165  Mich.  540,  131  App.  Div.  911,  100  N.  Y.  S.  Ill  ;  Sny- 
N.  W.  92.  der  v.  Lindsey,  92  Hun  432,  36  N.  Y.  S. 


1453  JOINT    STOCK    COMPANIES  §    1059 

company  may  always  be  closed  up  in  accordance  with  the  articles 
of  association/"  If  a  definite  time  for  its  duration  is  named  in 
the  articles  the  association  can  not  be  kept  ahve  without  the 
unanimous  consent  of  the  shareholders.  If  a  distribution  of 
assets  is  not  made  upon  the  termination  of  such  time  a  receiver 
will  be  appointed  for  that  purpose.  Upon  dissolution  the  trus- 
tees holding  the  property,  or  the  receiver,  if  one  has  been  ap- 
pointed, must  convert  the  assets  into  money  and  after  payment  of 
company  debts  distribute  the  proceeds  among  the  shareholders."" 
Where  a  joint  stock  company  was  organized  under  an  agreement 
that  the  death  of  a  member  should  not  work  a  dissolution,  it  was 
held  that  upon  the  death  of  a  member  the  legatees  or  distributees 
of  the  deceased  could  not  require  a  division  of  the  assets,  but 
that  they  were  entitled  to  succeed  to  the  shares.®^ 

1037,    72    N.   Y.    St.   439;   Werner   v.  so  Prothingham   v.    Barney.   6   Hun 

Leisen,  31  Wis.  169.  (N.  Y.)    366. 

7f>  Francis  v.  Taylor,  31   Misc.   187,  »i  Taber   v.    Breck,    192   Mass.   355, 

65  N.  Y.  S.  28 ;  Tindel  v.  Park,  154  78  N.  E.  472. 
Pa.  St.  36,  26  Atl.  300. 


CHAPTER  XXXIII 


FORMS 


SECTION  SECTION 

1065.  Introductory.  1095. 

1066.  Body  of  contract.  1096. 

Particular  Clauses  in  Partnership  jqq^ 
Agreements. 

1067.  Firm   name.  1098. 

1068.  Duration.  1099. 

1069.  Firm  name  and  duration.  1100. 

1070.  Partnership    to    continue    after  1101. 

retirement  or  death  of  partner.  1102. 

1071.  Where   business   is  to   be   con-  1103. 

ducted.  1104. 

1072.  Purposes.  1105. 

1073.  Capital.  1106. 

1074.  One  partner  furnishing  capital.  1107. 

1075.  One  partner  without  capital. 

1076.  Additional     money    contributed  1108. 

by  one  partner.  1109. 

1077.  Increase  of  capital.  1110. 

1078.  Patents  as  partnership  property.  1111. 

1079.  Interest  on  capital.  1112. 

1080.  Rent  paid  to  one  partner.  1113. 

1081.  Deposit  of  partnership  moneys. 

1082.  Expenses.  1114. 

1083.  Division  of  profits  and  losses. 

1084.  Guaranty  of  profits.  1115. 

1085.  Advances  to  partners.  1116. 

1086.  Overdrawing  accounts.  1117. 

1087.  Expense  accounts. 

1088.  Advances  by  partner  to  firm.  1118. 

1089.  Dormant  partner.  1119. 

1090.  Regular  meetings.  1120. 

1091.  Bond  of  partner. 

1092.  Time  to  be  devoted  to  firm.  1121. 

1093.  Vacations. 

1094.  Engaging  in  other  business.  1122. 

1454 


Managing  partner. 

Salary  to  come  only  from 
profits. 

Limit  upon  contracts  by  one 
partner. 

Negotiable  paper. 

Bonds   and   securities. 

Suretyship. 

Extending  credit. 

Pledging  credit. 

Causing  attachment  of  property. 

Release  of  debts. 

Hiring  employes. 

Giving  information. 

Indemnity  against  individual 
debts. 

Keeping  trade  secrets. 

Keeping  accounts. 

Taking  accounts. 

Majority  to  rule. 

Power  to  expel  partner. 

Sale  or  assignment  of  part- 
ner's share. 

Retiring  partner  not  to  com- 
pete with  business. 

Admission  of  sons  into  firm. 

Survivorship. 

Purchase  of  deceased  partner's 
share  by  surviving  partners. 

Dissolution  in  case  of  loss. 

Withdrawal  of  partner. 

Dissohition  on  bankruptcy  of 
partner. 

Dormant  partner's  share  on  dis- 
solution. 

Good  will. 


1455 


FORMS 


SECTION 

1123.  Purchase  of  partner's  share  in 

good  will. 

1124.  Sale  of   deceased   partner's   in- 

terest, 

1125.  Purchase  of  share  of  deceased 

or  bankrupt  partner. 

1126.  Payment  of   deceased  partner's 

share  to  his  representatives. 

1127.  Continuation  in  business  by  de- 

ceased   partner's    representa- 
tives 

1128.  Winding  up  business. 

1129.  Division  of  property  upon  dis- 

solution. 

1130.  Final  accounting. 

1131.  Purchase  by  one  partner  on  dis- 

solution. 

1132.  Purchase    of    retiring    partner's 

interest. 

1133.  Retiring  partner's   covenant   as 

to  debts. 

1134.  Indemnity  to  retiring  partner. 

1135.  Amending     partnership     agree- 

ment. 

1136.  Arbitration  clauses. 

1137.  Reference  to  attorney  to  settle 

disputed  rights. 

1138.  Close   of   contract. 

Notices. 

1139.  Of  intention  to  withdraw. 

1140.  Of  desire  to  sell. 

1141.  Of  intention  to  purchase. 

1142.  Of  intention  to  expel. 

1143.  Of  demand    for    inspection    of 

business. 

1144.  Of  dissolution. 

1145.  Of  retirement  of  partner. 

1146.  Of  sale  of  business. 

1147.  To  firm    debtor    after    dissolu- 

tion. 

Complete  Agreements 

1148.  Farm  partnership  contract. 

1149.  Agreement  for  mercantile  part- 

nership. 


SECTION 

1150.  Mercantile  partnership  contract. 

1151.  Agreement  between  merchants. 

1152.  Professional     partnership     con- 

tract. 

1153.  Short  form,  partnership  agree- 

ment between  lawyers. 

1154.  Agreement  between  attorneys — 

Long  form. 

1155.  Agreement    where    one    partner 

dormant. 

1156.  Extension   of   partnership   term 

indorsed  on  articles. 

1157.  Continuation  of  business  under 

new  agreement. 

1158.  Admission  of  new  partner. 

Miscellaneous  Agreements  and  Forms 

1159.  Indorsement      on      articles      of 

agreement  to  admit  new 
partner. 

1160.  Admission  of  partner's  son  into 

firm. 

1161.  Admission   of   partner's   legatee 

into  firm. 

1162.  Agreement  by  continuing  .part- 

ners to  purchase  retiring  part- 
ner's share. 

1163.  Agreement  for  sale  by  retiring 

partner  of  his  share  in  part- 
nership to  incoming  partner, 
with  concurrence  of  contin- 
uing partners. 

1164.  Assignment  by  retiring  partner 

to  continuing  partner. 

1165.  Assignment  to  surviving  partner 

of  deceased  partner's  share. 

1166.  Conveyance   of   share   of    retir- 

ing partner  to  copartners. 

1167.  Charge  on  partner's  profits. 

1168.  Bond       indemnifying      retiring 

partner  against  partnership 
debts. 

1169.  Bond  by  surviving  partners   to 

secure  payment  of  share  of 
deceased  partner  and  for  in- 
demnity. 


§  1065 


LAW    OF    TARTNERSHIfi 


1456 


SECTION 

1170.  Partnership  bond  with  sureties 

to  secure  banking  account. 

1171.  Bond   by    partner   to    copartner 

and  inventor  for  protection 
of  secret  process. 

1172.  Composition  agreement  between 

partners  and  partnership 
creditors  with  covenant  not  to 
sue. 

1173.  Assignment     by     partners     for 

benefit  of  creditors,  with  pref- 
erences. 

1174.  Assignment  of  leasehold  by  one 

partner  to  another  on  disso- 
lution of  partnership — After 
recitals  of  partners  and  of 
lease  and  of  dissolution  of 
partnership. 

1175.  Habendum    clause    in    deed,    to 

hold  as  partnership  property. 

1176.  Mortgage  of  partner's  interest. 

1177.  Option   to   one   partner   to  buy 

partnership  property. 

1178.  Appointment  of  an  arbitrator  in 

pursuance  of  arbitration  clause 
in  articles  of  partnership. 

1179.  Award    on    reference    to    settle 

terms  of  dissolution  of  part- 
nership. 

1180.  Agreement  for  joint  adventure 

or  syndicate. 


SFXTION 

1181.  Preliminary  agreement  between 

partners   as   to   formation   of 
corporation. 

1182.  Promoter's      agreement      with 

partners  to  form  corporation. 

1183.  Limited  partnership. 

1184.  Certificate   of    formation. 

Ba}ikruptcy 

1185.  Proof    of    claim    in    bankruptcy 

by  partnership. 

1186.  Partnership    petition — Official 

form. 

Pleadings  Generally 

1187.  Caption. 

1188.  Petition  for  accounting. 

1189.  Petition  for  dissolution. 

Pleading   Causes  for  Dissolution 

1190.  Transfer  of  one  partner's  inter- 

est. 

1191.  Assignment  for  benefit  of  cred- 

itors. 

1192.  Breach  of  contract  by  one  part- 

ner. 

1193.  Dissolution  under  terms  of  con- 

tract. 

Answer. 


1194.  Admission  and  general  denial. 

1195.  Specific  denial. 

§  1065.     Introductory. 

Naturally,  there  is  no  exclusive  form  prescribed  for  a  general 
partnership  agreement.  The  chief  aim  is  to  embody  therein,  in 
clear  and  unmistakable  terms,  the  various  provisions  according  to 
the  understanding  of  both  parties  thereto.  For  this  reason,  some 
of  the  usual  forms  adopted  in  general  practice  are  herein  given, 
simply  as  suggestions,  which  may  be  varied  to  meet  each  case. 

It  is  common  practice  to  commence  the  contract  in  one  of  the 
following  manners : 

This  agfreement,  made  this dav  of  ,  at ,  , 


between ,  hereinafter  known  as  the  party  of  the  first  part. 


1457  FORMS  §   1066 

and  ,  hereinafter  known  as  the  party  of  the  second  part, 

witnesseth :     (Follow  with  body  of  contract.) 

This  form,  in  few  words,  is  very  convenient,  as  it  disposes  of 
the  questions  of  parties,  time,  place,  and  shows  that  there  is  a 
meeting  of  the  minds  of  the  parties  thereto. 

Another  form,  which  does  not  cover  so  many  questions,  fol- 
lows : 

It  is  hereby  understood  and  agreed  between ,  party  of  the 

first  part,  and ,  party  of  the  second  part,  that  (follow  with 

body  of  contract). 

However,  as  stated  before,  no  particular  form  is  necessary, 
and  a  simple  statement,  such  as : 

"We,  and  ,  hereby  agree  that,"    followed  by  the 

agreement,  is  sufficient,  or  other  forms,  such  as  the  following : 

This  agreement  of  partnership,  made  and  entered  into  this 

day  of ,  by  and  between ,  ,  and ,  all  of 

the  city  and  state  of ,  witnesseth  : 

That  the  said  parties  agree  hereby  to  become  partners  upon 
the  terms  and  conditions  herein  set  forth ;  or 

Articles  of  copartnership  entered  into  on ,  between , 

of ,  and ,  of ,  witness : 

The  aforesaid  parties  hereby  form  a  business  partnership  upon 
the  following  terms : 

Although  not  ahvays  necessary,  it  may  be  so,  and  is  much 
better,  that  somewhere  in  the  contract  the  date  of  the  contract, 
and  the  place  of  execution,  should  be  shown.  If  not,  the  gen- 
eral rule  is  that  these,  as  well  as  other  matters,  may  be  shown  by 
parol,  but  it  is  certainly  better  to  have  them  definitely  fixed  in 
the  written  contract 

§  1066.     Body  of  contract. 

The  body,  or  substance  matter  of  the  contract,  is,  as  a  rule, 
the  important  matter  to  be  considered.  The  above  introductions 
may  be  used  with  practically  all  forms  of  contract,  but  the  body 
must  be  changed  to  meet  every  condition.  A  collection  of  forms, 
covering  the  more  usual  subjects  provided   for  in  partnership 


§     1067  LAW    OF    PARTNERSHIP  1458 

agreements  is  here  given,  which  may  be  used  as  framework 
upon  which  to  build  the  contract  desired. 

These  forms  should  follow  an  introductory  statement,  as,  for 
example,  one  of  those  given  above.  First,  there  will  be  given 
various  forms  for  particular  clauses,  some  of  which  are  neces- 
sary in  most  partnership  agreements,  and  these  will  be  followed 
by  a  series  of  complete  forms,  which  may  serve  as  a  guide  in  any 
particular  case. 

Particular  Clauses  in  Partnership  Agreements 

§  1067.     Firm  name. 

(a)  The  firm  name  of  the  said  partnership  shall  be . 

(b)  The  business  of  the  said  partnership  shall  be  carried  on 
under  the  firm  name  of . 

§  1068.     Duration. 

(a)  This  partnership  shall  continue  for  the  term  of  

years  from  the  date  of  this  agreement. 

(b)  This  partnership  shall  continue   for  the  term  of  

years,  unless  it  shall  sooner  be  terminated  by  mutual  agreement. 

(c)  This  partnership  shall  continue  until  the  death  of  the 
parties,  unless  previously  terminated,  but  either  party  may  ter- 
minate it  at  will  upon  giving  days'  notice  to  the  other 

partners, 

§  1069.     Firm  name  and  duration. 

(a)    and agree  to  become  and  remain  partners  in 

the  business  of ,  from  the day  of ,  19 — ,  during 

the  term  of years,  under  the  firm  name  and  style  of . 

(b)  The  said , , ,  and ,  and  the  survivors 

of  them,  will  become  and  remain  partners  in  the  business  of , 

from  the day  of ,  19 — ,  during  the  term  of years, 

if  they  or  any  two  of  them  shall  so  long  live,  under  the  firm 
name  of ,  subject,  nevertheless,  to  determination  as  herein- 
after provided. 


1459  FORMS rARTICULAR  CLAUSES  §  1073 

§  1070.     Partnership  to  continue  after  retirement  or  death  of 
partner. 

(a)  Any  partner  may  retire  from  the  partnership  on  or  at  any 

time  after  the day  of ,  19 — ,  on  giving  not  less  than 

months'  previous  written  notice  to  the  others  of  his  intention  so 
to  do,  and  at  the  expiration  of  such  notice  the  partnership  shall 
determine  so  far  as  regards  the  partner  giving  or  leaving  such 
notice,  but  not  as  between  the  remaining  partners. 

(b)  The  death  of  any  partner  shall  not  dissolve  the  partner- 
ship between  the  remaining  partners. 

§  1071.     Where  business  is  to  be  conducted. 

(a)  The  partnership  business  and  operations  shall  be  carried 

on  at ,  or  at  such  other  place  as  the  partners  shall  from  time 

to  time  determine. 

(b)  The  offices  of  said  firm  shall  be  situated  at  . 

§  1072.     Purposes. 

(a)    This  partnership  shall  be  for  the  purpose  of  buying,  sell- 
insf  and  dealingf  in . 


^Ja 


(b)  The  object  of  this  copartnership  shall  be  to  engage  gen- 
erally in  the  business  of ,  and  its  allied  arts  and  trades,  and 

of  buying,  selling  and  generally  dealing  in  all  goods,  merchan- 
dise and  supplies  incidental  thereto. 

(c)  This  partnership  is  for  the  purpose  of  buying,  develop- 
ing and  selling  a  certain  tract  of  land  described  as  follows  : , 

and  for  no  other  purpose. 

§  1073.     Capital. 

(a)  The  capital  of  the  partnership  shall  be dollars,  and 

each  partner  shall  contribute  equally  thereto  (or  in  the  shares  or 
proportions  following,  namely,  etc.),  or  in  such  shares  as  may 
from  time  to  time  be  agreed  upon  in  writing. 

(b)  The  stock  in  trade  and  plant  now  owned  by  the  said 

shall  be  taken  to  be  of  the  value  of dollars,  and  shall  become 

the  partnership  property  at  such  valuation,  and  shall  be  credited 
to  the  said on  account  of  the  capital  which  he  is  to  contribute. 


§     1074  LAW    OF    PARTNERSHIP  1460 

§  1074.     One  partner  furnishing  capital. 

The  said  shall  at  once  bring  into  the  business  the  sum 

of dollars  as  capital,  which  shall  be  employed  in  the  said  busi- 
ness, and  for  the  benefit  of  the  partnership,  during  the  partnership 
term,  without  any  allowance  of  interest  for  its  use,  and  shall, 

from  time  to  time,  at  the  request  of  the  said ,  advance  and 

bring  into  the  said  business  such  further  sums  of  money  (not 
exceeding  the  sum  of dollars  in  any  one  year,  nor  exceed- 
ing, together  with  the  said  sum  of  dollars,  the  total  sum 

of  dollars)   as  shall,  in  the  opinion  of  the  said  ,  be 

required  for  carrying  on  the  said  business,  and  shall  be  allowed 

interest  on  such  further  advances  at  the  rate  of per  centum 

per  annum  out  of  the  profits  of  the  said  business,  before  any 
division  of  such  profits. 

§  1075.     One  partner  without  capital. 

(a)  Said  A  shall  furnish dollars  as  a  working  capital  for 

said  firm,  and  shall  hold  the  same  as  a  debt  against  the  said  firm, 
and  shall  draw per  cent,  per  year  as  interest  thereon. 

All  losses  or  net  profits  shall  be  shared  equally  between  said 
partners. 

(b)  The  said  shall  furnish  the  sum  of  dollars  as 

capital  to  carry  on  the  business.    The  said shall  devote  his 

entire  time,  services  and  skill  to  the  management  of  the  business 
and  shall  not  be  required  to  contribute  to  the  capital  stock  of  the 
partnership,  and  shall  share  equally  in  profits  and  losses  (includ- 
ing depreciation  in  capital)  with  the  other  partners. 

§  1076.     Additional  money  contributed  by  one  partner. 

(a)  In  case  the  said  business  shall  require  extra  capital,  and 
any  partner  herein  shall,  with  the  consent  of  his  copartners,  con- 
tribute capital  in  addition  to  the  amount  provided  for  herein,  it 
shall  be  considered  as  a  loan  to  said  firm  and  shall  draw  interest 
at  per  cent,  per  annum  from  the  time  it  shall  be  so  con- 
tributed until  paid. 

Such  capital  shall  not  be  withdrawn  except  on  weeks' 


1461  FORMS PARTICULAR  CLAUSES  §  1077 

notice,  served  on  each  member  of  said  partnership,  unless  such 
partners  shall  agree  to  waive  such  time  limit. 

Such  capital  may  be  returned  to  said  partner  at  any  time,  upon 

at  least weeks'  notice  to  such  partner  by  a  majority  of  the 

partners,  of  such  intention.  If  not  so  accepted  by  him,  it  shall 
cease  to  draw  interest  at  the  expiration  of  said weeks. 

(b)  If  any  partner  shall,  with  the  other  partners'  consent,  bring 
in  additional  capital,  or  leave  any  part  of  his  profits  in  the  busi- 
ness, the  same  shall  be  considered  a  debt  due  to  him  from  the 

partnership,  and  shall  bear  interest  at  the  rate  of per  cent. 

per  annum,  and  shall  not  be  drawn  out  except  upon  giving 

calendar  months'  written  notice ;  and  the  partner  who  has  brought 
in  additional  capital  or  left  in  part  of  his  profits  shall  be  bound 
to  draw  out  the  same  on  a  like  notice  given  to  him  by  the  other 
partners,  and  at  the  expiration  of  such  notice  interest  shall  cease 
to  be  payable  thereon. 

§  1077.     Increase  of  capital. 

(a)  If,  at  any  time  during  the  continuance  of  this  agreement,  it 
shall  be  deemed  for  the  best  interests  of  the  said  firm  that  the 
capital  be  increased,  and  a  majority  of  the  partners  shall  vote  to 
so  increase  said  capital,  then  each  partner  in  said  firm  shall  con- 
:tribute  to  such  additional  capital  in  the  same  proportion  as  the 
amount  of  capital  he  then  holds  bears  to  the  total  capital  of  the 
firm  at  such  time. 

In  case  any  partner  neglects  or  refuses  to  so  contribute  such 
additional  capital,  then  the  partners  contributing  shall  be  enti- 
tled to  purchase  the  interest  of  such  noncontributing  partner,  at 
its  appraised  value  before  any  of  their  additional  capital  is  con- 
tributed by  such  contributing  partners. 

(b)  If,  at  any  time  hereafter,  further  capital  shall  be  required 
for  carrying  on  the  business,  and  a  majority  of  the  partners  shall 
determine  to  increase  the  capital,  the  additional  capital  shall  be 
advanced  by  the  partners  in  equal  shares  (or  in  such  proportions 
as  they  have  respectively  contributed  to  the  original  capital  of 
the  firm). 


§     1078  LAW    OF    PARTNERSHIP  1462 

§  1078.     Patents  as  partnership  property. 

(a)  The  patent  rights  in  the  patent  known  and  described  as 
follows,  to  wit  (description),  now  held  by  ,  shall  be  con- 
tributed by  said  ,  to  said  partnership,  and  as  a  considera- 
tion therefor  he  shall  have,  fully  paid  up,  a  one-third  interest  in 
the  said  partnership,  and  such  partnership  interest  in  all  the  assets 
of  said  partnership. 

Said  patent  shall  be  duly  and  legally  transferred  by  said 

to  this  partnership,  which  partnership  shall  thereby  be  substituted 

for  said as  to  all  his  rights,  of  every  kind  and  description, 

in  said  patents  now  owned  by . 

(b)  The  patent  right  in  (describing  patent)  shall  be  consid- 
ered as  part  of  the  partnership  property,  and  to  have  been  brought 
into  the  business  as  capital  by  the  said  patentee ;  and  no  share  or 
interest  therein,  or  license  to  use  the  same,  shall  be  sold,  granted 
or  assigned  to  any  person  or  persons,  without  both  partners'  con- 
sent; and  moneys,  benefits  and  advantages  to  accrue  from  any 
such  sale,  grant,  assignment  or  license  shall  be  divisible  between 
the  partners  in  the  same  proportions  as  the  profits  of  the  business 
are  hereinafter  directed  to  be  divided.  The  said  patent  right  shall, 
for  the  purposes  of  the  business,  and  of  any  accounts  in  relation 

thereto,  be  taken  to  be  of  the  value  of dollars  at  this  date. 

and  to  become  depreciated  in  value  at  the  rate  of  dollars 

every  half  year. 

§  1079.     Interest  on  capital. 

Each  partner  shall  be  credited  in  partnership  accounts  with 

interest  at  the  rate  of per  cent,  per  annum  on  the  share  of 

the  capital  for  the  time  being  standing  to  his  credit,  and  such 

interest  shall  be  paid  to  him  on  the  day  of  ,  and  the 

day  of ,  in  every  year,  before  any  division  of  profits 

is  made,  and  such  capital  and  interest  shall  be  deemed  to  be  a 
debt  due  from  the  partnership. 

§  1080.     Rent  paid  to  one  partner. 

The  said shall  be  allowed  by  the  partnership dollars 

per  year,  as  rent  for  the  aforesaid  real  estate  in  street, 


1463  FORMS PARTICULAR  CLAUSES  §  1083 

while  the  said  business  shall  be  carried  on  therein;  but  said  real 

estate  shall  continue  the  sole  property  of  the  said  ,  subject 

only  to  be  used  for  the  purposes  of  the  partnership  business, 

§  1081.     Deposit  of  partnership  moneys. 

(a)  All  moneys  which  shall  from  time  to  time  be  received  for 
or  on  account  of  said  partnership,  not  required  for  current  ex- 
penses, shall  be  deposited  immediately  in  the  bank  for  the  time 

being  dealt  with  by  the  partnership  (or,  to  the bank),  in  the 

same  drafts,  checks,  bills  or  cash  in  which  the  same  are  received, 
and  all  disbursements  for  or  on  account  of  the  partnership  shall 
be  made  by  check  on  such  bank. 

(b)  The  bankers  of  the  partnership  shall  be  the Banking 

Company,  or  such  other  bankers  as  the  partners  shall  from  time 
to  time  agree  upon;  and  all  partnership  moneys  (not  required 
for  current  expenses)  shall  be  paid  into  the  firm's  account  at 
the  said  bank  at  the  end  of  every  week.  Each  partner  shall  be 
at  liberty  to  draw  on  the  partnership  account,  but  only  for  part- 
nership purposes  or  as  mentioned  in  succeeding  clauses  hereof, 
and  only  by  drafts  or  checks  upon  such  bankers  in  the  firm  name. 

§  1082.     Expenses. 

All  rent,  expenses  for  repairs  or  improvements,  all  taxes,  pre- 
miums of  insurance,  salaries  and  wages,  and  any  and  all  other 
reasonable  and  necessary  expenses,  losses  and  damages  which 
may  be  incurred  in  carrying  on  the  partnership  business  (and  the 
interest  on  the  capital,  payable  to  the  respective  partners),  shall 
be  paid  out  of  the  receipts  and  earnings  of  the  said  business,  and 
in  case  such  receipts  and  earnings  are  insuf^cient  to  pay  such 
charges,  then  said  partners  shall  contribute  thereto  in  the  shares 
or  proportions  in  which  they  are  entitled  to  the  profits  of  the 
business. 

§  1083.     Division  of  profits  and  losses. 

(a)  Each  partner  herein  shall  share  in  all  profits  or  losses  of 
said  business  in  the  same  proportion  as  his  share  in  the  capital  of 
said  firm  bears  to  the  total  capital  of  said  firm. 

42 — Row.  ON  Partn. — Vol.  2 


§    1084  LAW    OF    PARTNERSHIP  1464 

(b)  The  partners  shall  be  entitled  to  the  net  profits  of  the  busi- 
ness in  equal  shares  (or  in  the  shares  following,  that  is  to  say, 
etc.),  and  the  net  profits  shall  be  divided  as  soon  after  the  end 
of  each  year  as  the  general  annual  account  shall  Lave  been  taken, 
as  hereinafter  provided. 

All  losses  happening  in  the  course  of  the  said  business  shall  be 
borne  in  the  same  proportions,  unless  caused  through  the  wilful 
neglect  or  default  (and  not  the  mistake  or  error)  of  either  of 
the  said  partners,  in  which  case  the  loss  so  incurred  shall  be  made 
good  by  the  partner  through  whose  neglect  or  default  such  losses 
shall  arise. 

(c)  The  partners  shall  at  all  times  during  the  continuance  of 
their  partnership  bear,  pay  and  discharge  equally  between  them 
all  rents  and  all  other  expenses  that  may  be  required  for  the 
prosecution  and  management  of  the  said  business;  and  all  gains, 
profits  and  increase  that  shall  come  or  arise  from  or  by  any  means 
of  their  said  business  shall  be  divided  between  them  equally;  and 
all  loss  that  shall  happen  to  their  said  joint  business  by  deprecia- 
tion of  commodities,  bad  debts  or  otherwise,  shall  be  borne  and 
paid  between  them  equally. 

(d)  The  profits  and  losses  shall  belong  to,  and  be  borne  by, 
the  said and in  equal  shares. 

(e)  And  each  of  said  partners  shall  be  entitled  to  one  equal 
part  of  the  profits  of  the  said  business,  and  all  losses  hap- 
pening in  the  course  of  the  said  business  shall  be  borne  in  the 
same  proportions,  unless  the  same  shall  happen  through  the  wilful 
neglect  or  default  (and  not  the  mistake  or  error)  of  either  of 
the  said  partners,  in  which  case  the  loss  so  incurred  shall  be  made 
good  by  the  partner  through  whose  neglect  or  default  such  losses 
shall  arise. 

§  1084.     Guaranty  of  profits. 

In  case  the  share  of  said in  the  said  net  profits  shall  in 

any  year  be  less  than dollars,  such  share  shall  in  every  such 

year  be  made  up  to dollars  by  the  other  partners,  by  contri- 


1465  FORMS PARTICULAR  CLAUSES  §  1085 

butions  in  proportion  to  the  shares  in  which  they  are  entitled  to 
the  net  profits. 

§  1085,     Advances  to  partners. 

(a)  The  said  partners  shall  be  at  liberty  to  draw  out  of  the 
said  business,  in  anticipation  of  their  expected  profits,  the  fol- 
lowing sums,  namely :  the  said ,  a  sum  not  exceeding 

dollars ;  the  said ,  a  sum  not  exceeding dollars ;  and  the 

said ,  a  sum  not  exceeding dollars  in  any  quarter  of 

a  year ;  but  in  case  in  any  year  the  amount  so  drawn  out  by  any 
partner  shall,  on  taking  the  general  account,  be  found  to  be  in 
excess  of  his  share,  then  immediately  after  such  account  he  shall 
refund  the  excess  so  drawn  out. 

(b)  The  partners  may,  from  time  to  time,  draw  out  of  the 
said  business,  for  their  own  use  respectively,  any  sum  or  sums 

not  exceeding  the  sums  following,  that  is  to  say :  The  said , 

the  sum  of  —■ —  dollars  per  month ;  the  said ,  the  sum  of 

dollars  per  month;  and  the  said  ,  the  sum  of  

dollars  per  month ;  such  sums  to  be  duly  accounted  for  by  each 
partner  respectively  on  the  taking  of  every  such  general  annual 
account  hereinafter  directed ;  and  any  partner  whose  drawings 
shall,  on  the  taking  of  such  account,  be  found  to  exceed  his  share 
of  the  net  profits  and  interest  on  capital  accrued  to  him  for  the 
previous  year,  shall  forthwith  refund  the  difference. 

(c)  Each  of  the  said  partners  respectively  shall  be  at  liberty, 
from  time  to  time,  to  draw  out  of  the  said  business  any  sum  or 

sums  of  money,  not  exceeding  the  sum  of dollars  per  month, 

for  his  own  use;  all  such  sums,  at  the  time  of  drawing  the  same, 

.  to  be  entered  in  the  cash-book,  and  to  be  duly  accounted  for  on 
every  settlement  of  accounts  and  divisions  of  the  profits  of  the 
said  business, 

(d)  The  said may  draw,  out  of  the  profits,  money  not 

exceeding dollars  in  each  month;  and  the  said  may 

draw,  out  of  the  profits,  money  not  exceeding dollars  in 

each  month. 


§     1086  LAW    OF    PARTNERSHIP  1466 

§  1086.     Overdrawing  accounts. 

Neither  partner  hereto  shall  draw,  for  his  own  use,  any  of  the 
funds  of  this  firm,  except  salary  and  division  of  profits,  when 
due  and  payable,  as  provided  in  this  contract,  unless  it  shall  be 
with  the  previous  knowledge  and  consent  of  his  copartner. 

In  such  cases,  where  one  partner,  with  the  consent  of  his  co- 
partner, shall  so  withdraw  any  firm  funds  for  his  individual  use, 

4ie  shall  pay  interest  thereon  at  the  rate  of  per  cent,  per 

annum.  As  an  offset  to  such  interest,  he  may  deduct  interest,  at 
the  same  rate,  on  any  of  his  individual  funds  used  by  said  firm, 
provided  it  be  so  used  with  the  consent  of  all  the  partners  in  said 
firm. 

§  1087.     Expense  accounts. 

Each  partner  herein  shall  be  entitled  to  an  expense  account  of 

not  to  exceed dollars  per  week,  of  his  actual,  reasonable  and 

necessary  expenses,  incurred  for  and  in  behalf  of  said  firm,  but 
shall  keep  an  itemized  account  thereof,  which  account  shall  only 
bind  the  other  members  thereof,  when  approved  in  writing  by  at 
least  a  majority  of  said  partners.  All  such  accounts  shall  be  filed, 
after  such  approval,  and  kept  for  a  period  of  at  least  one  year 
after  such  approval. 

§  1088.     Advances  by  partner  to  firm. 

Any  partner  may  from  time  to  time,  with  the  consent  of  the 
others,  advance  any  sums  of  money  to  the  firm  by  way  of  loan, 

and  every  such  advance  shall  bear  interest  at  the  rate  of per 

cent,  per  annum,   from  the  time  of  making  the  advance  until 

repayment  thereof,  and  may  be  withdrawn  at  any  time  on 

months'  notice. 

§  1089.     Dormant  partner. 

Said shall  contribute  the  sum  of dollars  to  said  firm, 

as  his  share  of  the  capital  thereof,  but  shall  have  no  active  part 
in  the  management  of  the  business  of  said  firm,  nor  shall  his  name 
be  used  in  said  firm  name,  nor  in  any  advertising  of  said  firm, 
but  shall  be  entitled  to per  cent,  of  the  profits,  if  any,  of 


1467  FORMS PARTICULAR  CLAUSES  §  1092 

said  firm,  and  shall  bear per  cent,  of  the  losses,  if  any,  of 

said  firm. 

Nothing  herein,  however,  shall  be  so  construed  as  to  restrict 

said from  an  inspection  of  said  business,  and  the  books  and 

accounts  thereof,  at  any  reasonable  time. 

§  1090.     Regular  meetings. 

On  Monday  of  each  week,  at  7 :30  p.  m.,  there  shall  be  a  meet- 
ing of  said  partners,  at  the  office  of  said  firm,  for  the  purpose  of 
going  over  expense  accounts  for  the  preceding  week,  and  for  the 
further  purpose  of  discussing  and  acting  upon  the  general  con- 
duct of  the  business  of  said  partnership. 

For  any  matters  within  the  scope  of  the  business,  and  within 
this  or  supplemental  contracts,  a  majority  of  said  partners  pres- 
ent at  any  such  meeting  shall  prevail.  Any  change  of  the  scope 
or  nature  of  said  business,  however,  shall  not  be  made  except  by 
and  with  the  knowledge  and  consent  of  all  of  said  partners. 

§  1091.     Bond  of  partner. 

Each  member  of  this  partnership  shall  enter  into  a  bond  in 

the  sum  of  dollars,  satisfactory  to  all  of  his  copartners 

hereunder,  to  the  effect  that  he  shall  fully  account  to  the  said 
partnership  for  all  property  of  the  said  firm  which  shall  come 
into  his  possession,  and  that  he  will  turn  the  same  over  to  said 
firm. 

§  1092.     Time  to  be  devoted  to  firm. 

(a)  Each  partner  shall  devote  his  whole  time  and  attention  to 
the  partnership  business,  and  diligently  and  faithfully  employ 
himself  therein,  and  carry  on  the  same  to  the  greatest  advantage 

of  the  partnership.    (Provided,  however,  that  the  said shall 

give  only  such  an  amount  of  supervision  and  attention  to  the 
said  business  as  may  be  necessary  for  the  efficient  management 
thereof,  and  except  to  that  extent  shall  not  be  bound  to  personal 

attendance  or  participation  therein.    Or,  the  said shall  not 

be  obliged  to  attend  to  the  said  business  any  further  than  he 
shall  think  proper.) 


§     1093  LAW    OF    PARTNERSHIP  1468 

(b)  Each  of  said  partners  shall  give  his  whole  time  and  atten- 
tion, during  office  hours,  to  the  business  of  said  firm,  excepting 
in  case  of  sickness  for  short  periods.    In  case  of  a  continuous 

sickness  for  a  period  exceeding weeks,  the  other  partners 

hereunder  may  hire  help  to  take  the  place  of  such  sick  partner, 

for  a  salary  of  not  to  exceed dollars  per  week,  ;3nd  deduct 

the  same  from  the  salary  of  such  sick  partner. 

Each  partner  shall  be  entitled  to  a  vacation  of weeks  each 

year,  but  only  one  of  said  partners  shall  take  such  vacation  at  the 
same  time.  In  case  of  conflict  between  such  partners  as  to  the 
time  of  such  vacation,  the  choice  of  time  shall  be  determined 
by  lot. 

(c.)  It  is  agreed  by  and  between  the  parties  that  at  all  times 
during  the  continuance  of  their  said  partnership  they  and  each 
of  them  will  give  their  attention  to  the  business,  and  with  their 
full  skill  and  power  will  exert  themselves  for  their  joint  interest, 
profit,  benefit  and  advantage. 

§  1093.     Vacations. 

Each  partner  shall  be  entitled  to weeks'  vacation  in  each 

year.   In  the  first  year  of  the  partnership  the  said shall  have 

the  first  choice  of  the  time  at  which  he  shall  take  his  vacation, 
and  in  all  succeeding  years  the  choice  shall  be  made  by  the  part- 
ners alternately. 

§  1094.     Engaging  in  other  business. 

(a)  No  partner  shall,  during  the  continuance  of  the  partner- 
ship, carry  on  or  be  concerned  or  interested,  directly  or  indirectly, 
in  the  same  kind  of  business  as  that  carried  on  by  said  partner- 
ship, nor  be  engaged  in  or  undertake  any  other  trade,  or  business, 
without  the  consent  in  writing  of  the  other  partners  or  partner. 

(b)  Neither  partner  shall,  either  alone  or  with  any  other 
person,  either  directly  or  indirectly,  engage  in  any  trade  or  busi- 
ness except  upon  the  account  and  for  the  benefit  of  the  partner- 
ship.    (Provided,  however,  that  the  said may  continue  the 

business  at wherein  he  is  now  concerned  or  engaged. ) 


1469  FORMS — PARTICULAR  CLAUSES  §  1097 

§  1095.     Managing  partner. 

The  said shall  be  the  manager  of  the  said  business,  and 

shall  be  paid  for  his  services  as  manager  the  annual  sum  of 

dollars  before  any  division  of  profits  is  made,  and  in  addition 
thereto  his  share  of  the  profits,  by  equal  quarterly  payments,  the 
first  salary  payment  to  be  made  on  the day  of 

§  1096.     Salary  to  come  only  from  profits. 

Said shall  devote  his  whole  time  to  the  said  business  of 

said  firm,  and  shall  receive  therefor  the  sum  of dollars  per 

month,  which  salary,  however,  shall  only  be  payable  out  of  the 
profits  of  said  business. 

Said  salary  shall,  however,  be  cumulative,  and  all  accumulated 

salary  shall  be  payable  to  said out  of  said  profits,  whenever 

made,  before  any  payment  shall  be  made  to  any  other  partner 
herein,  of  any  share  of  said  profits. 

§  1097.     Limit  upon  contracts  by  one  partner. 

(a)  Neither  partner  hereto  shall,  without  the  consent  of  his 
copartner,  enter  into  any  contract  in  behalf  of  said  firm  in  ex- 
cess of dollars. 

(b)  Neither  partner,  without  the  previous  consent  in  writing 
of  the  others,  shall  buy  or  sell  or  enter  into  any  contract  for  the 
purchase  or  sale  of  any  goods  or  other  articles  amounting  to  the 
value  of dollars  or  more. 

(c)  No  partner  shall  buy,  order,  or  contract  for  any  article 

exceeding  the  value  of dollars,  without  the  previous  consent 

in  writing  of  the  other  partners  or  partner;  and  in  case  he  does 
so,  the  other  partners  or  partner  shall  have  the  option  to  take 
the  goods  or  articles  so  bought,  ordered,  or  contracted  for,  on 
behalf  of  the  partnership,  or  to  leave  the  same  for  the  separate 
use  of  the  partner  so  buying,  ordering,  or  contracting,  to  be  paid 
for  out  of  his  own  money. 

(d)  Neither  of  the  said  partners  shall,  in  the  course  of  the 
said  business,  without  the  consent  of  the  others  of  them,  enter 
into  any  contract  or  engagement,  or  give  credit,  or  lend  any  of 
the  partnership  moneys,  or  give  any  bill,  note,  or  security,  or 


§     1098  LAW    OF    PARTNERSHIP  1470 

contract  any  debt  on  account  of  the  said  partnership,  except  in 
the  usual  and  regular  course  of  the  business,  and  for  the  benefit 
thereof;  or  compound,  release,  discharge,  or  postpone  any  debt, 
duty,  or  demand  due  to  the  said  firm ;  or  become  bail  or  security ; 
or  enter  into  any  gaming  transaction  or  time  bargain  for  the  sale 
or  purchase  of  wheat,  corn,  or  other  grain,  or  of  any  produce, 
or  of  railroad  or  other  shares  or  bonds;  or  expose  himself  to 
any  other  risk  as  such  partner  as  aforesaid. 

§  1098.     Negotiable  paper. 

(a)  No  partner  shall,  without  the  other  partners'  consent, 
draw,  accept  or  sign  any  bill  of  exchange  or  promissory  note,  or 
contract  any  debt  on  account  of  the  partnership,  or  employ  any 
of  the  moneys  or  effects  thereof,  or  in  any  manner  pledge  the 
credit  thereof,  except  in  the  usual  and  regular  course  of  business. 
(Any  infraction  of  this  provision  shall  be  a  ground  for  an  imme- 
diate dissolution  of  the  partnership  as  to  the  offending  partner, 
and  the  other  partners  may  forthwith  declare  the  same  dissolved 
by  a  written  notice  to  the  offending  partner.) 

(b)  All  checks,  notes,  and  other  writings  pledging  the  credit 
or  affecting  the  property  of  the  partnership,  shall  be  signed  by 
the  said  ,  or ,  and  not  otherwise. 

§  1099.     Bonds  and  securities. 

(a)  Whenever  there  shall  be  occasion  to  give  any  bond,  note, 
bill  or  other  security  for  the  payment  of  any  money  on  account 
of  the  partnership,  the  same  shall  be  respectively  signed  and 
executed  by  all  the  (acting)  partners,  unless  in  the  course  of 
business  the  use  of  the  partnership  name  by  one  partner  shall  be 
unavoidable. 

(b)  If  there  shall  be  occasion  to  give  any  bond,  promissory 
note,  bill  of  exchange,  or  other  security  for  the  payment  of  any 
money  on  account  of  the  partnership,  except  when  the  giving  of 
such  obligation  shall  in  the  common  course  of  business  be  un- 
avoidable, the  same  shall  be  signed  by  both  partners;  and  if  either 
partner  shall  give  such  obligation,  except  in  the  case  aforesaid, 
the  same  shall  be  deemed  to  be  given  on  his  separate  account,  and 


1471  FORMS PARTICULAR  CLAUSES  §  1103 

shall  be  payable  out  of  his  separate  estate,  and  he  shall  indemnify 
the  other  partner  against  the  payment  thereof. 

§  1100.     Suretyship. 

(a)  No  partner  shall,  without  the  others'  previous  written 
consent,  enter  into  any  bond,  or  become  bail,  surety  or  security, 
for  any  person. 

(b)  And  it  is  further  agreed  that,  during  the  continuance  of 
their  said  partnership,  none  of  the  said  partners  shall  indorse  any 
note,  or  otherwise  become  surety  for  any  person  or  persons 
whomsoever,  without  the  consent  of  the  others  of  the  said  part- 
ners. 

(c)  Unless  the  written  consent  of  the  other  partners  has  been 
given,  no  partner  shall  enter  into  any  bond  or  become  surety  or 
security  with  or  for  any  person  or  knowingly  cause  or  suffer  to 
be  done  anything  whereby  the  partnership  property  may  be  at- 
tached or  taken  in  execution. 

§1101.     Extending  credit. 

No  partner  shall  lend  any  money,  or  give  credit  to,  or  have 
dealings  on  behalf  of  the  partnership  with,  any  person,  partner- 
ship or  corporation  whom  the  other  partners  or  partner  shall 
have  forbidden  him  to  trust  or  deal  with;  and  if  he  shall  act  con- 
trary to  this  provision,  he  shall  repay  to  the  partnership  any  loss 
which  may  have  been  incurred  thereby. 

§  1102.     Pledging  credit. 

No  partner  shall  pledge  the  credit  of  the  firm  or  use  any  money, 
goods  or  effects  of  the  partnership  except  in  the  ordinary  course 
of  business  and  upon  the  account  or  for  the  benefit  of  the  part- 
nership, 

§  1103.     Causing  attachment  of  property. 

No  partner  shall  do,  or  willingly  suffer  to  be  done,  anything 
whereby,  or  by  means  whereof,  the  stock-in-trade,  capital  or  prop- 
erty of  the  partnership  may  be  attached  or  taken  on  execution. 


§     1104  LAW    OF    rARTXERSHIP  1472 

§  1104.     Release  of  debts. 

No  partner  shall,  without  consent  of  the  others,  compound, 
release  or  discharge  any  debt  which  shall  be  due  or  owing  to  the 
partnership,  without  receiving  the  full  amount  thereof. 

§  1105.     Hiring  employes. 

No  partner  shall  hire  or  dismiss,  unless  m  case  of  gross  mis- 
conduct, any  clerk  or  any  other  person  in  the  employment  of  the 
partnership,  without  the  other  partners'  consent. 

§  1106.     Giving  information. 

Each  partner  shall,  upon  every  reasonable  request,  render  to 
the  others,  or  any  of  them,  a  true  account  of  all  transactions 
relating  to  the  firm's  business,  and  full  information  of  all  letters, 
accounts,  writings  and  other  things  which  have  come  into  his 
hands  or  to  his  knowledge  concerning  its  business. 

§  1107.     Indemnity  against  individual  debts. 

(a)  Each  partner  sliall  promptly  pay  his  own  debts,  and  keep 
indemnified  the  other  partners,  and  the  stock-in-trade,  capital  and 
property  of  the  partnership,  against  the  same,  and  all  expenses 
on  account  thereof. 

(b)  Each  partner  shall  at  all  times  duly  and  punctually  pay 
and  discharge  his  separate  and  private  debts  and  engagements 
whether  present  or  future  and  keep  indemnified  therefrom  and 
from  all  actions,  claims  and  demands  in  respect  thereof,  the  part- 
nership property. 

§  1108.     Keeping  trade  secrets. 

Neither  partner  shall,  during  the  continuance  of  the  partner- 
ship, nor  for years  after  its  determination  by  any  means, 

without  the  others'  written  consent,  or  of  his  executors  or  ad- 
ministrators, divulge  to  any  person  not  a  member  of  the  firm  any 
trade  secret,  method  of  manufacture  or  special  information, 
employed  in  or  conducive  to  the  partnership  business,  and  which 
may  come  to  his  knowledge  in  the  course  of,  or  by  reason  of, 
this  partnership. 


1473  FORMS PARTICULAR  CLAUSES  §  1110 

§1109.     Keeping  accounts. 

(a)  Proper  books  of  account  shall  be  kept  by  the  said  part- 
ners, and  entries  made  therein  of  all  such  matters,  transactions 
and  things  as  are  usually  entered  in  books  of  account  kept  by 
persons  engaged  in  the  same  or  similar  business.  Such  books, 
and  all  partnership  letters,  papers  and  documents  shall  l^e  kept  at 
the  firm's  counting-house  or  office,  and  each  partner  shall  at  all 
times  have  free  access  to  examine,  copy  and  take  extracts  from 
the  same. 

(b)  There  shall  be  kept  at  all  times,  during  the  continuance 
of  their  said  partnership,  full  and  correct  books  of  account 
wherein  each  of  the  said  partners  shall  enter  all  moneys  by  them 
or  any  one  of  them  received,  paid,  laid  out,  or  expended  in  and 
about  the  said  business,  also  all  goods,  wares,  commodities,  and 
merchandise  by  them  or  either  of  them  bought  or  sold,  by  reason 
or  on  account  of  the  said  business,  and  all  other  matters  and 
things  whatsoever  belonging  in  any  wise  to  the  said  business  and 
the  management  thereof;  which  said  books  shall  be  used  in  com- 
mon between  the  said  partners,  so  that  either  of  them  may  have 
access  thereto  without  any  interruption  or  hindrance  of  the 
others. 

(c)  Proper  books  of  account  shall  be  kept  at  the  office  of  the 
firm,  in  which  shall  be  entered  all  the  dealings  and  transactions 
of  the  said  partnership.  The  said  books  shall  at  all  times  be  open 
to  the  inspection  of  all  or  any  of  the  partners,  and  be  kept  con- 
stantly posted  up.. 

§1110.     Taking  accounts. 

(a)   On  the day  of ,  19 — ,  and  on  the  same  day  in 

each  subsequent  year,  a  general  account  shall  be  taken  of  the 
assets  and  liabilities,  and  of  all  dealings  and  transactions  of  said 
firm  during  the  then  preceding  year,  and  of  all  matters  and  things 
usually  comprehended  in  accounts  of  a  like  nature ;  and  in  taking 
such  account  a  just  valuation  shall  be  made  of  all  items  requiring 
valuation.  Such  account  shall  be  entered  in  a  book,  which  shall 
be  signed  by  all  the  partners,  and  when  so  signed  shall  be  binding 


§     1111  LAW    OF    PARTNERSHIP  1474 

on  them,  save  that,  if  any  manifest  error  therein  shall  be  found 

and  signified  by  any  partner  to  the  others  within calendar 

months  thereafter,  the  same  shall  be  rectified.  (The  profits  aris- 
ing from  the  business  as  determined  by  such  account  shall  be  car- 
ried to  the  credit  of  the  partners  in  the  proportions  hereinbefore 
specified  on  the  firm's  books  immediately  after  every  annual  ac- 
count shall  have  been  taken  and  signed,  and  may  be  drawn  out 
at  pleasure.) 

(b)   The  said  partners,  once  in  each  year,  namely,  on  the 

day  of in  each  and  every  year,  or  oftener  if  necessary,  shall 

make  and  render,  each  to  the  other,  full  and  correct  inventories 
and  accounts  of  all  profits  and  increase  by  them  or  either  of  them 
made,  and  of  all  losses  by  them  or  either  of  them  sustained;  and 
also  of  all  payments,  receipts,  disbursements,  and  all  other  things 
by  them  made,  received,  disbursed,  acted,  done,  or  suffered  in 
their  said  partnership  and  business;  and  upon  the  rendering  of 
every  such  account  shall  clear,  adjust,  pay,  and  deliver,  each  to 
the  other,  their  just  share  of  the  profits  so  made  as  aforesaid 

§  1111.     Majority  to  rule. 

(a)  In  case  of  disagreement  between  the  members  of  said 
partnership  upon  any  question  not  governed  by  this  agreement,  a 
majority  vote  of  all  the  members  of  said  partnership  shall  gov- 
ern. Such  majority  vote  shall  not,  however,  be  allowed  to  change 
any  of  the  provisions  of  this  partnership  agreement. 

(b)  In  all  cases  relating  to  the  management  of  the  partnership 
business,  the  decision  of  a  majority  in  value  of  the  acting  part- 
ners shall  be  conclusive  upon  and  bind  all  the  partners. 

§  1112.     Power  to  expel  partner. 

(a)  Whenever  any  member  of  said  partnership  shall  neglect 
or  refuse  to  abide  by  the  provisions  of  this  contract,  or  to  carry 
out  his  duties  as  provided  therein,  he  may,  by  a  two-thirds  vote 
of  all  the  members  of  said  firm,  be  expelled  from  said  partner- 
ship, upon days'  written  notice  of  said  vote,  and  upon  the 

payment  to  him  of  his  proportionate  share  of  the  assets  of  said 
firm,  as  found  upon  an  inventory  thereof,  said  inventory  to  be 


1475  FORMS PARTICULAR  CLAUSES  §  1113 

made  by  two  competent  persons,  one  of  which  shall  be  selected 
by  such  partner  sought  to  be  expelled,  and  one  by  his  copartners. 
In  case  the  assets  of  said  firm  are  less  than  the  liabilities,  as 
shown  by  such  Inventory,  then  such  expelled  partner  shall  forth- 
with pay  to  said  partnership  his  proportionate  share  of  said  defi- 
ciency, upon  the  remaining  partners  paying  the  creditors  of  said 
firm  in  full,  or  upon  their  giving  satisfactory  bond  to  such  ex- 
pelled partner,  indemnifying  him  from  such  debts. 

The  same  rule  of  expulsion  shall  govern  in  case  of  the  death, 
insanity,  insolvency  or  assignment  of  his  interest  In  said  firm. 
Provided,  however,  that  in  case  notice  can  not  be  served  upon 
him  on  account  of  death  or  insanity,  that  it  shall  be  upon  his 
guardian  or  personal  representative. 

(b)  If  either  partner  shall  infringe  any  of  the  clauses  herein 
contained,  or  break  any  of  the  provisions  of  this  agreement,  or 
become  insane,  or  enter  into  any  arrangement  or  composition  for 
the  benefit  of  his  creditors,  or  shall  (without  the  consent  of  the 
other  partner)  make  any  assignment  either  absolutely  or  by  way 
of  mortgage,  or  declaration  of  trust  of  all  or  any  of  his  share  and 
interest  in  the  partnership,  the  other  partner  may  forthwith  de- 
termine the  partnership  by  written  notice,  left  at  the  place  of 
business,  and  may  thereafter  continue  the  business  alone,  and 

may  advertise  notice  of  the  dissolution  in  the (newspaper), 

and,  if  necessary,  sign  the  infringing  partner's  name  to  such  no- 
tice of  dissolution. 

§  1113.     Sale  or  assignment  of  partner's  share. 

(a)  No  partner  shall  assign  his  share  or  interest  in  the  part- 
nership, without  the  previous  written  consent  of  the  others. 

(b)  It  shall  be  lawful  for  any  partner,  or  his  executors  or 
administrators,  to  assign  all  or  any  of  his  share  or  interest  in 
the  partnership  concern,  subject  to  the  provisions  as  to  pre- 
emption herein  contained. 

(c)  Any  partner  who  shall  desire  to  sell  his  share  and  interest 
In  the  business  shall  be  at  liberty  to  do  so,  but  shall  in  such  case 
first  offer  such  share  and  interest  to  the  other  partners  or  partner 


§     1114  LAW    OF    PARTNERSHIP  1476 

for  the  time  being  at  a  price  to  be  named  by  the  selHng  partner, 
and  if  the  other  partners  or  partner  shall  not  within  one  calendar 
month  accept  such  offer,  then  the  selling  partner  shall  be  at  liberty 
to  sell  his  share  and  interest  to  any  other  person  or  persons  at 
the  same  or  a  higher  price,  but  shall  not  sell  the  same  to  any  other 
person  at  a  less  price,  unless  and  until  it  shall  have  been  offered 
to  the  other  partners  or  partner  for  the  time  being  at  such  less 
price,  and  such  last-mentioned  offer  shall  not  have  been  accepted 
within  one  calendar  month. 

§  1114.     Retiring  partner  not  to  compete  with  business. 

In  the  event  of  any  of  the  said  partners  retiring  as  aforesaid, 
he  shall  not,  during  the  remainder  of  the  term  of  the  said  part- 
nership, carry  on  or  engage  or  be  interested,  directly  or  indirectly, 
in  any  other  business  competing  or  interfering  with  the  business 
of  the  said  firm. 

§  1115.     Admission  of  sons  into  firm. 

Either  of  said  partners  may  at  any  time  nominate  a  son,  being 
of  the  age  of  twenty-one  years  or  more,  to  succeed  to  his  share 
in  the  partnership  and  the  capital  and  future  profits  thereof ;  and 
upon  signing  a  proper  written  contract  respecting  the  admission 
of  a  new  partner,  every  such  son  shall  be  and  become  a  partner 
in  the  partnership  concern  in  the  place,  and  in  respect  of  the 
share  and  interest,  of  his  father  therein,  and  be  entitled  thereto 
upon  the  same  terms  and  conditions,  and  under  and  subject  to 
the  same  advantages,  regulations  and  agreements,  in  all  respects 
and  in  the  same  manner,  as  the  father  would  have  been  entitled 
to  if  he  had  remained  a  partner,  or  as  near  thereto  as  the  differ- 
ence of  circumstances  will  permit. 

§  1116.     Survivorship. 

There  shall  be  no  benefit  of  survivorship  between  the  partners, 
and  the  executors  and  administrators  of  each  partner  who  shall 
die  shall  become  entitled  to  his  share  as  part  of  his  personal 
estate. 


1477  FORMS PARTICULAR  CLAUSES  §  1118 

§  1117.     Purchase  of  deceased  partner's  share  by  surviving 
partners. 

If  any  partner  shall  die  before  the  expiration  of  the  term  of 
partnership,  the  surviving  partners  or  partner  shall  have  the 
option  to  retain  his  share  in  the  firm  capital  in  the  said  business 
during  the  residue  of  the  term  of  the  partnership,  and  shall  sig- 
nify such  option  to  the  representatives  of  the  deceased  partner 
within  a  reasonable  time;  and  in  case  the  surviving  partners  or 
partner  shall  elect  so  to  do,  the  said  business  shall  be  carried  on 
during  the  residue  of  the  said  term,  as  nearly  as  may  be,  accord- 
ing to  the  provisions  of  this  agreement,  but  so  that  the  repre- 
sentatives of  the  deceased  partner  shall  succeed  to  his  share  in 
the  business,  and  be  substituted  for  him  as  silent  partners  only : 
Provided,  that  in  case  the  surviving  partners  or  partner  shall 
continue  the  business  by  virtue  of  such  option  as  aforesaid,  all 
proper  instruments  for  carrying  the  provisions  of  this  clause 
into  effect  shall  be  executed  and  made  between  them  or  him  and 
the  representatives  of  the  deceased  partner:  Provided,  also,  that 
if  the  net  profits  of  the  business  which  shall  be  coming  to  the 
representatives  of  such  deceased  partner  shall  in  any  year  be  less 

than per  cent,  on  the  amount  of  the  capital  of  such  deceased 

partner  retained  in  the  said  business,  it  shall  be  lawful  for  such 
representatives  to  retire  from  the  partnership  on  giving  not  less 

than months'  notice  to  the  other  partners  or  partner  of  their 

intention  so  to  do,  or  leaving  such  notice  at  the  firm  office ;  and  at 
the  expiration  of  such  notice  the  partnership  shall  determine  as 
to  them,  and  they  shall  be  entitled  to  receive  the  share  of  capital 
of  such  deceased  partner,  "with  all  interest  and  profits  becoming 
due  thereon  up  to  the  expiration  of  such  notice,  on  the  same  or 
the  like  footing  as  if  the  deceased  partner  had  then  died,  and 
such  option  of  retaining  his  capital  as  aforesaid  had  not  been 
exercised.  . 

§  1118.     Dissolution  in  case  of  loss. 

(a)  In  case  the  net  assets  of  said  partnership  shall  at  any  time 
fall  below  the  sum  of dollars,  then  any  member  thereof,  in 


§     1119  LAW    OF    PARTNERSHIP  1478 

spite  of  the  fact  that  the  partnership  has  not  expired  by  lapse  of 
time,  may  withdraw  from  said  firm,  and  commence  an  action  for 
the  dissolution  of  said  firm. 

(b)  At  any  time  when,  owing  to  losses  from  any  cause  what- 
ever, one- fourth  of  the  entire  capital  of  the  partnership  has  been 
sunk,  or  reasonable  apprehensions  are  entertained  that  further  - 

capital,  to  the  extent  of •  dollars,  will  be  required  in  order  to 

carry  on  the  firm  business,  a  majority  in  value  of  the  partners 
may  require  the  partnership  to  be  dissolved  and  wound  up,  as  if 
the  same  had  expired  by  lapse  of  time. 

(c)  If  it  shall  appear  at  any  account-taking  of  the  said  partner- 
ship that  a  loss  of  the  amount  of dollars  or  upward  has  been 

incurred  during  the  preceding  year,  or  that  a  loss  of  the  amount 

of dollars  or  upward  altogether  has  been  incurred  since  the 

commencement  of  the  partnership  business,  it  shall  be  lawful  for 
any  of  the  partners  thereupon  to  determine  and  dissolve  the  said 
partnership  by  giving,  within  three  calendar  months  from  the 
time  of  such  account-taking,  notice  in  writing  to  the  other  part- 
ner or  partners  of  his  determination,  and  the  partnership  shall  be 
considered  to  have  determined  at  such  last  mentioned  account- 
taking. 

§  1119.     Withdrawal  of  partner. 

(a)  If  at  any  time  after  the day  of ,  19 — ,  any  part- 
ner shall  desire  to  retire  from  the  partnership,  he  shall  be  at 
liberty  to  give  to  the  other  partners  or  partner,  or  to  leave  for 
them  or  him  at  the  place  where  the  business  shall  for  the  time 
being  be  carried  on,  written  notice  of  such  desire  and  of  his  in- 
tention to  determine  the  partnership  so  far  as  he  is  concerned; 

and  the  partnership  shall,  at  the  expiration  of months  after 

the  giving  or  leaving  of  such  notice,  determine  accordingly  as  re- 
gards the  partner  giving  such  notice. 

(b)  Any  partner  may  retire  at  any  time  from  the  partnership, 
upon  giving  written  notice  of  his  intention  to  do  so,  to  the  other 
partners  personally,  and  the  partnership  shall  determine  as  to  him 
months  after  the  date  of  said  notice;  but  the  other  partners 


1479  FORMS PARTICULAR  CLAUSES  §  1121 

may  purchase  his  interest  at  a  fair  valuation  and  carry  on  the 
business. 

§  1120.     Dissolution  on  bankruptcy  of  partner. 

If  any  partner  shall  be  adjudicated  bankrupt  or  insolvent,  or 
shall  take  proceedings  for  liquidation  by  arrangement  or  compo- 
sition, or  compound  with  his  own  creditors,  and  the  other  part- 
ner shall  thereupon  give  to  him  notice  in  writing  that  the  part- 
nership shall  forthwith  determine,  or  shall  leave  such  notice  at 
the  place  where  the  business  of  the  partnership  shall  for  the  time 
being  be  carried  on,  then  immediately  upon  such  notice  being  so 
given  or  left  the  partnership  shall  determine.  The  partner  giving 
such  notice  shall  be  at  liherty  to  advertise  a  notice  of  dissolution, 
and,  if  necessary,  to  sign  the  name  of  the  other  partner  to  such 
notice. 

§  1121.     Dormant  partner's  share  on  dissolution. 

Upon  the  dissolution  of  the  said  partnership  by  lapse  of  time, 
the  death  of  either  of  the  said  partners,  or  by  such  notice  to 
be  given  by  the  said  (dormant  partner),  as  aforesaid,  the  said 
(dormant  partner),  or  his  executors  or  administrators  shall  in 
the  first  place  receive  out  of  the  said  partnership  joint  stock  and 

effects  the  full  sum  of dollars,  being  the  full  amount  of  the 

capital  contributed  by  him,  in  satisfaction  of  his  share  thereof, 
without  any  deduction  or  abatement  on  account  of  any  losses 
or  other  expenses  which  may  have  been  incurred  in  the  carry- 
ing on  of  the  said  business;  which  said  sum  of  dollars 

shall  be  paid  to  the  said  (dormant  partner),  his  executors  or 
administrators,  by  the  bond  of  the  said  (acting  partners),  -by 
four  equal  instalments,  at  three,  six,  nine  and  twelve  calendar 
months,  to  be  computed  from  the  time  of  the  dissolution 
of  the   said   partnership,   together  with   interest   for  the   same 

at  the   rate  of  per  cent,   per  annum,    to    be    computed 

from  the  time  of  such  dissolution.  In  case  the  said  partnership 
stock  and  effects  shall  prove  insufificient  to  pay  unto  the  said 
(dormant  partner),  his  executors  or  administrators  the  said  sum 
of dollars,  then  and  in  such  case  the  same  shall  be  made 

43 — Row.  ON  Partn. — Vol.  2 


§     1122  LAW    OF    PARTNERSHIP  1480 

good  by  the  said  (acting  partners),  their  executors  or  adminis- 
trators, out  of  his  or  their  own  separate  estate. 

§1122.     Goodwill. 

(a)  On  the  death  or  retirement  of  any  partner  no  allowance 
(or  an  allowance)  shall  be  made  to  him  or  his  representatives  in 
respect  of  the  value  of  the  good  will  of  the  said  business. 

(b)  The  good  will  of  said  partnership  shall  be  considered  an 
asset  of  said  partnership,  and,  upon  dissolution  of  the  said  firm, 
it  shall  be  sold  with  the  other  assets.  No  partner,  after  such  dis- 
solution, shall  do  business  under  such  firm  name,  unless  he  shall 
purchase  the  same,  but  nothing  herein  contained  shall  be  so  con- 
strued as  to  prevent  any  partner  from  pursuing  the  same  line 
of  business  after  such  dissolution,  under  another  name. 

In  case  any  partner  shall  withdraw  or  be  expelled  from  the 
said  firm,  the  said  rules  shall  apply  to  him,  but  the  remaining 
partners  shall  be  entitled  to  the  said  firm  name. 

(c)  On  dissolution  of  said  partnership  the  good  will  of  the 
business  shall  not  be  sold,  but  each  partner  shall  be  at  liberty  to 
commence  and  carry  on  a  similar  business  in  his  own  or  other 
name  not  identical  with  the  firm  name  and  to  send  circulars  to 
the  firm  customers  announcing  the  facts  of  the  dissolution  and 
commencement  of  business  by  a  former  partner. 

(d)  On  dissolution  of  said  partnership,  if  sold  as  a  going  con- 
cern, the  good  will  of  the  business  shall  be  treated  as  a  part- 
nership asset  and  no  partner  (unless  he  shall  be  the  purchaser 

of  such  business)  shall,  for years  from  the  completion  of 

such  sale,  directly  or  indirectly  carry  on  or  be  concerned  or  in- 
terested in  the  business  of  as  principal,  agent,  manager, 

traveler  or  servant  within miles  from  the  place  of  business 

of  said  partnership. 

§  1123.     Purchase  of  partner's  share  in  good  will. 

In  the  event  of  the  death  or  retirement  of  any  partner  and  the 
purchase  of  his  share  by  another  partner  the  good  will  of  the 
business  shall  be  regarded  as  part  of  the  partnership  assets,  and 
the  value  thereof  shall  be  deemed  to  be times  the  average 


1481  FORMS PARTICULAR  CLAUSES  §  1125 

I 

annual  profits  of  the  partnership  for  the  then  last  preceding 


years  or  from  the  commencement  of  the  partnership,  whichever 
be  the  shorter.  A  retiring  partner  whose  share  is  purchased 
shall  not,  for years  after  such  purchase,  directly  or  indi- 
rectly carry  on  or  be  concerned  or  interested  in  the  same  busi- 
ness as  principal,  agent,  manager,  traveler  or  servant  within 

miles  from  the  place  of  business  of  said  partnership. 

§  1124.     Sale  of  deceased  partner's  interest. 

The  executors  or  administrators  of  any  partner  who  shall  die 
during  the  partnership,  or  any  person  or  persons  to  whom  he  may 
by  will  bequeath  his  share  in  the  partnership  shall  be  entitled 
to  his  share  in  the  firm,  capital  stock,  property  and  effects  and 
may  either  continue  as  partner  or  partners  in  the  business  in  re- 
spect and  to  the  extent  of  his  share  and  interest  of  such  deceased 
partner,  or  may  sell  the  same  in  the  manner  hereinbefore  pro- 
vided with  respect  to  a  sale  by  any  living  partner  of  his  share 
and  interest. 

§  1125.     Purchase  of  share  of  deceased  or  bankrupt  partner. 

Upon  the  death  of  any  partner  or  his  adjudication  as  bankrupt 
or  insolvent,  or  the  taking  of  proceedings  for  liquidation  by  ar- 
rangement or  composition  with  his  creditors,  the  partnership 
shall  thereupon  determine  as  to  him,  and  he  or  his  executors,  ad- 
ministrators or  assigns,  as  the  case  may  be,  shall  have  no  interest 
in  common  with  the  sun^iving  or  other  partners  or  partner  in  the 
firm  property,  but  shall  be  considered  in  equity  as  a  vendor  or 
vendors  to  the  surviving  or  other  partners  or  partner  of  the 
shares  in  the  partnership  of  the  deceased,  or  bankrupt,  or  liquidat- 
ing, or  compounding  partner,  as  from  the  day  of  his  death,  or 
bankruptcy  or  insolvency,  or  of  his  having  taken  such  proceeding 
for  liquidation  as  aforesaid,  or  of  his  having  compounded  as 
aforesaid,  at  the  amount  standing  to  his  credit  at  the  last  pre- 
ceding annual  account,  together  with  interest  thereon  at  the  rate 

of per  cent,  per  annum,  in  lieu  of  profits,  from  such  annual 

account,  or  in  case  of  bankruptcy  or  insolvency,  at  the  option  of 
the  assignee,  at  an  amount  to  be  ascertained  by  arbitration,  under 


§     1126  LAW    OF    PARTNERSHIP  1482 

the  provision  hereinafter  contained;  but  less  any  sums  with- 
drawn by  him  in  the  meantime  in  diminution  of  his  share  of 

capital  or  profits;  and  the  balance,  with  such  per  cent. 

added,  or  the  amount  ascertained  by  arbitration,  as  the  case  may 
be,  shall  be  considered  a  debt  owing  from  the  partnership  to  the 
deceased,  bankrupt,  liquidating  or  compounding  partner,  or  his 
executors,  administrators  or  assignee,  and  shall  be  paid  by  three 

equal  instalments  at , and calendar  months,  with 

interest  thereon  at  the  rate  of  per  cent,  per  annum;  and 

all  necessary  deeds  and  assurances  shall  be  executed  for  vesting 
the  share  of  such  partner  in  the  surviving  or  other  partners. 

§  1126.  Payment  of  deceased  partner's  share  to  his  repre- 
sentatives. 
If  any  partner  shall  die,  an  account  and  statement  shall  be 
taken  and  made  out  of  his  share  of  the  capital  and  effects  of  the 
partnership,  and  of  all  unpaid  interest  and  profits  belonging  to 
him  up  to  the  time  of  his  death,  for  which  purpose  a  valuation 
shall  be  made  of  any  and  all  assets  or  effects  requiring  valuation, 
and  the  amount  so  ascertained  to  be  due  and  owing  to  the  de- 
ceased partner  shall  be  paid  by  the  surviving  partners  to  his 

representatives  within  calendar  months  from  the  date  of 

his  death,  with  interest  thereon  from  the  date  of  his  death,  until 

payment  at  the  rate  of per  cent,  per  annum;  and  on  such 

payment  the  share  of  the  deceased  partner  in  the  partnership 
property  and  effects  shall  go  and  belong  to  the  surviving  partners 
in  the  proportions  in  which  they  shall  have  contributed  to  the 
purchase  thereof, 

§  1127.     Continuation    in    business   by    deceased    partner's 
representatives. 

If  any  partner  shall  die  before  the  expiration  of  the  partner- 
ship term,  his  representatives  shall  have  the  option,  to  be  de- 
clared by  notice  in  writing  given  to  the  surviving  partners  or 

partner,  or  left  at  the  firm  office,  within  calendar  months 

after  his  death,  of  succeeding  to  his  share  in  the  said  business 
as  from  his  death  as  silent  partners;  and  if  such  option  shall  be 


1483  FORMS PARTICULAR  CLAUSES  §  1129 

exercised,  the  said  business  shall  be  carried  on  during  the  residue 
of  the  said  term  as  from  the  death  of  such  deceased  partner  as 
nearly  as  may  be  according  to  the  provisions  hereof,  so  that  the 
deceased  partner's  representatives  shall  succeed  to  his  share  in 
the  said  business,  and  be  substituted  for  him  as  silent  partners 
only :  Provided  also,  that  in  case  the  representatives  of  a  de- 
ceased partner  shall  elect  to  become  silent  partners,  by  virtue  of 
such  option  as  aforesaid,  all  proper  instruments  for  carrying  the 
provisions  of  this  present  clause  into  effect  shall  be  executed  and 
made  between  them  and  the  surviving  partners  or  partner. 

§1128.     Winding  up  business. 

Upon  dissolution  of  the  partnership  a  full  and  general  account 
of  the  firm  assets,  liabilities  and  transactions  shall  be  taken,  and 
the  assets  and  property  of  the  firm  shall,  as  soon  as  practicable, 
be  sold,  the  debts  due  the  partnership  collected,  the  proceeds  to 
be  applied,  first,  in  the  discharge  of  the  firm  liabilities  and  the 
expenses  of  liquidating  the  same;  and  next,  in  payment  to  each 
partner  or  his  representatives  of  any  unpaid  interest  or  profits 
belonging  to  him,  and  of  his  share  of  the  capital;  and  the  sur- 
plus, if  any,  shall  be  divided  between  the  partners  or  their  rep- 
resentatives in  the  shares  in  which  they  contributed  the  firm  cap- 
ital; and  the  partners  or  their  representatives  shall  execute  all 
requisite  or  proper  instruments  for  facilitating  the  collection  and 
division  of  the  partnership  property  and  for  their  mutual  in- 
demnity and  release. 

§  1129.     Division  of  property  upon  dissolution. 

(a)  At  the  expiration  of  this  agreement  the  said  parties  herein 
shall  '^ach  give  all  possible  aid  to  arrive  at  a  just  and  true  account 
of  all  the  assets  and  liabilities.  The  said  assets,  including  the 
good  will  of  said  business,  shall  first  be  offered  for  sale  to  the 
partners  herein,  and  the  partner  offering  the  most  for  the  same 
shall  be  allowed  to  purchase  the  same. 

In  case  there  is  no  partner  who  desires  to  purchase  the  said 
assets,  then  the  said  assets  shall  be  sold  to  whomsoever  shall 
pay  the  most  therefor. 


§     1130  LAW    OF    PARTNERSHIP  1484 

In  either  event,  all  liabilities  shall  be  paid  for  out  of  the  pro- 
ceeds of  such  sale.  The  net  amount  secured  by  such  sale  shall 
be  divided  among  the  parties,  in  proportion  to  their  interest  in 
said  firm,  at  such  time  of  dissolution. 

(b)  At  the  end  of  their  partnership  the  said  partners  shall  make 
each  to  the  other  full  and  correct  accounts  of  all  things  relating 
to  their  said  business,  and  shall  in  all  things  truly  adjust  the 
same;  and  all  the  stock  and  effects,  and  the  gains  and  increase 
thereof,  which  shall  then  appear  to  be  remaining  either  in 
money,  goods,  wares,  fixtures,  debts  or  otherwise,  shall  be  di- 
vided between  them  in  the  same  shares  and  proportion  that  they 
have  contributed  to  firm  capital. 

(c)  In  case  any  disagreement  shall  arise  as  to  the  division  of 
the  said  credits,  moneys,  property  and  effects,  then  the  outstand- 
ing credits  shall  be  collected  by  some  person  to  be  mutually  ap- 
pointed by  the  said  partners,  who,  after  deducting  thereout  an 
allowance  for  his  trouble,  and  all  incidental  expenses  incurred 
in  such  collection  as  aforesaid,  shall  pay  over  the  same  to  the  said 
partners  in  the  proportions  in  which  they  are  so  respectively 
entitled  thereto,  and  shall  sell  the  remainder  of  the  said  partner- 
ship property  and  effects,  and  divide  the  moneys  arising  there- 
from between  the  said  partners  in  the  same  proportions. 

§1130.     Final  accounting. 

Within days  after  the  dissolution  of  the  partnership,  a 

full  and  general  account  and  balance-sheet  shall  be  taken  and 
made  of  the  firm  property,  assets  and  liabilities ;  and  a  full  and 
particular  inventory  and  valuation  of  all  the  firm  machinery, 
plant,  tools,  utensils,  stock-in-trade,  materials  and  effects  shall  be 

made  by of ,  or  such  other  person  or  persons  as  the 

parties  hereto  agree  upon  for  that  purpose ;  and  all  debts  owing 

to  the  firm  shall  be  collected  and  got  in  by of ,  or  such 

other  person  or  persons  as  the  parties  hereto  shall  jointly  appoint 
for  that  purpose. 


1485  FORMS PARTICULAR  CLAUSES  §  1132 

§  1131.     Purchase  by  one  partner  on  dissolution. 

Upon  the  determination  of  the  said  partnership,  if  either  part- 
ner shall  desire  to  purchase  the  other  partner's  share  in  the  said 
partnership  effects,  he  may  do  so  on  giving  to  the  other  partner, 
his  executors  or  administrators,  written  notice  of  such  desire, 
within  thirty  days  after  the  dissolution  of  such  partnership.  And 
if  the  said  partners  shall  happen  to  differ  as  to  the  price  to  be 
given  for  the  share  of  the  other  partner  in  the  said  partnership 
effects,  then  the  value  thereof  shall  be  ascertained  by  two  dis- 
interested persons,  one  to  be  chosen  by  each  partner,  and  these 
referees,  previously  to  their  entering  upon  the  reference,  shall 
choose  an  umpire  between  them,  whose  decision,  if  such  referees 
do  not  agree,  shall  be  binding  and  conclusive  on  all  parties ;  and 
if  either  of  the  said  parties  shall  refuse  to  name  a  referee  within 
seven  days  after  request,  then  the  referee  named  by  the  other 
party  may  proceed  alone,  and  his  award  shall  be  binding  and 
conclusive  on  all  parties;  and  the  partner  desiring  to  purchase 
shall  thereupon  pay  to  the  other  partner,  his  executors  or  admin- 
istrators, such  sum  of  money  for  the  purchase  of  the  said  business 
as  the  said  referees,  or  their  umpire,  shall  determine  to  be  the 
value  thereof.  In  case  both  partners  desire  to  purchase  at  such 
\-aluation,  the  right  to  do  so  shall  be  awarded  to  the  partner  who 
shall  bid  for  the  privilege  of  purchasing  the  highest  sum  above 
such  valuation. 

§  1132.     Purchase  of  retiring  partner's  interest. 

In  case  the  said  partnership  shall  be  dissolved  in  pursuance  of 
any  notice,  given  or  delivered  as  heretofore  provided,  the  party 
to  whom  such  notice  shall  have  been  so  given  or  delivered  shall 
be  at  liberty  to  purchase  the  interest  of  the  retiring  partner,  and 
shall  pay  him  the  value  of  his  share  in  the  effects  of  the  said 
partnership;  and  the  amount  of  such  share  shall  be  ascertained 
by  two  persons,  one  to  be  chosen  by  the  partner  who  shall  give 
such  notice,  and  the  other  by  the  continuing  partner,  who,  pre- 
viously to  their  entering  into  the  reference,  shall  choose,  etc. 
(Continue  as  in  last  clause.) 


§    1133  LAW    OF    TARTNERSHIP  ,1486 

§  1133.     Retiring  partner's  covenant  as  to  debts. 

The  said hereby  covenants  with  tlie  said in  manner 

following  (that  is  to  say),  that  he,  the  said ,  has  not  at  any 

time  heretofore  contracted  any  debt  or  obligation  which  can  or 
may  charge  or  affect  the  said ,  his  executors  or  administra- 
tors, or  any  part  of  the  firm's  assets  or  effects;  nor  received 
nor  discharged  any  of  the  firm's  credits,  except  as  appears  by  the 
firm  books;  nor  done  any  act  whereby  any  part  of  the  share  and 
premises  hereby  assigned,  may  be  charged  or  encumbered  in  any 

manner  howsoever ;  and  that  he,  the  said ,  his  executors  or 

administrators,  will  at  all  times  hereafter,  on  the  request  and  at 
the  costs  of  the  said  ,  his  executors,  administrators  or  as- 
signs, make,  do  and  execute  every  such  further  assurance,  act  or 
thing  whatsoever  for  the  more  effectually  vesting  in  the  said 

■ ,  his  executors,  administrators  or  assigns  the  premises  hereby 

assigned,  and  every  part  thereof,  and  enabling  him  and  them 
to  receive  the  same,  as  shall  be  reasonably  required ;  and  that  he, 

the  said  ,  his  executors  or  administrators,  will  not  at  any 

time  hereafter  receive,  compound  or  discharge  any  of  the  goods, 
credits  or  effects,  one  moiety  whereof  is  intended  to  be  hereby 
assigned,  and  will  not  release,  disavow  or  become  nonsuit  in  any 

action  or  proceeding  which  may  be  brought  by  the  said ,  his 

executors  or  administrators,  by  virtue  of  the  said  power,  or  do 
any  other  act  or  thing  in  derogation  of  the  assignment  hereby 
made,  or  the  powers  or  authorities  hereby  given. 

§  1134.     Indemnity  to  retiring  partner. 

(a)  In  case  any  partner  herein  shall  at  any  time  withdraw 
from  said  partnership,  and  shall  sell  his  interest  therein  to  the 
remaining  partners,  or,  in  case  of  dissolution,  when  a  part  of 
such  partners  shall  purchase  the  interests  of  the  other  partners, 
then  such  purchasing  partners  shall  give  good  and  sufficient  bond 
to  such  withdrawing  partners,  to  the  reasonable  satisfaction  of 
such  withdrawing  partners,  in  an  amount  equal  to  the  amount 
of  the  debts  of  such  firm,  conditioned  for  the  payment,  in  full, 
of  all  outstanding  debts  of  said  firm,  when  due,  and  for  the 


1487  FORMS PARTICULAR  CLAUSES  §  1135 

saving,  as  to  such  withdrawing  partners,  of  any  loss  which 
might  occur  to  such  withdrawing  partners,  by  reason  of  the  non- 
payment of  such  debts,  as  herein  provided. 

(b)   The  said hereby  covenants  with  the  said  that 

he,  the  said ,  his  heirs,  executors  or  administrators  will  pay 

and  discharge  all  said  firm's  debts  and  liabilities  within  • 

calendar  months   from  the  date  hereof,   and  will  at   all  times 

hereafter  effectually  keep  indemnified  the  said  ,  his  heirs, 

executors  and  administrators,  and  his  and  their  estate  and  effects, 
against  all  actions,  proceedings,  costs,  damages,  expenses,  claims 
and  demands  in  respect  thereof,  and  also  against  all  costs,  dam- 
ages and  expenses  by  reason  of  any  action  or  proceeding  which 

may  be  brought  or  instituted  by  the  said ,  his  executors  or 

administrators,  in  the  name  or  names  of  the  said ,  his  exec- 
utors or  administrators,  by  virtue  of  the  power  or  authority  here- 
inbefore contained,  or  any  act,  matter  or  thing  in  relation  thereto. 

§  1135.     Amending  partnership  agreement. 

(a)  If,  at  any  time  during  the  continuance  of  said  partnership 
under  this  agreement,  it  shall  seem  advisable  by  all  parties  hereto 
to  change  or  amend  this  agreement,  for  any  legal  purpose  what- 
soever, such  change  or  amendment  may  be  made  at  any  time,  by 
supplemental  contract,  in  writing,  signed  by  all  members  of  said 
firm.  Such  supplemental  contract  shall  be  attached  hereto,  and 
shall  govern  in  all  matters  wherein  it  changes  any  of  the  pro- 
visions of  this  contract. 

(b)  If  at  any  time  during  the  continuance  hereof  the  said 
parties  shall  deem  it  necessary  or  expedient  to  make  any  altera- 
tion in  any  article,  clause,  matter  or  thing  herein  contained,  for 
the  more  advantageous  or  satisfactory  management  of  the  said 
partnership  business,  it  shall  be  lawful  for  them  so  to  do  by  any 
writing  under  their  joint  signatures  indorsed  on  these  articles, 
or  entered  in  any  of  the  partnership  books ;  and  all  such  altera- 
tions shall  be  adhered  to  and  have  the  same  effect  as  if  the  same 
had  been  originally  embodied  in  and  formed  a  part  of  this  agree- 
ment. 


§    1136  LAW    OF    PARTNERSHIP  1488 

(c)  And  it  is  hereby  lastly  agreed,  that  if  at  any  time  or  times 
hereafter  it  shall  appear  to  the  said  partners,  or  the  major  part  of 
them  for  the  time  being,  that  these  presents,  or  any  covenants, 
stipulations,  clauses,  matters,  or  things  herein  contained,  are  in 
any  way  inefficient  or  defective,  or  are  not  expressed  with  suffi- 
cient clearness  to  be  safely  acted  upon,  and  any  alteration  therein 
or  addition  thereto  shall  be  advised  by  counsel  for  and  on  behalf 
of  the  said  partners,  then  and  in  every  such  case  the  said  partners 
will  enter  into,  execute  and  perfect  all  such  further  deeds  and 
assurances  as  such  counsel  shall  so  advise  as  aforesaid ;  such 
deeds  or  other  assurances  to  be  prepared  at  the  expense  of  the 
said  joint  partnership  concern. 

(d)  These  articles  of  partnership  may  be  amended  at  any 
time  in  any  respect  by  written  agreement  of  all  the  partners. 

§  1136.     Arbitration  clauses  in  partnership  agreements, 
(a)   Whereas  the  said  parties  have  carried  on  the  business  of 
as  a  partnership,  and  the  accounts  between  them  have  be- 


come involved,  and  differences  have  arisen  among  them  relating 
thereto,  it  is  hereby  agreed  that  the  copartnership  accounts  and 
all  matters  in  difference  between  the  parties,  or  any  of  them,  or 
between  any  one  or  more  of  them,  and  any  other  one  or  more  of 
them,  shall  be  referred  to  the  arbitration  of  two  indifferent  per- 
sons, one  to  be  appointed  by  each  party  to  the  reference,  or  an 
umpire  to  be  appointed  by  the  arbitrators  in  writing,  before 
entering  on  the  business  of  the  reference;  and  if  either  party 

shall  refuse  or  neglect  to  appoint  an  arbitrator  within  -, days 

after  the  other  party  shall  have  appointed  an  arbitrator,  and  shall 
have  served  a  written  notice  upon  the  first  mentioned  party  requir- 
ing such  party  to  make  such  appointment,  then  the  arbitrator  ap- 
pointed as  aforesaid  shall,  at  the  request  of  the  party  appoint- 
ing him,  proceed  to  hear  and  determine  the  matters  in  differ- 
ence as  if  he  were  an  arbitrator  appointed  by  both  parties  for 
that  purpose;  and  the  award  or  determination  made  by  the  said 
arbitrators,  arbitrator,  or  umpire  shall  be  final  and  binding  upon 
the  said  parties  hereto  respectively,  and  their  respective  heirs. 


1489  FORMS rAKTICULAR    CLAUSES  §     1136 

legal  representatives  and  assigns :  Provided  the  award  shall  be 

made  in  writing  within days  next  after  the  reference  to  them 

or  him,  or  on  or  before  any  later  day  to  which  the  said  arbitrators 
or  arbitrator,  by  any  writing  signed  by  them  or  him,  shall  enlarge 
the  time  for  making  their  or  his  award  and  provided  such  um- 
pire shall  make  his  award  or  determination  in  writing  within 

days  next  after  the  original  or  extended  time  appointed  for 

making  the  award  of  the  said  arbitrators  shall  have  expired,  or 
on  or  before  any  later  day  to  which  the  umpire  shall,  by  any 
writing  signed  by  him,  enlarge  the  time  for  making  his  award. 

(b)  Any  and  all  disputes  and  differences,  which  shall  arise 
between  the  said  parties,  shall  be  referred  to,  and  decided  by,  two 
competent  persons  in  or  well  acquainted  with  the  trade,  one  to 
be  chosen  by  either  party,  or  by  an  umpire  to  be  chosen  by  the 
referees,  in  the  usual  course  in  such  or  similar  cases;  and  their 
or  his  decision  shall  in  all  respects  be  final,  and  conclusive  on  both 

the  said  parties,  and  shall  be  given,  in  writing,  within days 

next  after  such  submission,  or  within  such  further  times,  not 
exceeding days,  as  they  or  he  shall  require. 

(c)  If  at  any  time  during  the  continuance  of  the  partnership, 
or  after  the  dissolution  or  determination  thereof,  any  dispute, 
difference,  or  question  shall  arise  between  the  said  partners  or 
any  of  them,  or  their  or  any  of  their  representatives,  touching 
the  partnership  or  the  accounts  or  transactions  thereof,  or  the 
dissolution  or  winding  up  thereof,  or  the  construction,  meaning, 
or  effect  of  these  presents,  or  anything  herein  contained,  or  the 
rights  or  liabilities  of  the  partners  or  their  representatives  under 
these  presents  or  otherwise  in  relation  to  the  premises,  then 
every  such  dispute,  difference,  or  question  shall  be  referred  to 
the  arbitration  of  two  disinterested  persons,  one  to  be  appointed 
by  each  party  to  the  reference,  or  of  an  umpire  to  be  appointed 
by  the  arbitrators  in  writing;  and  if  either  party  shall  refuse  or 

neglect  to  appoint  an  arbitrator  within days  after  the  other 

party  shall  have  appointed  an  arbitrator,  and  shall  have  served 
a  written  notice  upon  the  first  mentioned  party  requiring  such 
party  to  make  such  appointment,  then  the  arbitrator  appointed  as 


§     1137  LAW    OF    PARTNERSHIP  1490 

aforesaid  shall,  at  the  request  of  the  party  appointing  him,  proceed 
to  hear  and  determine  the  matters  in  difference  as  if  he  were  an 
arbitrator  appointed  by  both  parties  for  the  purpose;  and  the 
award  or  determination  which  shall  be  made  by  the  said  arbi- 
trators, arbitrator,  or  umpire  shall  be  final  and  binding  upon  the 
said  parties  hereto  respectively,  and  their  respective  executors, 
administrators,  and  assigns. 

§  1137.     Reference  to  attorney  to  settle  disputed  rights. 

If  any  difference  shall  arise  between  the  parties  hereto  as  to 
their  rights  or  liabilities  under  the  foregoing  instrument,  or  of 
any  instrument  made  in  pursuance  of  the  stipulations  herein- 
before contained  made  for  the  more  completely  carrying  said 
instrument  into  effect,  such  difference  shall  be  determined  and 

such  instrument  or  instruments  shall  be  settled  by esquire, 

counselor  at  law,  and  his  decisions  shall  be  final  as  to  the  con- 
tents and  interpretation  of  such  instrument  or  instruments,  and 
as  to  the  proper  mode  of  carrying  the  same  into  effect. 

§  1138.     Close  of  contract. 

In  witness  whereof,   we  hereunto   set  our  hands,  this  

day  of , ,  at , . 


Party  of  the  first  part. 
Party  of  the  second  part. 


Witnessed  by^  Party  of  the  third  part. 


Notices 

§  1139.     Of  intention  to  withdraw. 

(a)  In  pursuance  of  the  provisions  of  a  partnership  agree- 
ment heretofore  entered  into  between  us,  said  partnership  being 
known  as  and  ,  or  (whereas  you  have  violated  the 

1  Witnesses  not  required,  except  as     a  matter  of  caution,  in  most  contracts. 
See  statutes  of  each  state  as  to  when     required. 


1491  FORMS NOTICES  §    1140 

provisions  of  a  certain  contract  of  partnership  between  us,  and 
have  neglected  and  refused  to  abide  by  its  provisions),  I  hereby 
notify  you  that  I  intend  to  sever  all  connection  as  a  copartner 
with  you  in  said  business,  on  and  after ,  ,  and  I  fur- 
ther request  and  demand  of  you  that  all  new  business  of  said 
firm  cease  on  said  date,  and  that  the  said  partnership  assets  be 
determined  and  distributed  as  soon  thereafter  as  is  possible. 

(b)  In  pursuance  of  the  power  contained  in  written  instru- 
ment dated ,  19 — ,  and  made  between  (describe  parties),  I 

hereby  give  you  notice  that  I  intend  to  determine  the  partner- 
.ship  now  subsisting  between  us  on  the day  of ,  19 — . 

(c)  Gentlemen — Being  desirous  wholly  to  determine  our  pres- 
ent partnership,  so  far  as  relates  to  myself,  on  the day  of 

next,  and  to  retire  from  the  same  on  that  day,  I  hereby, 

pursuant  to  the  power  enabling  me  so  to  do  contained  in  our 

deed  of  articles  of  partnership,  dated  the day  of ,  19 — , 

give  you  written  notice  thereof;  and  I  declare  that  our  part- 
nership shall,  so  far  as  relates  to  myself,  be  hereby  wholly  de- 
termined on  the  said  day  of  ,  and  that  I  shall  retire 

from  the  same  on  that  day. 

(d)  To  Messrs. . 

I  hereby  give  you  notice  that  it  is  my  intention  to  dissolve 
the  partnership  now  subsisting  between  us  on  the  day  of 

next    (being  at  the  expiration  of  calendar  months 

from  the  day  of  the  date  hereof),  in  pursuance  of  a  power  to 
that  effect  contained  in  our  partnership  agreement. 

§1140.     Of  desire  to  sell. 

In  pursuance  of  the  power  contained  in  a  written  instrument 

dated ,  19 — ,  and  made  between  (describe  parties),  I  hereby 

give  you  notice  that  I  desire  to  dispose  of  my  entire  share  and 
interest  in  the  partnership  now  subsisting  between  us  at  such 
price  as  may  be  mutually  agreed  upon,  or  as,  in  case  of  differ- 
ence, shall  be  ascertained  by  arbitration. 


§     1141  LAW    OF    PARTNERSHIP  1492 

§  1141.     Of  intention  to  purchase. 

(a)  Under,  and  in  pursuance  of,  our  articles  of  partnership, 

in  the  business  conducted  under  the  firm  name  of and , 

I  hereby  notify  you  that  I  elect  to  purchase  your  interest  in  said 

business  upon  your  withdrawal  from  said  firm  on  ,  as  per 

your  notice  of  withdrawal  to  me  of , ,  at  the  appraised 

value  thereof,  as  provided  in  said  articles  of  partnership. 

(b)  I  hereby  give  you  notice  that  it  is  my  intention  to  pur- 
chase your  share  in  the  partnership  which  subsisted  between  us 

under  articles  of  partnership  dated  the day  of ,  19 — , 

for  a  term  of  years  next  ensuing,  and  which  said  term 

expired  on  the day  of last,  in  pursuance  of  the  powers 

and  upon  the  terms  and  conditions  contained  in  the  above-men- 
tioned articles  of  partnership. 

§  1142.     Of  intention  to  expel. 

I  hereby  give  you  notice  that  it  is  my  intention  immediately 
to  dissolve  the  partnership  now  subsisting  between  us,  in  pur- 
suance of  a  power  to  that  effect  contained  in  our  partnership 
articles  on  account  of  your  neglect  to  keep  proper  and  just  ac- 
counts contrary  to  the  stipulations  and  agreements  therein  con- 
tained, and  also  of  your  appropriation,  without  my  consent,  of 
moneys  and  eft'ects  of  the  partnership  to  your  own  separate  use ; 
and  of  your  commission  of  other  acts  contrary  to  the  said  stip- 
ulation and  agreements,  whereby  I  am  authorized,  by  giving  you 
written  notice  to  that  effect,  to  expel  you  from  the  partnership, 
and  I  do  therefore  expel  you  from  the  partnership  accordingly; 
and  I  do  declare  that  the  said  partnership  between  us  is  this  day 
dissolved,  and  that  the  business  thereof  shall  from  henceforth  be 
carried  on  in  my  name  only,  but  without  prejudice,  never- 
theless, to  any  remedies  which  either  of  us  may  be  entitled  to  as 
against  the  other  for  the  breach  of  all,  any,  or  either  of  the  cove- 
nants or  agreements  contained  in  our  said  partnership  articles 
previously  to  the  dissolution. 


1493  FORMS NOTICES  §    1146 

§  1143.     Of  demand  for  inspection  of  business. 

I  hereby  serve  notice  upon  you  that  I  herein  make  demand 
that  you  allow  me  to  inspect  the  books  and  general  business  af- 
fairs of and  company,  a  partnership  composed  of  you  and 

myself,  and  further  notify  you  that  I  will  be  at  the  office  of 
said  firm  on ,  at  p.  m.,  for  the  purpose  of  such  in- 
spection. 

§1144.     Of  dissolution. 

(a)   Notice  is  hereby  given  that  the  partnership  heretofore 

existing  between , ,  and ,  under  the  firm  name  of 

and  company,  was  on , ,  dissolved  by  mutual  con- 


sent of  all  the  members  thereof 

All  persons  indebted  to  said  firm  are  requested  to  adjust  said 

indebtedness  with ,  who  has  been  designated  by  all  of  said 

partners  to  close  the  business  matters  of  said  partnership. 

All  creditors  of  said  firm  are  also  requested  to  send  statements 

of  their  claims  to  said ,  in  order  that  they  may  be  adjusted 

as  soon  as  possible. 

(b)  Notice  is  hereby  given  that  the  partnership  lately  sub- 
sisting between  the  undersigned and ,  carrying  on  busi- 
ness as ,  at ,  under  the  style  or  firm  of &  Co.,  was 

on ,  19 — ,  dissolved  by  mutual  consent,  and  that  the  business 

in  future  will  be  carried  on  by  the  said alone  (who  will  pay 

and  discharge  all  debts  and  liabilities,  and  receive  all  moneys 
payable  to  the  said  late  firm). 

§  1145.     Of  retirement  of  partner. 

Notice  is  hereby  given  that  the  partnership  lately  subsisting 
between  the  undersigned , and ,  carrying  on  busi- 
ness under  the  firm  name  of ,  at ,  as ,  was- on  the 

,  19 — ,  dissolved  by  mutual  consent,  so  far  as  regards  the 

said ,  who  retires  from  the  firm. 

§  1146.     Of  sale  of  business. 

Notice  is  hereby  given  that  and  ,  partners,  lately 

doing  business  under  the  firm  name  of and ,  have  sold 


§     1147  LAW    OF    PARTNERSHIP  1494 

their  business,  known  as  the  hardware  store  at  No. street, 

, ,  to ,  who  will  continue  said  business  at  the 

same  location. 

All  persons  indebted  to,  or  having  claims  against,  said  firm  of 

and ,  are  requested  to  adjust  such  matters  with  either 

of  the  undersigned  partners  at  the  earliest  opportunity. 

§  1147.     To  firm  debtor  after  dissolution. 

We  hereby  give  you  notice  that  the  partnership  lately  sub- 
sisting between  us,  under  the  firm  of &  Co.,  was  dissolved 

on  the day  of last,  and  we  request  you  to  pay  the  debt 

owing  by  you  to  us  to  Mr. ,  who  is  duly  authorized  to  receive 

the  same,  and  whose  receipt  shall  be  your  sufficient  discharge. 

As  witness  our  hands,  this day  of ,  19 — .  To  Messrs. 

(debtors). 

Complete  Agreements 

§  1148.     Farm  partnership  contract. 

First  party  shall  let  and  lease  to  second  party  his  farm,  known 
and  described  as  (description)  for  the  period  of  ,  com- 
mencing   ,  and  ending ,  upon  the  following  terms  and 

conditions,  to  wit : 

Second  party  shall  do  ail  the  work  on  said  farm,  in  a  proper 
manner,  shall  furnish  all  tools  and  implements  connected  there- 
with, shall  furnish  and  keep  at  all  times  hereunder horses, 

to  be  used  upon  said  farm. 

Second  party  shall  cut  noxious  weeds  on  said  farm;  keep 
hedges  properly  trimmed;  repair  gates,  fences  and  buildings 
with  materials  furnished  by  first  party  to  the  extent  of  keeping 
the  same  in  as  good  condition  as  they  now  are  or  may  be  placed 
in  by  first  party,  and  shall  deliver  first  party's  share  of  crops 
or  stock  at  market,  when  sold,  all  without  expense  to  first  party. 

Each  party  hereto  shall  furnish  one-half  the  stock  on  said 
farm,  also  pay  for  one-half  of  all  seeds,  fertilizers,  feed  pur- 
chased, threshing  bills  and  other  expenses  of  said  partnership 
not  such  as  herein  agreed  to  be  paid  by  one  of  said  parties,  and 


1495  FORMS — COMPLETE   AGREEMENTS  §    1149 

each  party  shall  receive  one-half  of  the  proceeds  from  said  part- 
nership. 

Second  party  shall  have,  for  his  own  use,  the  dwelling-house 

on  said  farm,  shall  have  each  year cords  of  firewood,  cut 

from  down  timber,  and  may  keep  one  cow  at  his  own  expense  for 
feed,  all  without  expense  to  first  party  therefor. 

All  purchases  and  sales,  and  the  general  conduct  of  said  farm 
shall  be  upon  the  advice  and  consent  of  both  of  the  said  parties 
hereto. 

§  1149.     Agreement  for  mercantile  partnership. 

This  indenture,  made  this  day  of  ,  19 — ,  between 

of ,  of  the  one  part,  and  of ,  of  the  other 


part,  witnesseth  the  following  agreement : 

The  said and are  to  become  and  remain  partners  in 

the  business  of for  the  term  of years  from  the  date 

of  this  instrument,  if  both  of  them  shall  so  long  live. 

That  the  business  shall  be  carried  on  at  No.  in  

street,  in aforesaid,  on  which  premises  a  similar  business  is 

now  being  carried  on  by  the  said  ,  or  at  any  other  place 

they  may  hereafter  mutually  agree  to  rent  for  that  purpose ; 

That  proper  books  of  account  shall  be  kept  in  the  office  on 
'the  said  premises ;  and  therein  shall  be  duly  entered,  from  time 
to  time,  all  dealings,  transactions,  matters  and  things  whatsoever 
in  or  relating  to  the  said  business ;  and  each  party  shall  have  full 
and  free  access  thereto  at  all  times,  but  shall  not  remove  the  same 
from  such  depository; 

That  the  capital  requisite  to  carry  on  the  said  business  shall 
be  advanced  by  the  said  partners  share  and  share  alike,  and  the 
said  capital,  and  all  such  stock,  implements  and  utensils  in  trade, 
purchased  out  of  the  partnership  funds,  as  well  as  the  gains  and 
profits  of  the  said  business,  shall  belong  to  the  said  partners  share 
and  share  alike; 

That  each  party  shall  be  at  full  liberty  to  draw dollars 

monthly  for  his  own  private  use,  on  account,  but  not  in  excess  of 
his  presumptive  share  of  the  profits,  so  long  as  the  said  business 

44 — Row.  ON  Partn. — Vol.  2 


§     1149  LAW    OF    PARTNERSHIP  1496 

shall  be  carried  on  at  a  profit,  and  the  capital  advanced  as  afore- 
said shall  remain  undiminished; 

That  neither  party  shall  become  bail  or  surety  for  any  other 
person;  nor  lend,  spend,  give  or  make  away  with  any  part  of  the 
partnership  property;  or  draw  or  accept  any  bill,  note  or  other 
security  in  the  name  of  the  said  firm,  except  in  the  due  course  of 
the  said  partnership  business ; 

That  an  account  of  the  stock,  implements  and  utensils  belong- 
ing to  the  said  business,  and  of  the  book-debts  and  capital,  shall 
be  taken,  and  a  statement  of  the  firm  affairs  be  made  yearly,  to 
be  computed  from  the  date  hereof,  when  the  sums  drawn  by 
each  party  during  the  preceding  year  shall  be  charged  to  his  share 
of  the  firm  profits;  but  if,  at  the  end  of  any  one  year  of  the  said 
partnership,  it  shall  be  found  to  be  unprofitable,  the  said  partner- 
ship may  thereupon  be  dissolved,  unless  it  shall  be  occasioned  by 
some  unavoidable  loss  or  accidental  circumstance ;  k 

That  each  party  shall  sign  duplicate  copies  of  each  of  such 
statements  of  affairs,  and  shall  retain  one  of  them  for  his  own 
use;  and  another  copy  thereof  shall  be  written  in  one  of  the 
partnership  books,  and  likewise  be  signed  by  each  of  them;  such 
accounts  shall  not  again  be  opened,  unless  some  manifest  error 
shall  be  discovered  in  either  of  them,  within months  there- 
after, and  then  so  far  only  as  respects  the  correcting  of  such 
error;  and  every  such  statement  of  affairs  shall,  in  all  other  re- 
spects, be  conclusive  evidence  between,  and  binding  on,  said 
parties ; 

That  at  the  expiration  or  termination  (by  death  or  otherwise) 
of  the  said  partnership,  a  valuation  and  similar  account  of  the 
firm  stock,  effects  and  capital,  and  good  will,  if  any,  shall  like- 
wise be  taken,  stated,  copied  and  signed  and  become  equally  con- 
clusive; and  the  balance  of  such  account  then  found  to  exist 
shall  belong  to  the  said  parties  share  and  share  alike,  and  be 
realized  and  divided  accordingly,  and  thereupon  they  shall  execute 
mutual  releases; 

That  all  disputes  and  differences,  if  any,  which  may  arise  be- 
tween the  said  parties  shall  be  referred  to,  and  decided  by,  two 


1497  FORMS COMPLETE    AGREEMENTS  §     1150 

uninterested  competent  persons  in  or  well  acquainted  with  the 

trade,  one  to  be  chosen  by  either  party,  or  by  an  umpire 

to  be  chosen  by  the  referees  in  the  usual  course  in  such  or  sim- 
ilar cases ;  and  their  or  his  decision  shall,  in  all  respects,  be  final 
and  conclusive  on  both  the  said  parties,  and  shall  be  given,  in 

writing,  within days  next  after  such  submission,  or  within 

such  further  time,  not  exceeding days,  as  they  or  he  shall 

require ; 

That  either  party  may  determine  the  partnership  hereby  cre- 
ated on  breach  of  this  agreement  by  the  other  of  them,  on  giving 

unto  the  other  of  them calendar  months'  notice  thereof  in 

writing. 

§  1150.     Mercantile  partnership  contract. 

The  said  parties  hereto  hereby  agree  to  form  a  partnership, 

under  the  firm  name  of & ,  from  the  date  hereof  until 

such  time  as  either  partner  shall  choose  to  discontinue  said  firm, 
by  giving  the  other  party  at  least weeks'  notice  thereof,  be- 
fore such  dissolution,  for  the  purpose  of  conducting  a  retail  hard- 
ware store  in  the  city  of . 

Said  parties  hereto  shall  each  contribute dollars  to  said 

firm,  and  each  party  shall  receive  one-half  the  net  profits  of  such 
business,  and  each  party  hereto  shall  bear  one-half  of  any  losses 
which  said  partnership  may  incur. 

The  net  profits  shall  be  computed  as  follows :  In  January  of 
each  year  an  inventory  of  all  assets  and  liabilities  of  the  firm 
shall  be  taken,  and  the  total  amount  of  the  assets  or  liabilities, 
as  shown  thereby,  when  compared  with  the  capital  of  said  firm, 
as  shown  above,  shall  be  the  net  profits  or  losses  of  said  business. 

No  new  capital,  either  of  money  contributed  or  of  profits  re- 
tained in  the  business,  shall  be  used  in  said  business,  except  by 
the  consent  of  both  parties  hereto.  First  party  hereto  shall  have 
active  management  of  the  sales  department  of  said  firm,  and  sec- 
ond party  shall  have  charge  of  the  office  and  accounts.  First 
party  shall  draw  a  salary  of dollars  per  week,  and  second 


§     1150  LAW    OF    PARTNERSHIP  1498 

party  a  salary  of per  week,  both  as  part  of  the  expense  of 

said   firm. 

The  place  of  business  of  said  firm  shall  be  at  No. ■ 

street,  in  said  city  of  ,  unless  another  location  is  mutually 

agreed  upon  between  said  parties,  and  there  shall  be  no  change 
in  the  nature  or  scope  of  said  business  unless  by  the  consent  of 
both  of  said  partners.  Both  of  said  parties  shall  give  their  full 
time  and  best  efforts  to  said  business.  Second  party  shall  super- 
vise the  books  of  said  firm,  and  shall  cause  to  be  kept,  proper 
books  of  account  of  all  transactions  of  said  firm,  and  each  party 
hereto  shall,  at  all  times,  have  access  to  said  books.  Both  of  said 
partners  may  draw  checks  upon  the  firm  account  for  firm  pur- 
poses, and  no  other  purposes,  but  neither  of  said  partners  shall 
issue  any  notes  against  said  firm,  nor  mortgage  firm  property, 
nor  borrow  money,  without  the  consent  of  the  other  party  hereto. 

First  party  shall  purchase  goods  for  the  said  firm,  but  shall 
not  purchase  in  excess  of  the  firm  capital,  nor  shall  he  purchase 
goods  of  a  different  nature  than  general  hardware  goods,  with- 
out the  consent  of  second  party  hereto.  In  case  of  dissolution 
by  mutual  consent  or  otherwise,  each  party  hereto  shall  be 
entitled  to  one-half  of  the  net  proceeds  of  said  partnership  prop- 
erty. In  case  either  party,  or  both,  withdraws  from  this  partner- 
ship, the  party  offering  the  most  for  the  other  partner's  interest 
shall,  upon  payment  thereof  within  thirty  days  from  said  offer, 
be  entitled  to  all  the  assets  of  said  firm. 

Neither  party  hereto  can  sell  his  interest  in  said  firm  to  a 
third  party,  without  the  consent  of  the  other  party  hereto. 

In  case  one  partner  sells  his  interest  in  the  firm  to  the  other 
partner,  the  retiring  partner  shall  not  engage  in  the  same  business 
in  said  city  of ,  except  upon  the  written  consent  of  the  pur- 
chasing partner. 

Office  help  shall  be  hired  and  discharged  by  second  party,  and 
the  other  employes  by  first  party,  but  no  employe  may  be  re- 
tained after  objection  by  either  party  hereto. 


1499  FORMS COMPLETE    AGREEMENTS  §     1151 

§  1151.     Agreement  between  merchants. 

This  indenture,  made  this  day  of  ,  19 — ,  between 

of ,  of  the  one  part,  and of  ,  of  the  other 

part,  witnesseth  as  follows : 

The  said and will  become  and  remain  partners  in 

the  business  of for  the  term  of years  from  the  date 

of  these  presents,  if  both  of  them  shall  so  long  live. 

Nevertheless  the  partnership  shall  terminate  at  the  end  of 

years  from  the  date  of  these  presents,  if  either  partner  shall 
desire  its  termination,  and  of  such  desire  shall  give  not  less  than 

months'  previous  notice  in  writing  to  the  other  of  them,  or 

shall  leave  such  notice  at  the  place  where  the  said  business  shall 
for  the  time  being  be  carried  on. 

The  firm  name  of  the  partnership  shall  be . 

The  business  of  the  partnership  shall  be  carried  on  at  , 

or  at  such  other  place  or  places  as  the  partners  shall  hereafter 
determine. 

Each  of  them,  the  said and ,  will  at  all  times  dili- 
gently employ  himself  in  the  business  of  the  partnership,  and 
carry  on  the  same  for  the  greatest  advantage. 

Neither  party  shall,  either  directly  or  indirectly,  engage  in  any 
business  except  the  business  of  the  partnership,  and  upon  ac- 
count thereof. 

The  capital  of  the  partnership  shall  consist  of  the  sum  of 

dollars,  to  be  brought  in  by  the  partners  in  equal  shares. 

The  rent  of  the  buildings  where  the  said  business  shall  be  car- 
ried on,  and  the  cost  of  repairs  and  alterations,  and  all  rates, 
taxes,  payments  for  insurance,  and  other  outgoings  whatsoever 
in  respect  of  the  same,  and  the  wages  of  all  persons  employed  in 
the  said  business,  and  all  other  moneys  to  become  payable  upon 
account  of  the  said  business,  and  all  losses  which  shall  happen  in 
the  same,  shall  be  paid  out  of  the  capital  of  the  partnership  and  the 
profits  arising  therefrom,  or,  if  the  same  shall  be  deficient,  by  the 
partners  in  equal  shares. 

If  either  partner  shall  buy  any  goods  or  articles  exceeding  the 
value  of dollars  without  the  previous  consent  in  writing  of 


§     1151  LAW    OF    PARTNERSHIP  150C 

the  other,  such  other  partner  shall  have  the  option  either  to  take 
such  goods  or  articles  on  account  of  the  partnership,  or  to  let  the 
same  remain  the  separate  property  of  the  partner  who  shall 
have  so  bought  the  same. 

Neither  partner  shall,  without  the  previous  consent  in  writing 
of  the  other,  enter  into  any  bond,  or  become  bail  or  security  for 
any  person,  or  do,  or  willingly  suffer  to  be  done,  anything  whereby 
the  capital  or  property  of  the  partnership  may  be  attached  or 
taken  in  execution. 

Each  partner  shall  punctually  pay  his  separate  debts,  and  in- 
demnify the  other  partner,  and  the  capital  and  property  of  the 
partnership,  against  the  same  and  all  expenses  on  account  thereof. 

Books  of  account  shall  be  kept  by  the  partners,  and  proper 
entries  made  therein  of  all  the  sales,  purchases,  receipts,  pay- 
ments, engagements,  transactions,  and  property  of  the  part- 
nership; and  the  said  books  of  account,  and  all  securities,  papers, 
and  writings  of  the  partnership,  shall  be  kept  at  the  counting- 
house  in aforesaid,  or  in  such  other  place  where  the  busi- 
ness shall  be  carried  on,  and  each  partner  shall  have  free  access 
at  all  times  to  examine  and  copy  out  the  same. 

On  the day  of in  the  year ,  and  on  the 

day  of  in  every  succeeding  year,  a  general  account  shall 

be  made  and  taken  by  the  partners  of  all  the  sales,  purchases, 
receipts,  payments,  engagements,  and  transactions  of  the  part- 
nership during  the  then  preceding  year,  and  of  all  the  capital, 
property,  engagements,  and  liabilities  for  the  time  being  of  the 
partnership;  and  the  said  general  account  shall,  immediately 
after  the  same  shall  be  made  and  taken,  be  written  in  two  books, 
and  be  signed  in  each  such  book  by  each  partner ;  and  after  such 
signature,  each  partner  shall  keep  one  of  the  said  books,  and 
shall  be  bound  by  every  such  account,  except  that,  if  any  mani- 
fest error  be  found  therein  by  either  partner,  and  signified  to 

the  other  partner  within months  after  the  same  shall  have 

been  so  signed  by  both  of  them,  such  error  shall  be  rectified. 

The  partners  shall  be  entitled  to  the  net  profits  arising  from  the 


1501  FORMS COMPLETE    AGREEMENTS  §    1151 

said  business,  and  remaining  after  the  payments  hereinbefore  di- 
rected to  be  made  thereout,  in  equal  shares. 

In  each  year  it  shah  be  lawful  for  each  partner  to  take  out  of 
the  net  profits  of  the  said  business,  by  equal  monthly  payments, 

the  sum  of dollars  for  his  separate  use ;  but  in  case,  at  the 

end  of  any  year,  it  shall  appear,  upon  taking  the  general  annual 
account,  that  the  net  profits  of  such  year  shall  not  have  amounted 
to  the  total  yearly  amount  of  the  allowances  to  both  partners,  in 
such  case,  immediately  after  such  general  annual  account  shall 
have  been  taken,  each  partner  shall  repay  to  the  partnership  the 
excess  (if  any)  of  the  amount  of  the  sum  which  he  shall  ac- 
tually have  received  in  respect  of  such  monthly  payments  over 
the  sum  which  he  shall  have  been  entitled  to  receive  as  his  share 
of  the  net  profits  of  the  said  business. 

Within  months  after  the  expiration  of  the  partnership, 

otherwise  than  by  the  death  of  either  partner,  a  general  account 
shall  be  taken  by  the  partners  of  all  the  capital,  property,  engage- 
ments, and  liabilities  of  the  partnership;  and  immediately  after 
such  last  mentioned  account  shall  have  been  so  taken  and  set- 
tled, the  partners  shall  forthwith  make  due  provision  for  the 
payment  of  the  debts  and  meeting  all  other  liabilities  of  the 
partnership,  and,  subject  thereto,  all  the  property  of  the  part- 
nership shall  be  divided  between  the  partners  in  equal  shares ; 
and  such  instruments  in  writing  shall  be  executed  by  the  partners 
respectively  for  facilitating  the  getting  in  of  the  debts  due  to  the 
partnership,  and  for  vesting  the  whole  right  in  the  said  respect- 
ive shares  of  the  property  in  the  partner  to  whom  the  same  re- 
spectively shall  upon  such  division  belong,  and  for  releasing  to 
each  other  all  claims  on  account  of  the  partnership,  and  other- 
wise, as  are  usual  in  cases  of  the  like  nature. 

This  agreement,  made,  etc.,  witnesseth,  that  the  said  parties 
hereby,  for  themselves  and  their  respective  heirs,  executors,  and 

administrators,  agree  to  become  partners  in  the  business  of . 

under  the  firm  of  ,  for  the  term  of  years  from  the 

date  hereof,  upon  the  terms  and  conditions  hereinafter  stated : 

That  the  business  shall  be  carried  on  at  No.  in  


§     1151  LAW    OF    PARTNERSHIP  1502 

street,  in  aforesaid,  on  which  premises  the  same  is  now 

being  carried  on  by  the  said  ,  or  at  any  other  place  they 

may  hereafter  mutually  agree  to  rent  for  that  purpose ; 

That  proper  books  of  account  shall  be  kept  in  the  counting- 
house  on  the  said  premises ;  and  therein  shall  be  duly  entered, 
from  time  to  time,  all  dealings,  transactions,  matters,  and  things 
whatsoever  in  or  relating  to  the  said  business;  and  each  party 
shall  have  full  and  free  access  thereto  at  all  times,  but  shall  not 
remove  the  same  from  such  depository ; 

That  the  capital  requisite  for  carrying  on  the  said  business 
shall  be  advanced  by  the  said  partners  in  equal  moieties,  and  the 
said  capital,  and  all  such  stock,  implements,  and  utensils  in  trade, 
purchased  out  of  the  partnership  funds,  as  well  as  the  gains  and 
profits  of  the  said  business,  shall  belong  to  the  said  parties  in 
equal  moieties ; 

That  each  party  shall  be  at  full  liberty  to  draw  dollars 

monthly  for  his  own  private  use,  on  account,  but  not  in  excess 
of  his  presumptive  share  of  the  profits,  so  long  as  the  said  busi- 
ness shall  be  found  profitable,  and  the  capital  advanced  as  afore- 
said shall  remain  undiminished; 

That  neither  party  shall  become  bail  or  surety  for  any  other 
person ;  nor  lend,  spend,  give,  or  make  away  with  any  part  of  the 
partnership  property;  or  draw  or  accept  any  bill,  note,  or  other 
security  in  the  name  of  the  said  firm,  except  in  the  due  course  of 
the  said  partnership  business ; 

That  an  account  of  the  stock,  implements,  and  utensils  be- 
longing to  the  said  business,  and  of  the  book-debts  and  capital, 
shall  be  taken,  and  a  statement  of  the  affairs  of  the  said  partner- 
ship be  made  yearly,  to  be  computed  from  the  date  hereof,  when 
the  sums  drawn  by  each  party  during  the  preceding  year  shall  be 
charged  to  his  share  of  the  profits  of  the  said  business;  but  if, 
at  the  end  of  any  one  year  of  the  said  partnership,  it  shall  be  found 
to  be  unprofitable,  the  said  partnership  shall  thereupon  be  dis- 
solved, unless  it  shall  be  occasioned  by  some  unavoidable  loss  or 
accidental  circumstance ; 

That  each  party  shall  sign  duplicate  copies  of  each  of  such 


1503  '  FORMS — COMPLETE   AGREEMENTS  §   1152 

statements  of  affairs,  and  shall  retain  one  of  them  for  his  own 
use;  and  another  copy  thereof  shall  be  written  in  one  of  the 
partnership  books,  and  likewise  signed  by  each  of  them ;  such 
accounts  shall  not  again  be  opened,  unless  some  manifest  error 
shall  be  discovered  in  either  of  them,  within months  there- 
after, and  then  so  far  only  as  respects  the  correcting  of  such 
error;  and  every  such  statement  of  affairs  shall,  in  all  other  re- 
spects, be  conclusive  evidence  between  and  binding  on  said  parties ; 

That  at  the  expiration  or  termination  (by  death  or  otherwise) 
of  the  said  partnership,  a  valuation  and  similar  account  of  the 
stock,  effects,  and  capital,  and  good  will,  if  any,  of  the  said  firm, 
shall  be  taken,  stated,  copied,  and  signed  in  like  manner,  and 
become  equally  conclusive ;  and  the  balance  of  such  account  then 
found  to  exist  shall  belong  to  the  said  parties  in  equal  moieties, 
and  be  realized  and  divided  accordingly,  and  thereupon  they  shall 
execute  mutual  releases; 

That  all  disputes  and  differences,  if  any,  which  shall  arise  be- 
tween the  said  parties,  shall  be  referred  to,  and  decided  by,  two 
indifferent,  competent  persons  in  or  well  acquainted  with  the 

trade,  one  to  be  chosen  by  either  party,  or  by  an  umpire 

to  be  chosen  by  the  referees  in  the  usual  course  in  such  or 
similar  cases;  and  their  or  his  decision  shall,  in  all  respects, 
be  final  and  conclusive  on  both  the  said  parties,  and  shall 
be  given,  in  writing,  within  days  next  after  such  sub- 
mission, or  within  such  further  time,  not  exceeding days, 

as  they  or  he  shall  require ;  i 

That  either  party  may  determine  the  partnership  hereby  cre- 
ated on  breach  of  this  agreement  by  the  other  of  them,  on  giving 

unto  the  other  of  them  • calendar  months'  notice  thereof  in 

writing. 

§  1152.     Professional  partnership  contract. 

In  consideration  of  the  matters  herein  contained,  the  said  par- 
ties hereby  form  a  partnership  for  the  purpose  of ,  under  the 

name  of and ,  to  continue  for  such  a  time  as  may  be 

mutually  agreeable,  but  neither  party  hereto  may  dissolve  said 


§     1153  LAW    OF    PARTNERSHIP  1504 

partnership,    without   at   least   weeks'    notice    thereof,    in 

writing. 

All  fees  for  professional  services  shall  be  divided  as  follows : 

to  first  party,  and to  second  party.   All  office  fixtures, 

supplies  and  expenses,  together  with  all  other  expenses  of  said 
firm,  shall  be  borne  by  said  parties  in  the  same  proportion  as  fees 
are  divided. 

Both  of  said  parties  hereto  shall  give  their  whole  time  and  best 
efforts  to  said  firm,  and  neither  shall  engage  in  any  business,  for 
and  in  behalf  of  himself;  but  nothing  herein  contained  shall  be 
so  construed  as  to  prevent  either  of  said  parties  from  giving  a 
reasonable  amount  of  attention  to  investments  which  he  now  has 
or  may  acquire,  so  long  as  it  does  not  interfere  with  his  duties 
to  this  partnership. 

Neither  party  shall  draw  any  compensation  for  his  said  serv- 
ices, except  as  above  set  forth. 

No  business  shall  be  accepted  by  either  partner  over  the  objec- 
tion of  the  other  partner,  nor  shall  any  method  of  advertising 
or  of  conducting  any  firm  business,  be  adopted  by  either  party 
hereto,  which  is  objected  to  by  the  other  party  hereto. 

§  1153.     Short  form,  partnership  agreement  between  lav>;'- 
yers. 

This  agreement,  made  this day  of  ,  19 — ,  between 

of , of and of ,  witnesseth : 


In  consideration  of  mutual  interests  and  profits  to  be  derived 
therefrom,  the  undersigned  attorneys  hereby  form  a  partnership 

under  the  name  of ,  to  continue  for years  from  date; 

but  any  party  may  retire  on  one  month's  notice  in  writing. 

All  receipts  by  way  of  counsel  fees  or  other  business  matters 
shall  be  divided  after  current  expenses  have  been  paid  and  de- 
ducted, whenever  the  same  shall  have  been  received,  in  the  fol- 
lowing proportions,  to  wit :    ^Ir.  shall  receive  ,  ^Ir. 

shall  receive ,  and  j\lr.  shall  receive , 

Each  of  said  parties  shall  devote  his  whole  time  and  attention 
to  the  business  of  said  law  firm,  and  shall  not  engage  in  any  other 


1505  FORMS — COMPLETE   AGREEMENTS  §     1154 

business  whatsoever,  either  on  his  own  account  or  as  agent,  alone 
or  in  partnership  with  any  other  person  or  persons  whatsoever. 

Neither  member  of  the  firm  shall  become  indorser  or  security 
in  any  manner  for  any  other  person  without  the  consent  of  all 
the  other  members  of  the  firm. 

In  witness  whereof,  etc. 

§  1154.     Agreement  between  attorneys — Long  form. 

Indenture  made  the  day  of  ,   19 — ,  between  


of ,  of  the  first  part,  and of ,  of  the  second  part. 

The  said  parties  agree  to  become  partners  as  attorneys  from  the 

day  of ,  during  the  term  of years,  subject  to  the 

provisions  herein  contained : 

The  partnership  shall  be  carried  on  under  the  firm  name  of 

and .   The  business  of  the  said  firm  shall  be  conducted 

at  the  offices  now  occupied  by  said ,  in  the  city  of ,  or 

at  such  other  place  as  the  partners  shall  from  time  to  time  agree 

upon.    The  said ,  in  whom  the  said  offices  are  now  vested 

by  lease  for  the  residue  of  a  term  of years,  dated  the 

day  of ,  19 — ,  shall  hold  said  lease,  the  demised  offices,  and 

the  fixtures  and  furniture  therein,  in  trust  for  and  as  part  of  the 
capital  of  the  partnership,  which  shall  indemnify  him  against  the 
rent  reserved  and  the  covenants  contained  in  said  lease. 

The  capital  of  the  partnership  shall  consist  of  the  said  lease- 
hold offices  and  fixtures  and  furniture,  the  same  being  valued  at 

the  sum  of dollars,  and  of  such  sum  or  sums  of  money  as 

from  time  to  time  shall  be  required,  and  shall  be  contributed  in 
such  proportions  as  from  time  to  time  may  be  agreed  upon  be- 
tween them;  and  each  partner  shall  be  entitled  to  interest  upon 

the  capital  contributed  by  him  at  the  rate  of per  cent,  per 

annum. 

All  moneys  received  by  the  partners  or  either  of  them,  on  ac- 
count of  the  partnership,  shall  be  immediately  deposited  to  the 

credit  of  the  partnership  in  the Bank,  and  all  checks  shall 

be  drawn  in  the  name  of  the  firm. 

All  rents,  repairs,  wages  of  clerks  and  servants,  and  other  ex- 


§     1154  LAW    OF    TARTNERSHIP  1506 

penses  that  may  be  incurred  in  conducting  the  business,  and  all 
losses  and  damages  happening  in  the  same,  shall  be  paid  out  of 
the  profits  of  the  partnership;  and  if  the  same  shall  not  be  suffi- 
cient, then  by  the  partners  in  the  shares  in  which  they  are  entitled 
to  the  net  profits. 

The  partners  shall  be  entitled  to  the  net  profits  of  the  business 
in  the  shares  following,  namely,  etc.,  and  they  shall  be  divided  as 
soon  after  the  end  of  each  year  of  the  partnership  as  the  general 
annual  account  shall  have  been  settled. 

The  said may  draw  out  of  the  profits  by  equal  monthly 

payments  the  annual  sum  of dollars;  and  the  said the 

annual  sum  of dollars,  also  by  equal  monthly  payments;  but 

if  at  the  end  of  any  year  it  shall  appear  that  the  share  of  any 
partner  of  the  net  profits  in  such  year  shall  not  amount  to  the 
sum  already  drawn  by  him,  then  he  shall  immediately  refund  to 
the  partnership  such  sum  as  he  may  have  drawn  out  in  excess 
of  his  share  of  the  net  profits. 

Each  partner  shall,  during  the  partnership,  devote  his  whole 
time  diligently  and  faithfully  to  the  partnership  business,  and  he 
shall  not,  either  alone  or  in  conjunction  with  any  other  person, 
either  directly  or  indirectly,  engage  in  any  other  trade  or  business 
without  the  consent  in  writing  of  the  other  partner.  He  shall  not 
undertake  any  professional  business,  or  accept  any  office  or  trust, 
except  for  the  benefit  of  the  partnership.  But  either  of  said  part- 
ners may,  at  his  own  cost  and  risk,  do  any  business  for  his  imme- 
diate or  near  relations  or  family  connections  without  making  any 
charge  for  the  same ;  but  in  case  he  shall  receive  any  fee  or  re- 
ward therefrom,  the  same  shall  go  to  the  general  account  of  the 
said  partnership,  and  be  accounted  for  accordingly.^ 

Neither  partner  shall  undertake  the  prosecution  or  defense  of 

1  In  some  cases  it  is  provided  that  one  partner  shall  have  the  income, 
profits,  or  salary  arising  from  some  particular  trusty  or  office  or  business, 
and  for  such  cases  the  following  clause,  with  variations  according  to  cir- 
cumstances, may  be  used  : — 

The   said   shall   have   the   entire  proceeds   of   his    services    in   the 

management    of    the    estate    which    he    holds    in    trust.     (Or,    shall 

have  the  entire  superintendence  of  the  business  of  the  corporation 

at  his  own  risk  and  cost,  and  for  his  own  sole  and  separate  benefit.) 


1507  FORMS COMPLETE    AGREEMENTS  §     1154 

any  action  or  suit,  or  transact  any  professional  business,  after 
being  requested  in  writing  not  to  do  so  by  the  other  partner. 

Neither  partner  shall  hire  or  dismiss  any  clerk  or  servant  with- 
out the  consent  of  the  other  partner. 

Neither  partner  shall,  without  such  previous  consent,  use  any 
of  the  moneys  or  effects  of  the  partnership,  or  pledge  the  credit 
of  the  partnership,  except  for  the  use  or  account  thereof. 

Neither  partner  shall,  without  such  previous  consent,  compro- 
mise or  release  any  debt  or  liability  to  the  partnership. 

Neither  partner  shall,  without  such  previous  consent,  enter  into 
any  bond,  or  become  bail,  surety,  or  security  with  or  for  any 
person. 

Each  partner  shall,  during  the  partnership,  pay  promptly  his 
present  and  future  separate  debts. 

Proper  books  of  account  shall  be  kept,  and  entries  made  therein 
of  all  money  expended  and  received  by,  and  debts  due  to  and 
from,  and  of  all  other  matters  and  things  relating  to  the  partner- 
ship usually  or  properly  entered  in  books  of  account  kept  by 
attorneys,  and  in  particular  each  partner  shall  enter  in  proper 
books  all  charges  for  professional  business  transacted  by  him, 
with  all  necessary  particulars  relating  thereto.  Such  books,  and 
all  papers,  letters  and  writings  relating  to  or  belonging  to  the 
partnership,  shall  be  kept  and  shall  remain  at  the  offices  of  the 
partnership,  and  each  partner  shall  at  all  times  have  free  access 
thereto. 

On  the day  of ,  19 — ,  and  on  every day  of 

In  each  succeeding  year,  a  general  account  in  writing  shall  be 
taken  of  all  moneys,  debts,  and  effects  belonging  or  due  to 
the  partnership,  and  of  all  the  liabilities  thereof,  and  of  all  other 
things  properly  included  in  such  an  account.  The  share  of  the 
net  profits  of  each  partner,  after  deducting  the  amounts  drawn 
by  him,  shall  be  carried  to  his  credit  on  the  books  of  the  partner- 
ship immediately  after  such  annual  account  shall  have  been  stated, 
and  may  be  drawn  out  at  pleasure. 

Upon  the  final  determination  of  the  partnership  by  lapse  of 
time  or  otherwise,  all  deeds,  drafts,  and  other  papers  relating  to 


§    1154  LAW    OF    TARTNERSHIP  1508 

the  business  of  the  partnership  shall,  unless  the  client  or  clients 
to  whose  business  the  same  relate  object,  be  delivered  to  the  part- 
ner who  shall  usually  have  attended  to  the  business  of  such  client 
or  clients;  and  upon  the  death  of  any  partner  such  deeds,  drafts, 
and  other  papers  shall,  unless  objected  to  as  aforesaid,  be  deliv- 
ered to  the  surviving  partner. 

Upon  the  determination  of  the  partnership  a  full  and  general 
account  in  writing  shall  be  taken  in  the  manner  provided  for  the 
taking  of  the  general  annual  account,  and  a  just  valuation  shall 
be  made  of  all  the  particulars  which  are  capable  of  valuation, 
and  all  debts  due  by  the  partnership  shall  forthwith  be  paid,  the 
capital  contributed  by  each  returned,  and  the  residue  of  the  part- 
nership property  and  moneys  shall  be  divided  between  the  part- 
ners or  their  representatives  in  the  proportion  in  Avhich  they  are 
at  the  time  of  dissolution  entitled  to  the  net  profits  of  the  partner- 
ship; and  such  instruments  in  writing  shall  be  executed  for  col- 
lecting the  outstanding  debts  of  the  partnership,  for  vesting  the 
property  in  said  debts  and  effects  in  the  party  to  whom  the  same 
shall  upon  such  division  belong,  and  for  releasing  to  each  other 
all  claims  on  account  of  the  partnership  in  the  maniier  usual  in 
cases  of  a  like  nature. 

If  either  of  the  said  partners  shall  happen  to  die  during  the 
continuance  of  the  said  partnership,  the  surviving  partner  shall 
be  at  liberty  to  take  at  a  fair  valuation,  to  be  made  by  some  disin- 
terested person  to  be  appointed  by  such  surviving  partner  and  the 
executors  or  administrators  of  the  deceased  partner,  the  office, 
furniture,  books,  papers,  stationery,  and  all  such  other  effects 
and  things  as  shall  have  been  used  in  the  said  partnership  busi- 
ness :  provided,  that  payment  for  the  same  be  made  within  one 
calendar  month  next  after  such  valuation  shall  be  made;  and 
upon  such  payment  being  made,  the  executors  or  administrators 
of  such  deceased  partner  shall  duly  assign  unto  him  the  said 
office,  furniture,  books,  papers,  stationery,  and  effects.  In  wit- 
ness, etc. 


1509  FORMS COMPLETE  AGREEMENTS  §  1155 

§  1155.     Agreement  where  one  partner  is  dormant. 

Indenture  made  the  day  of  ,  a.  d.   19 — ,  between 

and ,  heretofore  partners  under  the  style  of ,  par- 
ties of  the  first  part ;  and of ,  party  of  the  second  part : 

Whereas,  the  said  parties  of  the  first  part  have  heretofore  car- 
ried on  the  business  of as  partners  under  and  b}^  virtue  of 

articles  of  partnership,  dated  the day  of ,  19 — ; 

And,  w^hereas,  the  said  parties  of  the  first  part  are  desirous  of 
increasing  the  capital  of  their  said  business,  for  the  purpose  of 
more  effectually  carrying  on  the  same,  and  have  agreed  to  admit 
the  said  party  of  the  second  part  into  partnership  v^ith  them, 
upon  the  terms  and  conditions  hereinafter  contained,  upon  his 
advancing  the  sum  of dollars,  to  be  added  to  the  said  part- 
nership estate  and  effects : 

Now  this  indenture  witnesseth,  that  in  pursuance  of  the  said 
recited  agreement,  and  in  consideration  of  the  sum  of dol- 
lars, to  be  advanced  and  brought  in  by  the  said  party  of  the 
second  part  to  the  account  of  the  said  partnership,  at  or  before 
the  execution  hereof,  each  of  them,  the  said  partners,  do,  and 
each  of  them  doth  hereby  for  himself,  his  heirs,  executors,  and 
administrators,  covenant  and  agree  with  the  others  of  them,  his 
executors  and  administrators,  in  manner  following :  that  they  will 

be  partners  in  the  said  business  of  for  the  term  of  

years,  commencing  from  the  day  of  ,  subject  to  the 

stipulations  and  agreements  hereinafter  contained; 

That  the  capital  of  the  said  partnership  shall  be  the  sum  of 
dollars,  to  be  brought  in  by  the  said  partners  in  the  follow- 
ing proportions,  namely :  the  said  parties  of  the  first  part  shall 

bring  in  the  sum  of dollars,  the  original  capital  of  the  said 

partnership,  under  the  said  hereinbefore  recited  indenture  of  the 

day  of ,  and  being  one-third  of  the  said  partnership 

capital;  and  the  said  party  of  the  second  part  shall  bring  in  the 
sum  of dollars  so  agreed  to  be  advanced  by  him  as  afore- 
said, being  two-thirds  of  the  said  partnership  capital,  which  said 

last  mentioned  sum  of dollars  shall  be  paid  by  the  said  party 

of  the  second  part  into  the Bank  to  the  credit  of  the  said 


§    1155  LAW    OF    PARTNERSHIP  1510 

partnership,  on  or  before  the  day  of  next;  and  the 

said  partners  shall  be  considered  as  creditors  with  respect  to  such 

capital,  and  shall  be  allowed  interest  thereon  at  the  rate  of 

per  cent,  per  annum ; 

That  the  business  of  the  said  partnership  shall  be  carried  on  at 
the  present  store,  warehouse,  and  premises,  or  at  such  other  place 
or  places  as  the  said  partners  shall  from  time  to  time  agree  upon, 
under  the  same  style  and  firm,  and  in  the  same  manner  in  all 
respects  (except  so  far  as  the  same  is  altered  hereby),  as  the  said 
partnership  business  has  been  hitherto  carried  on  by  the  said 
parties  of  the  first  part; 

That  the  said  partnership  business  shall  be  managed  and  car- 
ried on,  and  all  purchases,  sales,  bills  of  parcels,  orders,  notes, 
letters,  bills,  receipts,  payments,  contracts,  securities,  dealings, 
and  transactions  which  shall  be  made,  given,  or  taken  for  any' 
matter  or  thing  concerning  the  same,  shall  from  time  to  time  be 
so  made,  given,  taken,  and  entered  into  in  the  name  of  the  said 
parties  of  the  first  part; 

That  all  goods,  wares,  and  merchandise  bought  and  sold,  re- 
ceived in  or  delivered  out,  and  the  prices  for  which  the  same 
were  bought  and  sold,  and  all  moneys,  payments,  securities,  and 
dealings  in  general  relating  to  the  said  partnership  business,  shall 
be  daily  charged  and  entered  by  the  said  parties  of  the  first  part 
in  proper  books  for  that  purpose,  and  in  particular  that  a  book 
shall  be  kept  for  the  entry  of  the  account  of  cash  received  and 
paid  on  the  said  partnership  account; 

That  the  said  parties  of  the  first  part  shall,  during  the  con- 
tinuance of  the  said  partnership,  be  the  keepers  of  the  cash, 
bonds,  bills,  notes,  and  other  securities  belonging  to  the  said  part- 
nership, and  shall  balance  the  said  partnership  accounts  once  in 
every  month  in  such  manner  as  to  exhibit  the  true  state  and  con- 
dition of  the  affairs  of  the  concern;  and  that  the  said  cash-book, 
and  all  books  of  account,  bonds,  bills,  notes,  letters,  vouchers,  and 
securities,  shall  be  kept  in  the  office  belonging  to  the  said 
business,  or  other  place  where  the  said  partnership  busi- 
ness shall  be  carried  on,  and  be  open  at  all  times  during  the 


1511  FORMS COMPLETE    AGREEMENTS  §     1155 

regular  hours  of  business  to  the  inspection  of  all  the  said  part- 
ners, who  shall,  without  hindrance  or  denial,  be  permitted  to  take 
copies  or  extracts  therefrom. 

That  if  at  any  time  during  the  continuance  of  the  said  partner- 
ship any  cash,  or  bills,  or  other  securities  shall  be  received  by  the 
said  party  of  the  second  part  on  the  partnership  account,  he  will 
immediately  pay  over  the  same  to  the  said  parties  of  the  first 
part;  and  in  case  of  making  default  in  such  payment  as  aforesaid 

for  the  space  of days,  then,  and  in  every  such  case,  a  sum 

equal  to dollars  per  cent,  on  the  sum  so  detained  or  with- 
held shall  be  charged  against  the  said  party  of  the  second  part  by 
way  of  liquidated  damages  and  not  by  way  of  penalty,  and  shall 
be  retained  out  of  his  share  of  the  profits  of  the  said  business, 
and  added  to  the  capital  of  the  said  partnership  for  the  general 
benefit  of  the  whole  concern; 

That  the  parties  of  the  first  part  wiU,  at  all  times  during  the 
continuance  of  the  said  partnership,  devote  the  whole  of  their 
time  and  skill,  and  to  the  best  of  their  abilities  carry  on  all  the 
affairs  of  the  said  partnership,  and  shall  not  nor  will,  at  any  time 
during  the  continuance  of  such  partnership,  either  directly  or 
indirectly,  be  concerned  in  any  other  trade,  business,  or  profes- 
sion whatsoever; 

That  the  said  party  of  the  second  part  shall  not  be  required  to 
bestow  any  attention,  or  to  act  in  any  way  in  the  said  business 
any  further  than  he  shall  think  fit ;  nor  shall  he,  during  the  con- 
tinuance of  the  said  partnership,  or  at  any  other  time,  be  pre- 
vented from  carrying  on  any  other  business  or  trade,  excepting 

that  of ,  or  any  other  profession  or  employment  whatsoever, 

either  on  his  own  account  or  in  partnership  with  any  other  per- 
son or  persons ; 

That  the  profits  of  the  said  joint  partnership  concern,  after 
deducting  all  such  expenses  as  aforesaid,  shall  be  divided  into 

equal  portions,  and  that  the  said  parties  of  the  first  part 

shall  each  receive parts  of  the  said  profits;  the  said  party 

of  the  second  part  shall  receive  the  remaining parts;  and  all 

45 — Row.  ON  Partn. — Vol.  2 


§    1155  LAW    OF    PARTNERSHIP  1512 

losses  incurred  in  the  course  of  the  said  business  shall  be  borne 
in  the  same  proportions,  unless  the  same  shall  be  caused  by  the 
wilful  neglect  or  default  of  either  of  the  said  partners,  in  which 
case  the  loss  so  incurred  shall  be  made  good  by  the  partner 
through  whose  default  it  shall  arise; 

(Insert  any  appropriate  general  clauses,  such  as  requirement  to 
pay  private  debts,  prohibiting  becoming  surety,  etc.) 

That  all  moneys  advanced  by  either  of  the  said  partners  on  the 
joint  partnership  account,  with  the  approbation  of  the  others  of 
them,  and  all  sums  of  money  which  either  of  them,  with  such 
approbation  as  aforesaid,  shall  permit  to  remain  in  the  said  busi- 
ness, which,  by  the  rules  herein  prescribed,  he  may  be  at  liberty 
to  draw  out  as  part  of  his  ascertained  profits  thereof,  shall  be 
passed  to  his  credit  in  the  partnership  account,  and  be  entered  in 
the  books  of  the  said  partnership,  and  bear  interest  at  the  rate 

of per  cent,  per  annum  for  so  long  a  time  as  the  same  shall 

be  so  permitted  to  remain  therein,  and  shall  be  considered  as  a 
distinct  loan,  as  if  the  same  had  been  borrowed  from  any  other 
person,  and  be  accounted  for  and  paid  to  him  before  any  division 
shall  be  made  of  the  profits  of  the  said  partnership ; 

That  the  said  party  of  the  second  part  shall,  from  time  to  time, 
be  allowed  to  draw  out  of  the  said  partnership  business  weekly, 
and  for  his  private  expenses,  any  sum  or  sums  of  money  not  ex- 
ceeding the  sum  of dollars;  and  that  the  said  parties  of  the 

first  part  shall  in  like  manner  be  respectively  allowed  from  time 
to  time  to  draw  out  of  the  said  partnership  business  weekly,  for 
their  own  private  expenses,  any  sum  or  sums  of  money  not  ex- 
ceeding the  sum  of dollars  each;  all  such  sum  and  sums  of 

money,  from  the  time  of  drawing  out  the  same,  to  be  entered  in 
the  cash-book  belonging  to  the  said  partnership,  and  to  be  duly 
accounted  for  by  the  said  parties  respectively,  on  every  settlement 
of  accounts  and  division  of  the  profits  of  the  said  partnership; 

(Insert  general  clauses  for  stating  annual  account,  and  for  gen- 
eral account  on  dissolution.) 

That  if  either  of  the  said  partners  shall  be  desirous  of  deter- 
m.ining  the  said  partnership  at  any  time  before  the  expiration  of 


1513  FORMS COMPLETE    AGREEMENTS  §     1156 

the  said  term  of years,  he  shall  be  at  liberty  so  to  do,  on 

giving calendar  months'  previous  notice  in  writing  of  such 

his  desire  to  the  others,  or  either  of  them,  or  leaving  the  same  at 
the  counting-house  of  the  said  partnership,  and  such  partnership 

shall  determine  at  the  expiration  of  such calendar  months, 

or  at  such  future  day  as  in  such  notice  shall  be  named,  and  the 
continuing  partners  shall  have  the  privilege  of  taking  the  whole 
of  the  partnership  business,  at  the  rate  at  which  the  same  shall 
be  appraised  and  valued,  on  paying  his  or  their  shares  of  such 
valuation  to  the  retiring  partner; 

That  in  case  of  the  death  of  either  of  the  said  partners  before 
the  expiration  of  the  said  term  of  partnership,  the  surviving 
partners  will  settle  and  adjust  all  accounts,  matters,  and  things 
relating  to  the  said  partnership,  with  the  executors  or  adminis- 
trators of  such  deceased  partner;  but  the  surviving  partners  shall 
have  the  option  of  taking  the  whole  of  the  said  partnership  prop- 
erty at  a  valuation,  the  amount  of  which  shall  be  determined  by 
the  award  of  two  arbitrators,  or  their  umpire,  in  the  usual  man- 
ner, and  the  costs  of  making  such  valuation  shall  be  paid  by  the 
surviving  partners  and  the  executors  or  administrators  of  the 
deceased  partner,  according  to  their  respective  proportions  in  the 
said  partnership  business. 

In  witness,  etc. 

§  1156.     Extension  of  partnership  term  indorsed  on  articles. 

Indenture  made  the day  of ,  between of , 

of  the  first  part; of ,  of  the  second  part;  and of 

,  of  the  third  part.    Whereas  the  partnership  entered  into 

by  the  above-named  parties  under  the  within-written  indenture 

will  expire  by  limitation  on  the  day  of  next;  and 

whereas  the  said  parties  thereto  have  agreed  to  continue  the  said 

partnership  for  the  further  term  of  years  from  the  said 

day  of ,  in  manner  hereinafter  expressed : 

Now  this  indenture  witnesseth,  that  each  of  them,  the  said 
and ,  hereby  covenants  with  the  others  of  them. 


and  their  executors  and  administrators,  jointly  and  severally,  in 


§     1157  LAW    OF    PARTNERSHIP  1514 

manner  following,  that  is  to  say,  that  they,  the  said ,  


and  ,  and  the  survivors  of  them,  will  remain  and  continue 

partners  together  in  the  within-mentioned  trade  or  business  for 

the  further  term  of  years,  to  be  computed  from  the  said 

■ day  of next,  upon  the  same  terms  and  conditions,  and 

subject  to  the  same  provisions  and  agreements,  as  are  in  and  by 
the  within-written  indenture  expressed  and  contained  in  relation 
to  the  partnership  thereby  constituted,  and  so  that  all  such  terms, 
conditions,  provisions  and  agreements  shall  remain  in  force  and 
take  effect  in  like  manner  as  if  the  said  partnership  had  been 

originally  entered  into  for  the  full  term  of  years,  instead 

of  the  said  term  of  * years. 

In  witness,  etc, 

§  1157.     Continuation  of  business  under  new  agreement. 

This  agreement,  made  this  day  of  ,  19 — ,  between 

of , of ,  and of ,  all  of  the  city  of 

,  witnesseth : 


Whereas,  said  parties  have  for years  last  past  been  en- 
gaged in  the  business  of  ,  in  the  city  of  ,  under  the 

firm  name  and  style  of and  Company,  and  are  desirous  to 

continue  said  business  under  new  articles  of  partnership. 

Now,  therefore,  the  said  parties  for,  and  in  consideration  of 
the  premises,  and  of  the  mutual  covenants  herein  contained  and 
of  the  sum  of  $1  to  each  in  hand  paid  by  the  other,  the  receipt 
whereof  is  hereby  acknowledged,  do  hereby  covenant  and  agree 
as  follows : 

Said  business  shall  be  carried  on  in  all  respects  as  heretofore, 
except  as  modified  by  this  agreement,  and  shall  be  conducted  un- 
der the  firm  name  and  style  of  and  Company.    The  main 

office  and  place  of  business  of  said  company  shall  be  at  No. 

street,  in  said  city  of . 

Said  partnership  shall  commence  as  of  the  date  of  the  


day  of ,  19 — ,  and  shall  continue  for  the  term  of years 

from  date,  except  as  herein  provided. 

The  money  which  shall  be  in  said  business  to  the  credit  of 


1515  FORMS COMPLETE    AGREEMENTS  §     1157 

said  partners  of  said  firm  on  the  ■ day  of ,  19 — ,  shall 

remain,  except  as  otherwise  provided,  as  the  capital  of  the  vari- 
ous partners  in  said  business,  and  subject  to  the  terms  of  this 
agreement.  Regular  account  books  shall  be  kept  of  all  transac- 
tions of  the  firm,  and  each  partner,  or  his  legal  representative  or 
agent,  shall  have  free  access  thereto  for  the  purposes  of  inspection, 
examination  and  copying.  In  all  other  respects,  the  finances  and 
affairs  of  the  firm  shall  be  conducted  as  hitherto. 

On  the  day  of  January  of  each  year  during  the  con- 
tinuance of  said  term,  a  full  written  account  shall  be  made  and 
taken  of  all  the  stock  in  trade,  money,  assets,  credits  and  things 
belonging  to  and  owing  to  said  firm,  and  of  all  such  matters  as 
are  generally  included  in  annual  accounts.  Each  partner's  inter- 
est in  the  capital  and  effects  of  the  firm  shall  be  ascertained, 
and  a  balance  sheet  shall  be  made  out  and  corresponding  entries 
placed  upon  the  books  of  account,  so  that  the  true  condition  of 
the  firm  and  of  each  partner  therein  may  be  actually  known,  in 
order  that  the  amount  of  net  profits  earned  may  from  time  to 
time  be  credited  on  said  books  of  account  to  the  respective  part- 
ners in  the  proportions  and  amounts  to  which  they  shall  be  sev- 
erally entitled.  In  finding  out  the  amounts  due  upon  said  balance 
sheets,  all  expenses  of  the  business  shall  be  charged  up  and  also 
all  losses  and  other  charges  Incident  or  necessary  to  the  carrying 
on  of  said  business. 

The  financial  management  of  the  firm  shall  be  in  charge  of 

,  and  each  of  the  other  partners  shall  devote  his  time  and 

energy  exclusively  to  the  firm's  business,  and  during  the  continu- 
ance of  this  partnership  shall  not  be  engaged  or  interested  In  any 
other  business. 

After  the  payment  of  the  expenses  and  charges  heretofore 
mentioned,  the  net  profits  of  said  business  shall  be  divided  among 
the  said  partners  according  to  the  proportion  hereinafter  speci- 
fied, and  the  losses  shall  be  borne  In  the  same  proportion;  said 

first-named  party per  cent.,  said  second-named  party  

per   cent,    thereof,   and   said   last-named   party   per  cent. 

thereof. 


§     1157  LAW    OF    PARTNERSHIP  1516 


Said  partners  shall  be  entitled  to  draw  from  said  business  in 
each  year,  on  accounts  of  profits  due  to  them  respectively,  sums 
of  money  not  exceeding  the  following  amounts,  said  money  to 
be  drawn  in  equal  monthly  instalments :  said  first-named  party 

dollars,  said  second-named  party  dollars,  and  said 

last-named  party dollars. 

It  is  further  agreed  that  the  death  of  any  of  the  parties  hereto 
during  the  term  of  this  agreement  shall  not  operate  to  dissolve 
said  partnership,  but  the  same  shall  be  carried  on  by  the  sur- 
vivors until  such  time  as  said  partnership  shall  expire  by  the 
terms  hereof.  The  partnership  capital  shall  remain  unimpaired 
and  no  part  thereof,  except  as  above  provided,  shall  be  withdrawn 
by  the  legal  representatives  of  any  deceased  partner  before  the 
expiration  of  this  agreement,  but  such  representatives  shall  be 
entitled  to  all  payments  and  credits  which  said  partner  would 
have  received  if  living,  but  shall  have  no  right  of  active  control 
or  interference  in  said  business.  Such  representative  shall,  how- 
ever, have  all  other  rights,  including  that  of  access  to  books  of 
account  of  said  firm  which  would  have  belonged  to  such  deceased 
partner. 

If  no  written  notice  shall  be  given  by  any  of  the  parties  hereto 
to  the  others  within  three  months  before  the  expiration  hereof, 
of  his  or  their  desire  to  determine  and  dissolve  said  partnership 
at  the  date  fixed  for  said  termination,  then  said  partnership  shall 
continue  for  one  year  after  said  expiration,  upon  the  same  terms 
as  herein  provided,  and  shall  thereafter  continue  from  year  to 
year  until  three  months'  written  notice  shall  have  been  given  by 
any  of  said  partners  or  the  legal  representative  of  any  deceased 
partner,  at  the  time  and  in  the  manner  herein  specified. 

None  of  said  parties  hereto  shall,  without  the  consent  of  all 
the  other  parties,  in  any  way  use  the  firm  name  or  credit,  directly 
or  indirectly,  for  purposes  of  indorsement,  guaranty  or  otherwise, 
except  for  firm  business,  and  none  of  the  parties  shall,  without 
like  consent,  become  indorser,  guarantor  or  surety  for  any  other 
purpose,  except  for  firm  business. 

In  witness,  etc. 


1517  FORMS COMPLETE    AGREEMENTS  §     1158 

§  1158.     Admission  of  new  partner. 

Agreement  made  this day  of ,  19 — ,  between 


and ,  constituting  the  firm  of &  Co.,  of  the  first  part, 

and (incoming  partner),  of  the  second  part: 

Whereas,  by  a  written  agreement,  dated  the day  of , 

19 — ,  between  the  said  first  parties,  they  became  partners  in  the 

business  of  ,  for  the  term  of  years,  and  have  since 

continued  to  be  partners; 

And  whereas  the  said  partners  have  agreed  to  admit  the  said 
(incoming  partner)  into  partnership  with  them  in  the  said  busi- 
ness, for  the  residue  of  said  term  of years,  upon  the  terms 

and  conditions  hereinafter  mentioned,  and  upon  the  prehminary 
agreement  for  such  partnership  it  was  agreed  that  a  valuation 
should  be  made  of  the  whole  of  said  partnership  property  and 
effects  and  that  the  said  (incoming  partner)  should  pay  unto  tho 
said  first  parties  one-third  of  the  amount  of  such  valuation,  and 
be  admitted  to  a  proportionate  share  of  the  profits  and  losses  of 
the  said  business ; 

And  whereas  such  valuation  has  been  made  accordingly,  and 
the  value  of  the  said  partnership  property  fixed  at  the  sum  of 
dollars : 

Now  this  indenture  witnesseth,  that  in  pursuance  of  the  said 
recited  agreement,  and  in  consideration  of  the  sum  of dol- 
lars, being  one-third  of  the  valuation  of  the  said  partnership 
property,  paid  by  the  said  (incoming  partner)  to  the  said  first 
parties,  the  said  first  parties  admit  the  said  (incoming  partner) 

as  a  partner  in  the  said  business  for  the  term  of years  from 

the  date  hereof,  which  said  business  shall  henceforth  be  carried 

on  under  the  style  or  firm  name  of  ;  and  the  profits  and 

losses  of  the  said  partnership  shall  be  equally  divided  and  borne 
by  the  said  parties  hereto,  and  the  said  partnership  business  shall 
be  carried  on  by  them  under  and  subject  to  the  same  terms,  cov- 
enants, stipulations,  provisos,  declarations  and  agreements  as  are 
expressed  and  contained  in  the  said  hereinbefore  recited  written 
agreement  of  partnership  of  the day  of ,  of  and  con- 
cerning the  said  capital,  stock  in  trade  and  effects,  and  all  and 


§1159  LAW    OF    PARTNERSHIP  1518 

singular  the  other  matters  and  things  therein  mentioned  and  com- 
prised, and  that  as  fully  and  effectually  to  all  intents  and  pur- 
poses as  if  the  same  terms  were  expressed  and  contained  herein 
and  inserted  with  the  name  of  the  said  (incoming  partner) 
herein. 

Subject  to  the  covenants,  stipulations,  provisos,  declarations 
and  agreements  so  contained  in  the  said  hereinbefore  recited  in- 
denture as  aforesaid,  the  said  partnership  estate  and  effects  shall 
be  and  remain  unto  the  said  three  partners  constituting  the  said 

new  firm  of ,  their  respective  executors,  administrators  and 

assigns,  in  equal  shares  and  proportions. 

In  witness,  etc. 

Miscellaneous  Agreements  and  Forms 

§  1159.     Indorsement  on  articles  of  agreement  to  admit  new 
partner. 

Memorandum  of  agreement  made  the day  of ,  19 — , 

between  the  above-named and ,  of  the  first  part,  and 

of ,  of  the  second  part:  Whereby,  in  consideration  of 

the  sum  of dollars,  now  brought  in  and  contributed  by  the 

said  second  party  as  additional  capital  of  the  above-named  part- 
nership, it  is  hereby  agreed  as  follows : 

The  parties  hereto  shall,  as  from  the  date  hereof,  be  and  con- 
tinue partners  for  the  unexpired  residue  of  the  above-mentioned 
term,  subject  in  all  respects  to  the  conditions,  stipulation^  and 
provisions  of  the  above-written  articles,  so  far  as  applicable,  and 
except  as  varied  by  this  present  agreement. 

The  capital  of  the  partnership  shall  be  deemed  to  be  the  sum 

of  dollars,  and  to  have  been  contributed  by  the  parties 

hereto  in  the  shares  and  proportions  following:  that  is  to  say, 

two  equal  fifth  shares  by  the  said  ;  two  other  equal  fifth 

shares  by  the  said ;  and  the  remaining  one  equal  fifth  share 

by  the  said . 

The  profits  and  losses  shall  belong  to  and  be  borne  by  the  par- 
ties hereto  in  proportion  to  their  respective  shares. 

The  said and may  draw  out  of  the  profits  the  sums 


1519  FORMS MISCELLANEOUS  §  1160 

mentioned  in  the  above-written  articles —  and  the  said may 

draw  out  of  the  profits  money  not  exceeding  dollars  each 

month. 

In  witness,  etc. 

§  1160.     Admission  of  partner's  son  into  firm. 

Indenture  made  the  day  of  ,  between  ,  of  the 

first  part; and ,  of  the  second  part;  and ,  of  the 

third  part.   Whereas,  by  certain  articles  of  partnership  dated  the 

day  of ,  19 — ,  the  said  parties  of  the  first  and  second 

parts  became  partners  for  the  term  of years,  under  the  firm 

of ,  and  it  was  contemplated  and  provided  by  said  articles 

that  said  party  of  the  third  part,  the  son  of  said  party  of  the 
first  part,  should  at  some  future  time  become  a  partner  in  said 
firm ;  and  whereas,  in  pursuance  of  such  provision,  the  said  party 
of  the  first  part  is  now  desirous  of  introducing  his  said  son  as  a 
partner  into  the  said  firm  for  the  residue  of  the  said  term,  and  to 

assign  to  him  one  equal part  of  the  share  of  him,  the  said 

party  of  the  first  part,  but  subject  to  the  restrictions  and  provi- 
sions hereinafter  contained :  Now  this  indenture  witnesseth,  that 
for  effectuating  the  said  desire,  and  in  pursuance  of  the  said  pro- 
visions contained  in  the  said  articles,  the  said  party  of  the  first 
part,  with  the  consent  hereby  testified  of  the  said  parties  of  the 
second  part,  doth  hereby  introduce  the  said  party  of  the  third 
part  as  a  partner  into  the  said  firm,  upon  the  terms  and  subject 
to  the  restrictions  and  provisions  hereinafter  contained;  and  the 
said  party  of  the  first  part  doth  hereby  assign  unto  the  said  party 
of  the  third  part,  his  executors,  administrators,  and  assigns,  one 

equal part  of  the  share  of  him,  the  said  party  of  the  first 

part,  in  the  capital,  stock  in  trade,  assets,  good  will,  and  profits 

of  the  said  firm  as  from  the day  of ;  to  hold  the  same 

unto  the  said  party  of  the  third  part,  his  executors,  adminis- 
trators, and  assigns,  absolutely,  subject  as  hereinafter  mentioned. 
And  this  indenture  also  Avitnesseth,  that  in  consideration  of  the 
premises  he,  the  said  party  of  the  third  part,  doth  hereby  for  him- 
self, his  heirs,  executors,  and  administrators,  covenant  with  the 


§     1161  LAW    OF    PARTNERSHIP  1520 

said  parties  of  the  first  and  second  parts,  their  executors,  and 
administrators,  and,  as  separate  covenants,  with  each  of  them,  his 
executors  and  administrators,  and  each  of  them,  the  said  parties 
of  the  first  and  second  parts,  doth  hereby  for  himself,  his  heirs, 
executors,  and  administrators,  covenant  with  the  said  party  of 
the  third  part,  his  executors  and  administrators,  that  they,  the 
said  parties  of  the  first,  second,  and  third  parts,  will  henceforth 

become  and  remain  partners  in  the  said  business  of ,  for  the 

unexpired  residue  of  the  said  term  of  years,  under  and 

subject    to    the    stipulations    and    provisions    contained    in    the 

said    indenture    of    the    day    of   ,    19 — ,    with    such 

variations  as  are  rendered  necessary  by  the  admission  of  the 
said   party  of  the   third  part   into  the   said   business,   and   the 

assignment  to  him  of  the  said part  of  the  said  share  of  the 

said  party  of  the  first  part;  and  will  perform  and  observe  such 
of  the  same  covenants,  stipulations,  and  provisions,  with  such 
variations  as  aforesaid,  as  are  now  subsisting  and  capable  of  tak- 
ing effect,  in  the  same  manner,  so  far  as  the  circumstances  will 
admit,  as  if  the  said  party  of  the  third  part  had  originally  been 
made  a  party  to  the  same  indenture. 
In  witness,  etc. 

§  1161.     Admission  of  partner's  legatee  into  firm. 

Indenture  made  this  day  of  ,   19 — ,  between  • ■ 


of (legatee  of  deceased  partner),  of  the  first  part; of 

(executor  of  the  deceased  partner),  of  the  second  part;  and 

and (surviving  partners),  of  the  third  part:  Whereas 

the  said  ,  deceased,  and  said  surviving  partners  carried  on 

the  business  of ,  as  partners,  pursuant  to  the  provisions  of 

articles  of  copartnership,  bearing  date  the  day  of  , 

from  the  date  of  the  execution  thereof  up  to  the  time  of  the 

death  of  said  ,  which  occurred  on  the  day  of  , 

19 — ;  and  whereas  the  said executed  a  will  bequeathing  his 

share  in  the  property  and  business  of  said  partnership  to  his  son, 

the  said ,  and  said  will  was  duly  proved  in  the  probate  court 

of  the  county  of ,  at ,  on  the day  of ,  19 — . 


1521  FORMS MISCELLANEOUS  §    1162 

and  the  said was  duly  appointed  executor ;  and  whereas  the 

said  executor  has  assented  to  said  legacy,  and  in  testimony  of 
such  assent  joins  in  these  presents;  and  whereas  the  said  surviv- 
ing partners,  in  pursuance  of  a  provision  contained  in  said. arti- 
cles of  copartnership,  have  agreed  to  admit  the  said  (legatee) 
into  the  said  partnership  upon  his  entering  into  the  covenants 
hereinafter  contained :  Now  this  indenture  witnesseth,  that  the 
said  surviving  partners  hereby  admit  the  said  (legatee)  into  part- 
nership with  them  in  respect  of  the  share  of  the  said ,  de- 
ceased, subject  to  and  with  the  benefit  of  the  stipulations  and 
provisions  contained  in  the  said  articles  of  copartnership;  and 
the  said  (legatee)  doth  hereby  for  himself,  his  heirs,  executors, 
or  administrators,  covenant  with  the  said  surviving  partners  and 
each  of  them,  their  and  each  of  their  executors  and  administra- 
tors, that  he  will  henceforth  become  and  remain  a  partner  in 

respect  of  the  share  of  the  said  • ,  deceased,  so  bequeathed  to 

him  as  aforesaid  in  the  said  business,  for  the  unexpired  residue 
of  the  term  of  said  copartnership,  under  and  subject  to  the  stip- 
ulations and  provisions  contained  in  said  articles  of  copartner- 
ship, and  will  perform  and  observe  such  of  the  said  stipulations 
and  provisions  as  are  now  subsisting  and  capable  of  taking  effect, 
in  the  same  manner,  so  far  as  the  circumstances  will  admit,  as  if 
the  said  (legatee)  had  originally  been  made  a  party  to  the  said 
articles,  instead  of  the  said  (deceased  partner). 
In  witness,  etc. 

§  1162.  Agreement  by  continuing  partners  to  purchase  re- 
tiring partner's  share. 

Agreement  made  the day  of between and , 

continuing  partners,  and ,  retiring  partner. 

The  partnership  heretofore  carried  on  by  said  partners  in  the 

business  of ,  under  the  name  of ,  wherein  the  said  three 

partners  were  entitled  to  the  profits  and  liable  to  the  losses  of  said 
business  in  equal  shares,  shall  be  deemed  to  have  been  dissolved 
by  mutual  consent  as  and  from  the  day  of last,  and 


§     1162  LAW    OF    PARTNERSHIP  1522 

the  said  business  shall  as  from  that  date  be  carried  on  by  the  con- 
tinuing partners. 

The  continuing  partners  shall  pay  to  said  retiring  partner,  at 
the  dates  and  by  the  instalments  hereinafter  mentioned,  the  sum 

of dollars  as  the  purchase-money  for  his  share  and  interest 

in  said  partnership  and  the  capital,  property  and  good  will  thereof. 

The  said  purchase-money  shall  be  paid  to  said  retiring  partner 

as  follows :  the  sum  of dollars  upon  the  execution  hereof, 

and  the  balance  in  equal  instalments  of dollars  each,  pay- 
able at  the  expiration  of  successive  periods  of  calendar 

months  each  from  the  date  hereof,  together  with  interest  at  the 

rate  of per  cent,  per  annum  on  so  much  of  said  balance  as 

shall  for  the  time  being  remain  unpaid. 

The  said  retiring  partner  shall  not  for  the  period  of years 

from  the  date  hereof  carry  on  or  be  engaged,  either  directly  or 
indirectly,  and  either  as  principal,  clerk  or  agent,  in  the  said 

business  of within  the  state  of ,  and  shall  not  at  any 

time  hereafter  interfere  with  or  endeavor  to  divert  any  of  the 
business  carried  on  by  the  continuing  partners.  In  the  event  of 
any  breach  of  the  restrictions  in  this  clause  contained  by  said 
retiring  partner,  he  shall  pay  to  the  continuing  partners  the  sum 
of dollars  as  liquidated  damages. 

The  continuing  partners  shall  be  at  liberty,  if  they  shall  think 
fit,  to  use  the  name  of  the  retiring  partner  as  part  of  the  firm 
name  in  the  business  intended  to  be  carried  on  by  them;  that  is, 

continuing  the  firm  name  heretofore  used,  for  the  period  of 

years  from  the  date  of  this  agreement. 

The  continuing  partners  shall  have  the  right  to  collect  all 
moneys  and  assets  of  the  said  late  partnership  and  may  sue  for, 
recover  and  receive  and  give  effectual  receipts  for  all  debts  in  any 
wise  owing  and  for  all  effects  belonging  to  said  late  partnership 
and  to  settle  all  accounts  and  matters  relative  to  said  business, 
and  to  compound  for  or  release  all  debts  or  claims  belonging 
thereto,  and  to  institute  any  actions  or  proceedings  for  compelling 
payment  or  delivery  thereof,  and  for  such  purpose  to  use  the 
name  of  said  retiring  partner. 


1523  FORMS — MISCELLANEOUS  §  1163 

The  debts  and  liabilities  of  the  said  partnership  estimated  to 

amount  to  the  sum  of dollars  and  taken  into  account  at  that 

sum  in  estimating  the  value  and  purchase-money  aforesaid,  shall 
be  paid  and  discharged  by  the  continuing  partners,  who  shall 
indemnify  the  said  retiring  partner  therefrom,  and  from  all  ac- 
tions, costs,  claims  and  demands  in  respect  thereof. 

Each  of  the  parties  shall  sign  and  execute  such  further  deeds 
or  papers  as  the  other  party  shall  reasonably  require  for  effectu- 
ating this  agreement. 

The  expression  "continuing  partners"  shall  be  deemed  to  in- 
clude their  successor  or  successors  for  the  time  being  in  said 
business  so  intended  to  be  carried  on  by  them. 

In  witness,  etc. 

(Signatures  of  all  parties.) 

§  1163.  Agreement  for  sale  by  retiring  partner  of  his  share 
in  partnership  to  incoming  partner,  with  concur- 
rence of  continuing  partners. 

Indenture  made  the day  of  — — ,  between of 

(retiring  partner),  of  the  firm  of &  Co.,  hereinafter  called 

the  vendor;  ■ and  (continuing  partners);  and  

(incoming  partner),  hereinafter  called  the  purchaser. 

The  said  vendor,  with  the  approval  hereby  testified  of  the  said 
continuing  partners,  agrees  to  sell,  and  the  said  purchaser  agrees 
to  purchase,  all  the  share  and  interest  of  the  said  vendor  in  the 

good  will  of  the  business  of ,  as  the  same  is  now  carried  on 

l)y  the  said  vendor  in  partnership  with  the  said  continuing  part- 
ners, under  the  firm  name  of  &  Co.,  and  in  the  assets, 

property  and  capital  of  the  said  partnership,  and  in  the  profits 
thereof,  as  from  the day  of . 

The  purchase-money  shall  be  the  sum  of dollars,  but  the 

said  purchaser  shall  be  entitled  to  deduct  from  the  purchase- 
money  all  moneys  now  already  or  at  any  time  before  completion 
to  be  drawn  out  by  the  said  vendor  in  anticipation  of  his  share 
of  profits  for  the  current  year. 

The  purchase  shall  be  completed  on  the day  of  ,  at 


§     1163  LAW    OF    TARTNERSniP  1524 

the  office  of  said  firm,  at  which  time  and  place  the  said  vendor 
shall,  upon  payment  of  the  purchase-money  (subject  to  such  de- 
duction, if  any,  as  aforesaid),  execute  a  proper  assignment  of 
the  said  premises  to  the  said  purchaser,  with  such  powers  of 
attorney  and  other  provisions  as  may  be  proper.  And  if  from 
any  cause  whatever,  other  than  the  wilful  default  of  the  said 
vendor,  the  purchase  shall  not  be  completed  on  or  before  that 
day,  the  said  purchaser  shall  pay  to  the  said  vendor  interest  on 
the  purchase-money  (after  making  such  deduction  as  aforesaid), 
at  the  rate  of per  cent,  per  annum  from  that  day  until  com- 
pletion. 

Proper  instruments  shall  be  executed  for  the  indemnity  of  the 
said  purchaser  by  the  said  vendor  from  all  the  debts,  liabilities, 
and  engagements  of  the  firm,  if  any,  entered  into,  accepted  or 

given  before  the  said day  of ,  which  do  not  appear  in 

the  books  of  the  said  partnership,  and  for  the  indemnity  of  the 
said  vendor  and  his  representatives  against  all  the  outstanding 
debts,  liabilities  and  engagements  of  the  firm  which  appear  in 
^the  books  of  the  partnership. 

The  said  continuing  and  incoming  partners  shall,  upon  the 
completion  of  the  said  purchase,  execute  an  agreement  contain- 
ing mutual  covenants  by  the  said  continuing  and  incoming  part- 
ners to  be  and  remain  partners  in  the  said  business  of for 

the  residue  of  the  term  of years  from  the day  of , 

upon  the  terms,  and  subject  to  the  agreements  and  provisions, 
contained  in  the  said  articles,  with  such  variations  as  are  rendered 
necessary  by  the  introduction  of  the  said  purchaser  as  a  partner, 
and  the  assignment  to  him  of  the  share  and  interest  of  the  said 
vendor,  and  for  the  performance  and  observance  of  the  said 
agreements  and  provisions,  with  such  variations  as  aforesaid,  in 
the  same  manner,  as  far  as  circumstances  will  admit,  as  if  the 
said  purchaser  had  originally  been  a  party  to  the  said  articles. 

In  witness,  etc. 


1525  FORMS MISCELLANEOUS  §  1164 

§  1164.     Assignment  by  retiring  partner  to  continuing  part- 
ner. 

Indenture  made  the day  of ,  between of , 

of  the  one  part,  and of ,  of  the  other  part :  Whereas 

the  said  parties  have  for  some  years  past  carried  on  the  business 

of ,  at ,  under  the  provisions  of  articles  of  partnership, 

dated,  etc, ;  and  whereas  the  said  partners  are  possessed,  as  part 
of  their  partnership  property,  of  a  lease  dated,  etc.,  and  of  cer- 
tain fixed  and  movable  engines,  machinery,  plant,  stock  in  trade, 
and  other  effects;  and  whereas  it  has  been  agreed  between  the 
said  partners,  that  the  said  partnership  shall  stand  dissolved  as 

from  the day  of ,  and  a  notice  of  such  dissolution  has 

been  signed  by  the  said  parties,  to  be  published  in  the ,  and  it 

has  been  agreed  that  as  from  that  day  the  said  business  shall 

belong  to  and  be  carried  on  by  the  said  ,  the  continuing 

partner,  solely,  and  that  the  share  and  interest  of  the  said , 

the  retiring  partner,  In  the  assets  and  good  will  of  the  said  part- 
nership shall  be  assigned  and  made  over  to  the  said  continuing 
partner,  on  his  taking  upon  himself  the  whole  of  the  debts  and 
liabilities  of  the  said  partnership  which  were  outstanding  on  the 

said day  of ,  and  paying  to  the  said  retiring  partner 

the  value  of  his  share  and  interest  in  the  said  partnership,  and 
the  assets  and  good  will  thereof,  as  the  same  stood  on  that  day; 
and  whereas  an  account  and  valuation  has  been  taken  and  made 
by  the  said  partners  of  the  said  business,  and  the  assets  and  good 
will  thereof,  and  the  value  of  the  share  and  interest  of  the  said 
retiring  partner  therein,  after  providing  for  the  payment  and 

satisfaction  of  the  debts  and  liabilities  thereof  on  the  said 

day  of ,  has  been  ascertained  to  be  the  sum  of dollars : 

Now  this  indenture  witnesseth,  that  in  pursuance  of  the  said 
agreement  in  this  behalf,  they  the  said  parties  do  hereby  declare 
that  the  said  partnership  between  them  shall  be  considered  as 

determined  and  stand  dissolved  as  from  the  said  day  of 

;  and  that  in  pursuance  of  the  said  agreement,  and  in  con- 
sideration of  the  premises  and  of  the  sum  of dollars  now 

paid  by  the  said  continuing  partner  to  the  said  retiring  partner, 


§     1164  LAW    OF    PARTNERSHIP  1526 

he  doth  hereby  assign  and  transfer  unto  the  said  continuing 
partner,  his  executors,  administratOx"s,  and  assigns,  all  the  part 
or  share  and  interest  whatsoever  of  him,  the  said  retiring  part- 
ner, of  and  in  all  and  singular  the  leasehold  and  premises  herein- 
before mentioned  or  referred  to,  and  of  and  in  all  and  singular 
the  engines,  machinery,  whether  fixed  or  movable,  plant,  stock 
in  trade,  book  and  other  debts,  credits,  contracts,  assets,  effects, 
profits,  business,  and  good  will  of  the  said  partnership :  to  hold 
all  the  said  premises  unto  the  said  continuing  partner,  his  execu- 
tors, administrators,  and  assigns,  absolutely.  And  for  the  con- 
sideration aforesaid,  and  for  the  more  effectually  enabling  the 
said  continuing  partner,  his  executors,  administrators,  and  as- 
signs, to  receive  and  recover  and  obtain  the  benefit  of  the  prem- 
ises hereby  assigned,  the  said  retiring  partner  doth  hereby  irrev- 
ocably appoint  the  said  continuing  partner,  his  executors,  admin- 
istrators, and  assigns,  the  attorney  or  attorneys  of  him,  the  said 
retiring  partner,  his  executors  or  administrators,  in  the  joint 
names  of  the  said  partners,  or  in  the  name  or  names  of  the  said 
retiring  partner,  his  executors  or  administrators,  or  otherwise, 
as  the  case  may  require,  but  for  the  exclusive  benefit  and  at  the 
sole  cost  and  risk  of  the  said  continuing  partner,  his  executors, 
administrators,  or  assigns,  to  demand,  call  in,  and  receive  from' 
all  persons  liable  to  pay,  deliver,  or  account  for  the  same,  or  any 
part  thereof,  all  and  singular  the  book  and  other  debts,  credits, 
moneys,  and  effects  of  the  said  partnership,  and  to  give  effectual 
receipts  and  discharges  for  the  same  respectively,  and  to  indorse 
bills  and  other  negotiable  instruments,  and  to  use  and  adopt  all 
such  remedies,  proceedings,  or  means  for  getting  in  and  recover- 
ing the  said  debts,  credits,  moneys,  and  effects  respectively,  and 
enforcing  and  obtaining  the  benefits  of  any  of  the  contracts  of 
the  said  partnership  as  may  be  deemed  expedient,  and  for  all  or 
any  of  the  purposes  aforesaid  from  time  to  time  to  appoint  a 
substitute  or  substitutes,  and  such  substitution  at  pleasure  to 
revoke,  and  generally  to  do  whatsoever  may  be  requisite  for 
giving  to  the  said  continuing  partner,  his  executors,  administra- 
tors, or  assigns,  the  full  benefit  of  the  assignment  hereby  made ; 


1527  FORMS MISCELLANEOUS  §  1164 

and  the  said  retiring  partner  doth  hereby  covenant  with  the  said 
continuing  partner,  his  executors,  administrators,  and  assigns, 
that  he,  the  said  retiring  partner,  has  not  at  any  time  heretofore, 
except  as  appears  by  the  books  of  the  said  partnership,  contracted 
any  debt  or  obligation  which  can  or  may  charge  or  effect  the  said 
continuing  partner,  his  executors,  administrators,  or  assigns,  or 
the  assets  or  effects  of  the  said  partnership,  or  any  part  thereof, 
or  received  or  discharged  any  of  the  said  debts,  credits,  moneys, 
or  effects,  except  as  aforesaid;  and  that  he,  the  said  retiring  part- 
ner, his  executors  or  administrators,  will  at  all  times  ratify  and 
confirm  whatsoever  the  said  continuing  partner,  his  executors, 
administrators,  or  assigns,  or  any  substitute  or  substitutes  acting 
under  him  or  them,  shall  do  or  purport  to  do  by  virtue  of  these 
presents;  and  will  not  compound,  release,  or  become  nonsuit  in 
any  action  or  proceeding  which  may  be  instituted  or  taken  by  the 
said  continuing  partner,  his  executors,  administrators,  or  assigns, 
by  virtue  of  the  power  of  attorney  hereinbefore  contained,  nor  do 
any  other  act  by  means  whereof  the  recovery  of  the  premises 
hereby  assigned,  or  any  part  thereof,  may  be  impeached  or  de- 
layed, nor  interfere  in  or  about  the  premises  further  or  otherwise 
than  the  said  continuing  partner,  his  executors,  administrators,  or 
assigns,  shall  direct  or  require.  And  the  said  continuing  part- 
ner doth  hereby  covenant  with  the  said  retiring  partner,  his 
executors  and  administrators,  that  he,  the  said  continuing  part- 
ner, will  in  due  course  pay  all  the  debts  and  discharge  all 
the  liabilities  of  the  said  partnership,  including  therein  the 
rents  and  covenants  to  be  paid  and  performed  in  respect  of 
the  said  leasehold  premises;  and  will,  at  all  times  hereafter, 
effectually  keep  indemnified  the  said  retiring  partner,  his  execu- 
tors and  administrators,  and  his  and  their  estate  and  effects, 
against  all  such  debts  and  liabilities,  and  all  actions,  proceedings, 
costs,  and  expenses  in  respect  thereof,  and  all  costs  and  expenses 
by  reason  of  any  action  or  proceeding  which  may  be  instituted 
or  taken  by  the  said  continuing  partner,  his  executors,  adminis- 
trators, or  assigns,  by  virtue  of  the  power  or  authority  hereinbe- 
fore contained,  or  of  anything  relating  thereto.    And  each  of 

46 — Row.  ON  Partn. — Vol.  2 


§     1165  LAW    OF    PARTNERSHIP  1528 

them  doth  hereby  release  and  forever  discharge  the  other  of 
them,  his  heirs,  executors,  administrators,  and  assigns,  from  all 
actions,  proceedings,  claims,  and  demands  whatsoever,  which 
such  respective  releasing  party,  or  his  heirs,  executors,  adminis- 
trators, or  assigns,  now  has  or  hereafter  might  have  had  against 
the  other  of  them,  his  heirs,  executors,  administrators,  or  assigns, 
on  account  of  the  said  partnership,  or  anything  relating  thereto, 
but  so  nevertheless  that  this  present  release  shall  not  prejudice 
or  affect  any  of  the  covenants,  agreements,  or  provisions  herein 
contained,  or  the  rights  or  remedies  of  the  said  respective  par- 
ties, their  heirs,  executors,  administrators,  or  assigns,  hereunder. 
In  witness,  etc. 

§  1165.     Assignment  to  surviving  partner  of  deceased  part- 
ner's share. 

Indenture  made  the  day  of  ,  19 — ,  between  

and ,  executors  of  the  will  of ,  deceased  partner,  of  the 

one  part,  and ,  surviving  partner,  of  the  other  part :  Whereas 

by  articles  of  partnership  dated  the day  of ,  19 — ,  the 

said ,  deceased,  and  the  said  surviving  partner  became  part- 
ners in  the  business  of  for  the  term  of  years;  and 

whereas  it  was  stipulated  by  said  articles  (recite  provision  em- 
powering surviving  partner  to  buy  deceased  partner's  share)  ; 
and  whereas  the  said died  on  the day  of ,  hav- 
ing made  a  will  which  was  duly  proved  in  the  probate  court 

for  the  county  of ,  on  the day  of following,  and 

the  said  and  were  duly  appointed  and  qualified  as 

executors;  and  whereas  the  said  surviving  partner  has  settled 
and  adjusted  all  the  partnership  accounts  with  the  said  executors 
in  pursuance  of  the  stipulations  contained  in  said  articles;  and 
whereas  the  said  surviving  partner  has  signified  his  desire  to 
purchase  the  share  of  the  said  deceased  partner  in  the  partner- 
ship effects,  and  a  valuation  thereof  has  been  made  and  agreed 
upon  between  the  said  executors  and  the  said  surviving  part- 
ner, such  valuation  being  the  sum  of dollars;  and  whereas 

the  said  surviving  partner  has  this  day  executed  and  delivered  to 


1529  FORMS MISCELLANEOUS  §  1165 

said  executors  his  bond  in  the  penal  sum  of dollars,  con- 
ditioned for  the  payment  of  the  said  sum  of dollars,  with 

interest  thereon  at  the  rate  of per  cent,  per  annum,  by  four 

equal  instalments  at  three,  six,  nine,  and  twelve  calendar  months 
from  the  date  hereof;  and  also  for  indemnifying  the  said  exec- 
utors against  any  costs  or  damages  for  or  on  account  of  said 
partnership  business :  Now  this  indenture  witnesseth,  that  in  con- 
sideration of  the  premises  they,  the  said  executors,  do  hereby 
assign  unto  the  said  surviving  partner,  his  executors,  admin- 
istrators, and  assigns,  all  that undivided  part  or  share  of 

the  said  deceased  partner  in  and  to  all  the  goods,  credits,  and 
effects  belonging,  due,  and  owing  to  the  said  partnership ;  and  all 
the  right,  title,  and  interest  of  the  said  deceased  partner,  and  of 
the  said  executors  therein,  with  full  power  and  authority  to  the 
said  surviving  partner,  his  executors  or  administrators,  as  the 
attorney  or  attorneys  irrevocable  of  them,  the  said  executors,  and 
in  their  names,  or  in  the  name  of  the  survivor  of  them  or  of  the 
said  deceased  partner,  but  at  the  sole  cost  and  expense  of  the 
said  surviving  partner,  to  demand,  recover,  and  receive  the  said 
partnership  credits  and  effects,  and  to  give  effectual  receipts  and 
discharges  for  the  same,  and  to  appoint  a  substitute  or  substi- 
tutes for  any  or  all  of  the  purposes  aforesaid :  to  have  and  to 

hold  the  said part  or  share  of  the  said  goods,  credits,  and 

effects  unto  the  said  surviving  partner,  his  executors,  admin- 
istrators, and  assigns,  for  his  and  their  own  use,  forever.  And 
the  said  executors  do  hereby  confirm  all  and  whatsoever  the 
said  surviving  partner,  his  executors  and  administrators,  or  his 
or  their  substitute  or  substitutes,  shall  lawfully  do  or  cause  to 
be  done  in  the  premises  by  virtue  of  these  presents,  and  will  not 
receive  or  discharge  any  of  said  partnership  credits,  nor  interfere 
with  any  action  brought  by  the  said  surviving  partner,  his  exec- 
utors or  administrators,  in  respect  of  the  said  assigned  premises. 
In  witness,  etc. 


§     1166  LAW    OF    rARTNERSHIP  1530 

§  1166.     Conveyance    of   share    of   retiring   partner   to    co- 
partners. 

Indenture  made  this  day  of  ,  19 — ,  between  , 

retiring  partner,  of  the  one  part,  and and ,  continuing 

partners,  of  the  other  part:  Whereas  the  said  parties  have  car- 
ried on  the  business  of in  copartnership  up  to  the day 

of  ,  and  are  entitled  in  fee,  as  part  of  their  partnership 

property,  to  the  buildings  and  lands  described  in  a  certain  deed 

made  by to  said  partners,  dated  the day  of ,  and 

recorded  in county  registry  of  deeds,  book ,  page , 

and  to  the  buildings  and  lands  specified  in  an  indenture  of  lease 
dated  the •  day  of ,  and  made  by to  the  said  part- 
ners for  a  term  of years  from  the day  of ,  at  the 

yearly  rent  of dollars,  and  to  the  fixed  machinery  and  other 

erections  and  fixtures  upon  the  said  respective  freehold  and 
leasehold  premises,  in  the  shares  and  proportions  following,  that 

is  to  say,  the  said  retiring  partner  to  equal  parts 

thereof,  and  the  said  continuing  partners  to  the  remaining 

equal parts  thereof;  and  whereas  the  said  retiring  partner 

has  retired  from  the  said  firm  as  from  the  said day  of , 

and  the  said  continuing  partners  continue  to  carry  on  the  said 

business  of  in  copartnership  together;  and  whereas  the 

said  continuing  partners  have  come  to  a  settlement  with  the 
said  retiring  partner  in  respect  of  his  share  and  interest  in  the 
said  partnership,  and  the  assets  and  effects  thereof,  and  it  has 
been  agreed  that  they  should  pay  to  the  said  retiring  partner  the 
sum  of  dollars  in  full  satisfaction  of  such  share  and  in- 
terest; and  whereas  it  has  been  agreed  that  the  share  and  in- 
terest of  the  said  retiring  partner  in  the  said  freehold  and  lease- 
hold premises  should  be  conveyed  and  assigned  to  the  said  con- 
tinuing partners  in  manner  hereinafter  mentioned :  Now  this 
indenture  witnesseth,  that  in  pursuance  of  such  agreement,  and  in 
consideration  of  the  sum  of dollars  to  the  said  retiring  part- 
ner paid  by  the  said  continuing  partners  out  of  moneys  belonging 
to  their  said  new  partnership,  he,  the  said  retiring  partner,  doth 
hereby  grant,  assign,  and  release  unto  the  said  continuing  part- 


1531  FORMS — MISCELLANEOUS  §  1167 

ners,  their  heirs,  executors,  administrators,  and  assigns,  re- 
spectively, according  to  the  nature  of  the  said  respective  prem- 
ises, all  those equal  undivided parts  or  shares,  and  all 

other,  the  parts,  shares,  or  interests  of  the  said  retiring  partner  in 
the  freehold  and  leasehold  buildings,  lands,  and  premises  herein- 
before specified,  and  in  all  the  fixed  machinery  and  other  erections 
and  fixtures  in  or  upon  the  said  respective  premises :  To  have 
and  to  hold  to  them,  the  said  continuing  partners,  their  heirs, 
executors,  administrators,  and  assigns,  respectively,  as  joint  ten- 
ants, according  to  their  respective  shares,  rights,  and  interests, 
as  between  themselves,  of  and  in  the  property  of  their  said  pres- 
ent partnership,  but  as  regards  the  said  leasehold  premises  for  the 
residue  of  the  said  term  of years,  and  subject  to  the  pay- 
ment of  the  said  rent,  and  the  performance  and  observance  of 
the  covenants  by  the  lessee  and  conditions  of  the  said  indenture 
of  lease.    In  Mritness,  etc. 

§  1167.     Charge  on  partner's  profits. 

Agreement  made  this day  of ,  19 — ,  between , 


senior  partner  in  the  firm  of &  Co.,  of  the  first  part,  and 

,  junior  partner  in  said  firm,  of  the  second  part:  Whereas 

it  has  become  expedient  and  desirable  to  increase  the  capital  of 
said  firm,  and  the  said  junior  partner  is  not  at  present  prepared 
to  pay  his  proportion  thereof,  and  the  said  senior  partner  has 
agreed  to  lend  and  advance  to  him  his  share  of  the  increased 
capital,  being  the  sum  of dollars,  upon  the  terms  and  con- 
ditions hereinafter  expressed:   Now  these  presents  witness,  that 

in  consideration  of  the  said  sum  of dollars  now  advanced 

and  paid  by  the  said  senior  partner  into  the Bank,  at 

aforesaid,  to  the  credit  of  the  capital  account  of  the  said  co- 
partnership for  and  on  behalf  of  the  said  junior  partner,  as  he 
hereby  admits,  he,  the  said  junior  partner,  hereby  agrees  that  the 

said  sum  of  dollars  so  advanced,  together  with  interest 

thereon  at  the  rate  of per  cent,  per  annum,  shall  be  a  charge 

and  lien  upon  his  share  in  the  copartnership  property  and  profits. 
The  said  junior  partner  further  agrees,  that  he  will  pay  to  the 


§     1168  LAW    OF    PARTNERSHIP  1532 

said  senior  partner,  or  permit  him  to  receive,  half-yearly,  out  of 
his  the  said  junior  partner's  share  of  the  net  profits  of  the  said 
business,  one  full  moiety  thereof  in  part  satisfaction  of  the  said 
principal  sum  so  advanced  and  interest  thereon,  until  the  whole 
debt  shall  be  fully  satisfied ;  and  in  the  event  of  there  being  no 
such  profits,  the  same  shall  be  paid  out  of  his  share  of  and  in 
the  said  copartnership  funds  and  property  on  the  dissolution  of 
said  copartnership. 

And  it  is  further  mutually  agreed  that  in  the  event  of  there 
being  no  profits  arising  from  the  business  at  the  expiration  of 

months  from  the  date  hereof,  or  if  the  said  copartnership 

shall  be  sooner  dissolved,  or  if  the  said  borrower  shall  become 
bankrupt,  or  shall  compound  or  attempt  to  compromise  with  his 
creditors,  or  make  any  assignment  of  his  interest  in  said  copart- 
nership, or  shall  suffer  any  action  or  other  proceeding  to  be  in- 
stituted against  him  affecting  the  copartnership  property  or  his 
interest  therein,  then  and  in  either  of  such  cases  the  whole  of  the 
sum  so  advanced  as  aforesaid,  or  so  much  thereof  as  shall  then 
remain  due,  with  interest  thereon,  shall  thereupon  become  payable 
to  the  said  senior  partner,  his  executors,  administrators,  or  as- 
signs, in  priority  to  any  other  charge  or  claim  whatsoever  thereon 
or  thereto.    In  witness,  etc. 

§  1168.     Bond  indemnifying  retiring  partner  against  part- 
nership debts. 

Know  all  men  by  these  presents,  etc. :  Whereas  the  said , 

and have  carried  on  the  business  of ,  under  the 

firm  of ,  at aforesaid,  from  the day  of ;  and 

whereas  by  an  indenture  of  this  same  date  it  has  been  agreed  that 
the  said  partnership  shall  be  considered  as  determined  and  dis- 
solved from  the day  of ,  and  by  the  same  indenture 

the  said has  assigned  and  released  unto  the  said and 

,  their  executors,  administrators  and  assigns  all  the  estate 

and  interest  of  said ,  in  the  said  partnership  business,  and 

the  moneys,  debts,  property  and  effects  belonging  or  due  to  the 
said , and ,  as  partners,  or  in  respect  of  the  said 


1533  FORMS MISCELLANEOUS  §  1169 

partnership;  and  whereas  it  was  part  of  the  arrangement  for  the 

dissokition  of  the  said  partnership  that  the  said and  

should  execute  and  give  to  the  said the  above-written  bond 

with  such  condition  for  making  void  the  same  as  hereinafter  con- 
tained : 

Now  the  condition  of  the  above-written  bond  is  such  that,  if 

the  said and ,  or  one  of  them,  or  their  heirs,  executors 

or  administrators,  shall  pay  all  the  bills  and  notes,  and  all  other 
debts  and  moneys  due  or  growing  due  from  the  said  partnership, 
or  any  or  either  partner  in  respect  of  the  said  partnership,  and 
discharge  all  the  liabilities  and  perform  all  the  engagements  of 

the  said  partnership  to  which  the  said ,  and ,  or 

their  respective  heirs,  executors  or  administrators,  or  any  of 
them,  are,  is,  or  shall  be  liable,  and  shall  keep  indemnified  the 

said ,  his  heirs,  executors,  administrators,  estate  and  effects 

against  all  actions,  proceedings,  losses,  damages,  costs  and  ex- 
penses for  or  by  reason  of  the  nonpayment,  nondischarge  or 
nonperformance  of  any  of  the  said  bills,  notes,  debts,  moneys, 
liabilities  or  engagements,  or  of  any  act  or  thing  in  any  wise 
relating  thereto,  then  the  above-written  bond  shall  be  void,  other- 
wise the  same  shall  remain  in  full  force  and  effect. 

§  1169.  Bond  by  surviving  partners  to  secure  payment  of 
share  of  deceased  partner  and  for  indemnity. 

Know  all  men  by  these  presents  that  we, and (sur- 
viving partners)  of,  etc.,  hereby  bind  ourselves  jointly  and  sever- 
ally to (executor  of  deceased  partner)  for  the  payment  to 

him  the  sum  of dollars : 

Whereas  the  said  and  (surviving  partners)   and 

(deceased  partner),  late  of  ,  carried  on  business  in 

partnership  under  the  style  of ,  and  under  articles  of  partner- 
ship dated ; 

And  whereas  the  said  died  on  the  day  of  , 

during  the  subsistence  of  said  partnership,  and  by  his  w^ill  ap- 
pointed   his  executor,  who  duly  proved  said  will  in  the  pro- 
bate court  of county  on  the day  of ; 


^     1170  LAW    OF    PARTNERSHIP  1534 

And  whereas  the  share  and  interest  of (deceased  partner) 

in  said  partnership  has  been  ascertained  and  agreed  to  be  the 
sum  of dollars ; 

And  whereas  it  has  been  agreed  by  the  parties  hereto  that  the 
said  sum  shall  be  paid  by  instalments  in  the  manner  hereinafter 

mentioned,  and  that  the  said and  should  execute  the 

above-written  obligation  conditioned  as  hereinafter  expressed ; 

Xow  the  above-written  obligation  is  conditioned  to  be  void  in 

case  the  said and  (surviving  partners),  or  either  of 

them  or  either  of  their  heirs,  executors  or  administrators  shall 

pay  on  the  day  of  in  each  and  every  year  to  said 

executor  or  to  the  legal  representatives  for  the  time  being  of 

said (deceased  partner),  the  sum  of dollars  until  the 

whole  sum  shall  be  fully  paid. 

And  also  shall  at  all  times  save  harmless  and  keep  fully  and 
effectually  indemnified  the  heirs  and  legal  personal  representa- 
tives of  the  said (deceased  partner),  his  estate  and  prop- 
erty, from  all  debts,  liabilities,  claims  and  demands  which  now 
or  may  at  any  time  hereafter  be  or  become  due  or  be  made  by 
any  person  or  persons  from  or  against  the  said  heirs  or  legal 

personal  representatives  of  the  said (deceased  partner),  his 

estate  or  effects  by  reason  of  the  said (deceased  partner) 

having  been  a  member  of  the  said  partnership. 

Signed,  sealed,  etc.,  by and (surviving  partners). 

§  1170.  Partnership  bond  with  sureties  to  secure  banking 
account. 

(a)   Know  all  men  by  these  presents  that  we, and , 

merchants  and  copartners  under  the  firm  of &  Co.,  as  prin- 
cipals, and  and  — ,  as  sureties,  are  bound  to and 

,  bankers  and  copartners  under  the  firm  of &  Co.,  etc. : 

Whereas  the  above-bounden  (merchants)  are  carrying  on  busi- 
ness at  ,  and  the  above-named   (bankers)   have  agreed  to 

open  an  account  with  them,  and  to  accept  bills  and  drafts  to  be 
drawn  by  them  upon  the  said  bankers,  or  the  survivors  or  sur- 
vivor of  them,  or  any  other  person  or  persons  who,  either  in 


1535  FORMS MISCELLANEOUS  §     1170 

partnership  with  them  or  any  of  them,  or  otherwise,  shall  for 
the  time  being  constitute  the  said  banking  firm,  for  any  sums 
not  exceeding  in  the  whole,  on  the  balance  of  account,  the  sum  of 

dollars,   provided  the   said  merchants,  together  with  the 

above-bounden  sureties,  enter  into  a  bond  in  the  penal  sum  of 
dollars,  with  such  condition  as  is  hereunder  written : 

Now  the  condition  of  the  above-written  bond  is  such  that  if 
the  said  (obligors)  or  any  of  them,  or  any  of  their  heirs,  execu- 
tors or  administrators,  shall  at  all  times  hereafter  upon  demand 
pay  unto  the  said  bankers,  or  the  survivors  or  survivor  of  them, 
or  such  other  person  or  persons  as  aforesaid,  all  such  sums  of 
money  as  shall  be  advanced  by  them  or  him,  to  or  on  account 
of  the  said  merchants,  upon  such  bills  or  drafts  as  aforesaid, 
and  also  all  interest,  commission  and  customary  charges,  and  shall 
at  all  times  hereafter  keep  indemnified  the  said  bankers  and  eveiy 
of  them,  their  and  every  of  their  heirs,  executors  and  adminis- 
trators, and  also  such  other  person  or  persons  as  aforesaid,  his 
and  their  heirs,  executors  and  administrators,  against  all  losses, 
damages,  costs  and  expenses  which  they,  or  any  of  them,  shall 
pay,  sustain  or  be  put  to,  for  or  in  respect  of  such  bill  or  drafts 
as  aforesaid,  such  sums  of  money,  interest,  commission  and 
charges,  and  such  losses,  damages,  costs  and  expenses,  not  ex- 
ceeding in  the  whole  the  sum  of  dollars,  then  the  above- 
written  bond  shall  be  void;  otherwise  the  same  shall  remain  in 
full  force. 

In  witness,  etc. 

To  prevent  the  release  of  the  sureties  by  giving  time  to  the 
principal  debtors,  the  following  clause  may  be  added : 

(b)  Provided  that  as  between  the  said  (sureties)  and  the  said 
(obligees)  respectively,  the  said  (sureties)  shall  be  considered  as 
principal  debtors  for  the  moneys  intended  to  be  hereby  secured,  to 
the  intent  that  they  and  each  of  them,  their  heirs,  executors  and 
administrators,  shall  not  be  released  or  exonerated  in  respect  of 
their  liability"  hereunder  by  time  being  given  to  the  said  (princi- 
pals), or  either  of  them,  their  heirs,  executors  or  administrators, 
or  by  any  act  or  omission  of  the  said  (obligees),  or  the  survivor 


§     1171  \AW    OF    PARTNERSHIP  1536 

or  survivors  or  such  other  person  or  persons  as  aforesaid,  or  by 
any  other  matter  or  thing  whatsoever,  whereby  the  said  (sure- 
ties) and  each  of  them,  their  heirs,  executors  or  administrators, 
as  sureties  only  for  the  said  (principals)  w^ould  but  for  this  pres- 
ent provision  be  so  released  or  exonerated. 

§  1171.     Bond  by  partner  to  copartner  and  inventor  for  pro- 
tection of  secret  process. 

Know  all  men  by  these  presents  that  I,  ,  partner  in  the 

firm  of and ,  do  hereby  bind  myself  to ,  copartner, 

for  the  payment  to  him  of  the  sum  of dollars  as  liquidated 

damages  and  not  as  a  penalty. 

Sealed  with  my  seal  this day  of . 

Whereas  by  indenture  dated  the day  of .  made  be- 
tween the  said  parties,  they  have  agreed  to  enter  into  partnership 
for  the  term  of years ; 

And  whereas  the  said  has  invented  a  secret  process  of 

manufacture,  namely, ; 

And  whereas  upon  the  execution  of  said  articles  of  partnership, 
it  was  agreed  that  the  above-written  bond  should  be  given  for 
the  preservation  of  said  secret  process ; 

Now  this  obligation  is  conditioned  to  be  void  in  case  the  said 

shall  at  all  times  hereafter,  during  the  continuance  of  said 

partnership,  and  afterw^ard,  well  and  truly  keep  and  preserve 
said  secret  and  shall  not  disclose  the  same  or  suffer  the  same  to  be 
disclosed  to  any  other  person  except  with  the  consent  in  writing 

of  the  said (inventor). 

(Signature  and  seal  of  partners.) 

§  1172.     Composition  agreement  between  partners  and  part- 
nership creditors,  w^ith  covenant  not  to  sue. 

Indenture  made  the day  of ,  between , and 

,  all  of ,  trading  in  partnership  tnider  the  style  or  firm 


of &  Co.,  and  hereinafter  called  the  debtors,  of  the  one 

part;  and  the  several  persons,  companies  and  partnership  firms, 
being  creditors  of  the  debtors  in  respect  of  their  said  partnership, 
whose  names  and  seals  are  set  and  affixed  in  the  schedule  hereto. 


1537  FORMS MISCELLANEOUS  §  1172 

and  who  are  hereinafter  called  the  said  creditors,  of  the  other 
part : 

Whereas,  at  a  meeting  of  the  said  creditors  held  on  the , 

day  of last,  a  resolution  was  passed  to  the  effect  that  they 

should  accept  a  composition  of cents  on  the  dollar  upon  the 

amount  and  in  full  discharge  of  their  said  debts,  such  composi- 
tion to  be  payable  in  three  equal  instalments  at  the  respective 

periods  of , and calendar  months  from  the 

day  of ;  and  whereas,  in  part  pursuance  of  the  said  resolu- 
tion, the  debtors  have  delivered  to  the  said  creditors  respectively, 
upon  their  respective  execution  hereof,  the  joint  promissory  notes 
of  the  debtors  for  the  payment  of  the  said  composition  to  the 
said  creditors  respectively,  as  aforesaid.  Now  this  indenture 
witnesseth,  that  further  pursuant  to  said  resolution,  and  in  con- 
sideration of  the  premises  the  said  creditors  hereby  respectively 
covenant  with  the  debtors  that  said  creditors,  respectively,  will 
not,  unless  default  shall  be  made  in  meeting  any  of  the  said  notes 
at  maturity,  sue,  arrest,  attach  or  molest  any  of  said  debtors,  or 
any  of  their  estate,  for  or  on  account  of  the  said  respective  debts, 
and  that  these  presents  may  be  pleaded  as  a  defense  to  any  action 
or  other  proceeding  which  may  be  brought,  instituted  or  taken 
by  or  on  behalf  of  any  of  the  said  creditors  in  breach  of  this  cov- 
enant; and  further,  that  if  the  said  notes  shall  be  paid  at  ma- 
turity, the  said  debtors  shall  be  absolutely  released  and  discharged 
from  the  said  debts  due  from  them  to  the  said  creditors  respect- 
ively, and  these  presents  may  accordingly  thereafter  be  pleaded 
as  a  defense  to  any  action  or  other  proceeding  which  said  cred- 
itors respectively  shall  have  theretofore  brought,  or  otherwise 
might  thereafter  bring,  institute  or  take  in  breach  of  this  cove- 
nant. Provided  always,  that  in  case  default  shall  be  made  in 
meeting  any  of  the  said  notes  at  maturity,  or  in  case,  before  the 
said  notes  shall  be  fully  paid  to  the  said  creditors  respectively  as 
aforesaid,  they  shall  present  a  bankruptcy  petition,  or  make  an 
assignment  of  their  estate  for  the  benefit  of  their  creditors,  or 
any  arrangement  with  their  creditors  dift'erent  from  this  pres- 
ent arrangement,  then  and  in  any  of  such  cases  the  covenants 


§     1173  LAW    OF    PARTNERSHIP  1538 

on  the  part  of  the  said  creditors  herein  contained  shall  be  thence- 
forth at  an  end  and  void,  and  the  said  creditors  shall  respectively 
thenceforth  be  at  liberty  to  sue  for  or  prove  for  the  full  amount 
of  their  respective  debts  less  the  amount  which  may  have  been 
received  by  them  on  account  thereof  under  these  presents  or  oth- 
erwise. Provided  further,  that  these  presents  shall  not  in  any 
wise  prejudice  or  affect  the  rights  or  remedies  of  any  of  the  said 
creditors  against  any  surety  or  sureties,  or  any  person  or  persons, 
other  than  the  said  debtors  or  their  respective  heirs,  executors  or 
administrators,  and  that  for  the  sake  of  conformity  alone  the 
said  debtors  or  any  of  them,  their  or  any  of  their  heirs,  executors 
or  administrators  may  be  joined  in  any  actions  or  other  proceed- 
ings to  be  brought,  instituted  or  taken  by  any  of  the  said  cred- 
itors against  such  surety  or  sureties,  or  other  person  or  persons, 
and  that  these  presents  shall  not  prejudice  or  affect  any  security 
which  any  of  the  said  creditors  may  have  or  claim  for  his  debt ; 
but  nevertheless,  if  such  security  be  of  such  a  nature  that  the 
creditor  holding  or  claiming  the  same  would,  by  the  law  of  bank- 
ruptcy or  insolvency  in  force  at  the  time  and  place  of  the  execu- 
tion of  these  presents,  be  bound  to  realize  the  same,  or  deduct  the 
value  thereof  before  proving  his  debt  in  bankruptcy  against  the 
joint  estate  of  the  debtors,  then  and  in  that  case  such  creditor, 
unless  he  shall  give  up  his  said  security,  shall  be  entitled  to  re- 
ceive the  said  composition  upon  so  much  only  of  his  said  secured 
debt  as  may  remain  after  such  security  shall  have  been  realized, 
or  after  credit  shall  have  been  given  for  the  full  value  thereof. 
In  witness,  etc. 

§  1173.     Assignment  by  partners  for  benefit  of  creditors, 
w^ith  preferences. 

This  indenture,  made  this  day  of  ,  19 — ,  between 

and ,  partners  under  the  firm  name  and  style  of 


of ,  of  the  first  part,  and of ,  of  the  second  part, 

witnesseth : 

Whereas  this  partnership  is  justly  indebted  in  large  sums  of 
money,  and  has  become  unable  to  pay  and  discharge  the  same  with 


1539  FORMS MISCELLANEOUS  §    1173 

punctuality  or  in  full,  and  said  first  parties  are  desirous  of  making 
a  fair  distribution  of  all  their  property  and  effects  among  their 
creditors,  now  therefore,  the  said  first  parties,  in  consideration  of 
the  premises,  and  the  sum  of  one  dollar,  the  receipt  whereof  is 
hereby  acknowledged,  do  hereby  grant,  bargain  and  sell,  release, 
assign,  transfer  and  set  over  unto  the  second  party,  and  to  his 
heirs  and  assigns  forever,  all  and  singular,  the  land,  tenements, 
hereditaments  and  all  the  goods,  chattels,  merchandise,  bills, 
bonds,  notes,  book  accounts,  claims,  demands,  choses  in  action, 
judgments,  evidences  of  debt,  and  property  of  every  name  and 
nature  whatsoever  of  the  said  first  parties,  to  have  and  to  hold  the 
same  and  every  part  thereof,  to  the  said  second  party,  his  heirs, 
executors,  administrators  and  assigns,  in  trust  to  and  for  the  fol- 
lowing uses,  intents  and  purposes :  Said  second  party  shall  take 
possession  of  all  property  hereby  assigned,  and  sell  and  dispose  of 
the  same  for  the  best  price  that  he  shall  be  able  to  obtain,  and  con- 
vert the  same  into  money,  and  shall  collect  all  said  debts,  bonds, 
notes,  accounts,  claims,  demands  and  choses  in  action,  as  may 
prove  collectible,  and  thereupon  execute,  acknowledge  and  de- 
liver all  necessary  conveyances  and  instruments  for  the  purposes 
aforesaid;  and  by  and  with  the  proceeds  of  such  sales  and  col- 
lections, the  second  party  shall,  first,  pay  all  the  lawful  expenses, 
costs,  charges  and  commissions  of  executing  and  carrying  into 
effect  this  assignment ;  Second,  pay  all  wages  due  to  the  employes 
of  the  parties  of  the  first  part ;  Third,  pay  and  discharge  in  full 

the  debt  due  to  the  firm  of of ,  for  the  sum  of 

dollars;  Fourth,  pay  and  discharge  the  several  and  respective 
debts,  bills,  notes,  or  sums  of  money  due  or  to  become  due  from 
the  first  parties,  together  with  such  interest  as  may  accrue  there- 
on; and  if  such  net  proceeds  shall  not  be  sufficient  to  pay  the 
same  in  full,  then  such  net  proceeds  shall  be  distributed  pro  rata 
among  said  persons,  according  to  the  amount  of  their  respective 
claims;  Fifth,  if  there  shall  be  any  residue  and  remainder  after 
the  provisions  of  the  above  clauses  have  been  carried  out,  the  sec- 
ond party  shall  pay  and  discharge  all  private  and  individual  debts 
of  the  first  parties  due  or  to  become  due,  in  proportion  to  the 


§    1174  LAW    OF    PARTNERSHIP  1540 

amount  of  money  each  of  said  partners  has  invested  in  said  com- 
pany; and,  if  insufficient,  then  the  same  shall  be  applied  pro  rata 
to  the  payment  of  said  debt. 

For  the  better  execution  hereof,  and  of  the  several  trusts 
hereby  reposed,  the  said  first  parties  do  hereby  make,  nominate 
and  appoint  the  said  second  party  their  true  and  lawful  attorney 
with  full  power  and  authority  to  do,  transact  and  perform  all 
acts,  deeds,  matters  and  things  which  can  or  may  be  necessary  in 
the  premises,  as  fully  and  completely  as  the  said  first  parties,  or 
either  of  them,  might  or  could  do  were  these  presents  not  exe- 
cuted ;  and  attorneys,  one  or  more,  under  him,  to  make,  nominate 
and  appoint,  with  full  power  of  substitution  and  revocation, 
hereby  ratifying  and  confirming  all  that  said  attorney,  or  his  at- 
torneys, shall  do  or  cause  to  be  done  in  the  premises. 

The  party  of  the  second  part  hereby  accepts  the  trust  created 
by  these  presents,  and  covenants  that  he  will  faithfully  perform 
the  same. 

In  witness  whereof,  etc. 

§  1174.     Assignment  of  leasehold  by  one  partner  to  another 
on  dissolution  of  partnership — After  recitals  of 
partners  and  of  lease  and  of  dissolution  of  part- 
nership. 
Whereas  it  was  by  the  articles  of  partnership  between  said 
parties  declared  and  agreed  that  at  the  expiration  or  sooner  deter- 
mination of  the  said  partnership,  the  said (continuing  part- 
ner) should  purchase  the  share  and  interest  of  the  said (re- 
tiring partner)  in  the  leasehold  premises  where  the  said  business 
might  then  be  carried  on,  at  a  price  to  be  determined  by  valuation ; 
And  whereas  said  price  has  been  determined  to  be  the  sum  of 

dollars. 

Now  in  consideration  of  dollars  paid  by  the  said  


(continuing  partner)   to  the  said  (retiring  partner),  the 

said  (retiring  partner)  hereby  assigns  unto  the  said  

(continuing  partner)  all  the  undivided  moiety  or  share  of  the  said 
— : —  (retiring  partner)  under  the  said  articles  of  partnership  or 


1541  FORMS MISCELLANEOUS  §  1176 

otherwise,  of  and  in  the  premises  comprised  in  said  lease.  To 
hold  the  same  to  the  said (continuing  partner)  for  the  un- 
expired residue  of  the  said  term  of  years  created  by  the 

lease,  subject  to  the  rent  reserved  by  and  the  covenants,  conditions 
and  stipulations  contained  in  the  lease,  and  henceforth  on  the 
lessee's  part  to  be  paid,  performed  and  observed.     And  the  said 

(continuing  partner)   covenants  with  said  (retiring 

partner)  henceforth  during  the  continuance  of  said  lease  to  pay 
the  rent  and  observe  the  covenants,  conditions  and  stipulations 
therein  contained,  and  to  keep  indemnified  the  said  retiring  part- 
ner against  all  actions,  claims  and  demands  whatsoever  in  said 
lease. 

In  witness,  etc. 

§  1175.     Habendum  clause  in  deed,  to  hold  as  partnership 
property. 

To  have  and  to  hold,  etc.,  unto  the  said and ,  their 

heirs  and  assigns,  jointly  and  as  partners,  as  part  of  their  copart- 
nership estate,  so  that  after  the  death  of  either  of  them  the  said 
partners,  the  survivor  of  them,  or  the  heirs,  executors  or  ad- 
ministrators of  such  survivor,  shall  have  full  power,  without  the 
concurrence  of  the  executors  or  administrators  of  the  one  of 
them  so  first  dying,  to  sell,  mortgage,  lease  or  otherwise  dispose 
of  the  premises,  or  any  part  thereof,  and  to  receive  and  give 
effectual  discharges  for  any  moneys  arising  from  any  such  dispo- 
sition, and  that  every  such  disposition  or  receipt  shall  be  abso- 
lutely binding  upon  all  persons  having  or  claiming  any  interest  in 
the  partnership  estate. 

§  1176.     Mortgage  of  partner's  interest. 

Indenture  made  the  day  of  ,  19 — ,  between  

of ,  of  the  one  part,  the  mortgagor;  and of ,  of 

the  other  part,  the  mortgagee :   Whereas  the  said  mortgagor  is 

a  partner  in  the  firm  of ,  carrying  on  the  business  of , 

at  ,  in  the  county  of  ,  under  articles  of  partnership 

dated  the day  of ,  19 — ;  and  whereas  the  said  mort- 
gagee has  agreed  to  lend  to  the  said  mortgagor  the  sum  of 


§    1176  LAW    OF    PARTNERSHIP  1542 

dollars  upon  having  the  repayment  of  the  same  by  monthly  in- 
stahnents,  with  interest  for  the  same,  or  for  so  much  thereof 
as  shall  for  the  time  being  remain  unpaid,  secured  in  manner 
hereinafter  appearing : 

Now  this  indenture  witnesseth,  that  in  pursuance  of  the  said 

agreement,  and  in  consideration  of  the  sum  of dollars  now 

paid  to  the  said  mortgagor  by  the  said  mortgagee  (the  receipt 
whereof  the  said  mortgagor  hereby  acknowledges),  the  said 
mortgagor  hereby  covenants  with  the  said  mortgagee  to  pay  to 

him  the  sum  of dollars  within  the  period  of calendar 

months  from  the  date  hereof,  by  equal  monthly  instalments,  the 

first  of  such  payments  to  be  made  on  the day  of next, 

and  the  last  of  such  payments  to  be  made  on  the  day  of 

■ ,   19 — .     The  said  mortgagor  hereby  charges  all  that  his 

share  and  interest  in  the  said  business,  and  in  the  good  will  there- 
of, and  in  the  capital,  book  debts  and  assets  thereof,  with  the 
repayment  to  the  said  mortgagee,  his  executors,  administrators  or 
assigns,  of  the  moneys  hereby  secured  at  the  times  and  in  manner 
aforesaid;  and  the  said  mortgagor  hereby  covenants  with  the 
said  mortgagee  that  he,  the  said  mortgagor,  will,  so  long  as  he 
shall  continue  a  partner  in  the  said  firm  and  during  the  continu- 
ance of  this  security,  duly  observe  and  perform  all  the  covenants, 
conditions  and  stipulations  contained  in  the  said  articles,  and 
on  his  part  to  be  observed  and  performed ;  and  that  he  will  not 
do  or  suffer  anything  whereby  the  said  partnership  may  be  deter- 
mined, or  the  said  share  or  interest,  or  any  of  the  premises  hereby 
charged,  may  be  encumbered  or  alienated,  save  in  the  ordinary 
course  of  business,  or  otherwise  prejudicial  in  any  way  whatso- 
ever; and  that  he  will  at  all  times  devote  his  time  and  attention 
to  the  said  business,  and  diligently  and  faithfully  employ  himself 
therein,  and  use  his  utmost  endeavor  to  carry  on  the  same  to 
advantage;  and  will  from  time  to  time  inform  and  keep  informed 
the  said  mortgagee,  his  executors,  administrators  and  assigns, 
if  and  whenever  requested  so  to  do,  of  the  state  and  condition 
of  the  affairs  of  the  said  business,  and  of  the  liabilities,  assets, 
profits  and  losses  thereof ;  and  the  said  mortgagor  hereby  irrev- 


1543  FORMS MISCELLANEOUS  §  1177 

ocably  appoints  the  said  mortgagee,  his  executors,  administrators 
and  assigns  to  be  his  lawful  attorney  and  attorneys,  in  the  name 
and  on  behalf  of  the  said  mortgagor,  to  give  notice  of  dissolu- 
tion of  the  said  partnership,  and  to  demand  and  take  all  accounts 
pursuant  to  the  said  articles  of  partnership,  and  to  demand,  sue 
for,  recover,  receive  and  give  valid  receipts  for  all  moneys,  ef- 
fects and  things  to  which  the  said  mortgagor  is  entitled  under 
the  said  articles  of  partnership,  or  otherwise  in  relation  to  the 
premises,  and  for  the  purposes  aforesaid  or  any  of  them  to  exe- 
cute and  do  all  such  instruments  and  things  as  may  be  deemed 
necessary  or  expedient :  Provided  always,  that  if  the  said  mort- 
gagor shall  die,  or  if  he  or  the  said  firm  shall  become  bankrupt, 
or  enter  into  any  composition  or  scheme  for  the  arrangement  or 
hquidation,  statutory  or  otherwise,  of  his  or  their  affairs,  for  the 
benefit  of  his  or  their  creditors  generally,  or  if  he  shall  fail  to 
observe  and  perform  any  of  the  covenants  herein  contained  and 
on  his  part  to  be  observed  and  performed,  and  particularly  if  he 
shall  at  any  time  during  the  continuance  of  this  security  absent 

himself  from  the  said  business  at  any  time  for  more  than 

days'  except  in  case  of  illness,  without  the  consent  of  the  said 
mortgagee,  his  executors,  administrators  and  assigns,  then  and  in 
any  such  case  the  whole  of  the  said  sum  of dollars  (princi- 
pal and  interest)  shall  immediately  become  due  and  payable. 
In  witness,  etc. 

§  1177.     Option  to  one  partner  to  buy  partnership  property. 

This  agreement,  made  this  day  of  ,  between 

of ,  first  party,  and of ,  second  party,  witnesseth : 

Whereas,  a  partnership  was  formed  on  the day  of , 

19 — ,  between  said  parties,  which  is  about  to  be  dissolved ; 

And,  whereas,  they  have  been  unable  to  reach  an  agreement 
as  to  the  terms  of  dissolution ; 

Now,  therefore,  in  consideration  of  the  premises,  said  second 
party  hereby  agrees  to  sell  all  his  interest  in  said  partnership  and 
its  effects  to  said  first  party,  and  not  to  sell  the  same  to  any 
one  else. 

47 — Row  ON  Partn. — Vol.  2 


§     1178  LAW    OF    PARTNERSHIP  1544 

It  is  expressly  understood  and  agreed  that  a  period  of 


weeks  from  date  shall  be  allowed  for  said  parties  to  reach  an 
agreement  as  to  the  terms  of  dissolution.  If,  at  the  expiration 
thereof,  no  agreement  shall  have  been  reached,  said  first  party- 
shall  select  an  arbitrator,  said  second  party  shall  select  another 
arbitrator,  and  said  arbitrators  so  chosen  shall  select  a  third ;  and 
said  arbitrators  shall  agree  upon  the  terms  of  dissolution  and 
sale,  and  thereupon  said  second  party  shall  convey  all  his  interest 
in  said  partnership  and  its  effects  to  said  first  party,  in  accord- 
ance with  this  agreement  and  the  decision  of  said  arbitrators. 
In  witness,  etc. 

§  1178.  Appointment  of  an  arbitrator  in  pursuance  of  arbi- 
tration clause  in  articles  of  partnership. 

Whereas  by  articles  of  partnership,  dated ,  19 — ,  amongst 

other  things  it  was  agreed  that,  in  case  any  dispute  or  question 
should  arise  between  the  said  parties  relative  to  the  construction 
of  the  said  articles,  or  to  any  of  the  matters  therein  contained, 
the  same  should  be  referred  to  the  arbitration  of  two  indifferent 
persons,  one  to  be  named  by  each  of  the  parties,  with  power  for 
such  arbitrators  to  appoint  an  umpire  in  case  of  their  disagree- 
ment ;  and  that  the  award  of  the  said  arbitrators  or  umpire  should 
be  final  and  conclusive ;  and  whereas  disputes  have  arisen  between 
the  said  parties  relating  to  their  partnership  affairs,  and  they 
have  in  pursuance  of  the  said  covenant  agreed  to  refer  the  same 

accordingly :  Now,  therefore,  I, ,  one  of  the  partners,  hereby 

nominate  and  appoint of an  arbitrator  for  me  and  on 

my  behalf,  to  hear  and  determine  the  disputes  aforesaid,  in  ac- 
cordance with  the  provisions  of  the  said  articles  of  partnership. 

Dated  the day  of ,  19 — . 

§  1179.  Award  on  reference  to  settle  terms  of  dissolution  of 
partnership. 

I  do  make  this  my  award  of  and  concerning  the  matters  so  re- 
ferred to  me  as  aforesaid,  as  follows : 

I  do  award,  order,  and  adjudge  that  the  said  partnership  shall 


1545  FORMS MISCELLANEOUS  §  1179 

be  deemed  and  taken  to  have  ended  and  been  determined  on  and 
from  the day  of ,  19 — . 

I  do  award,  order,  and  direct  that  the  said  first  party,  his  exec- 
utors or  administrators,  shall  and  may  have,  demand,  and  receive 
to  his,  her,  or  their  own  use,  without  interference  of  the  said 
second  party,  all  debts  due  and  owing  to  the  said  partnership  from 
any  person  whomsoever;  and  shall  and  may  use  the  name  of  the 
said  second  party  either  alone  or  jointly,  in  any  action  or  suit  to 
be  commenced  for  the  recovery  of  any  such  debt  or  demand. 

I  do  award,  order,  and  direct  that  the  said  first  party,  his  ex- 
ecutors or  administrators,  shall  and  do  bear,  pay  and  discharge 
all  debts,  demands,  damages  and  claims  whatsoever,  due  or  owing 
by  the  said  partnership,  or  which  any  person  hath  or  can  make 
against  the  said  partnership,  or  the  said  second  party  in  respect 
thereof;  and  shall  and  do  indemnify  and  keep  harmless  the  said 
second  party  from  and  against  all  such  debts,  demands,  damages 
and  claims ;  and  from  and  against  any  loss  and  damages  that  may 
be  incurred  or  sustained  by  the  said  second  party  by  reason  of 
his  name  being  used  in  any  such  action  or  suit  so  to  be  commenced 
as  aforesaid,  in  pursuance  of  the  authority  hereby  given  to  the 
said  first  party,  his  executors  and  administrators;  and  that  the 
said  first  party  shall  seal,  execute,  and  deliver  his  bond  to  the  said 

second  party,  in  the  penal  sum  of  dollars,  conditioned  to 

indemnify  and  keep  hannless  the  said  second  party  from  and 
against  the  above-mentioned  debts,  demands,  damages,  claims, 
and  loss. 

I  do  award,  order,  and  direct  that  the  said  second  party  shall, 
at  any  time,  upon  the  request  of  the  said  first  party,  his  executors 
or  administrators,  deliver  up  to  the  said  first  party,  his  executors 
or  administrators,  all  and  every,  the  books,  papers  and  writings 
which  may  be  in  the  custody,  power  or  possession  of  him,  the 
said  second  party,  in  any  wise  relating  to  or  concerning  the  said 
business  of  the  said  copartnership. 

And  I  further  award  and  direct  that  the  said  first  party  shall, 
from  time  to  time,  give  to  the  said  second  party  an  account  in 
writing  of  his  proceedings  in  the  ascertainment  and  recovery  of 


§     1180  LAW    OF    PARTNERSHIP  1546 

the  said  debts,  within  weeks  after  a  request  in  writing  so 

to  do  shall  have  been  served  upon  the  said  first  party,  on  the  part 
of  the  said  second  party ;  and  shall  also  from  time  to  time,  as  the 
said  debts  shall  be  respectively  received,  pay  to  the  said  second 
party  one part  thereof,  after  having  first  deducted  all  neces- 
sary expenses  incurred  touching  the  ascertaining,  collecting  and 
recovering  the  same. 

§  1180.     Agreement  for  joint  adventure  or  S5nidicate. 

Agreement  made  on day  of ,  ,  between , 

, ,  and . 


It  is  hereby  agreed  by  the  aforesaid  parties  that  they  have 

formed  a  syndicate  under  the  firm  name  of syndicate,  for 

the  purpose  of (for  instance,  purchasing  at  receiver's  sale 

and  selling  again  the  property  of  the company). 

shall  manage  the  syndicate  and  in  his  own  name  shall 

make  all  contracts  for  the  sale  and  purchase  of  said  property,  but 
all  such  contracts  shall  be  for  the  sole  benefit  of  the  syndicate, 
and  he  shall  be  indemnified  by  the  parties  to  this  agreement  for 
any  and  all  necessary  expenses  or  losses  reasonably  incurred  in  ad- 
vancing the  purposes  of  this  agreement. 

Each  of  the  parties  to  this  agreement  shall  pay  into Bank, 

to  the  credit  of  the  syndicate, dollars,  and  each  shall  share 

equally  in  profits  and  losses  of  the  venture. 

The  manager  of  the  syndicate  shall  have  power  to  call  a  meet- 
ing of  the  parties  by  notice  sent  through  the  mails,  and  shall  call 
such  meeting  before  consummation  of  any  contract  for  the  pur- 
chase or  sale  of  the  aforesaid  property,  unless  authorized  to  make 
such  contract  at  a  previous  meeting. 

A  majority  of  the  members  may  at  any  meeting  remove  the 
manager. 

The  manager  shall  be  entitled  to  be  repaid  his  reasonable  ex- 
penses, and  shall  receive  a  commission  of per  cent,  of  the 

net  profits  made  by  the  syndicate,  and  his  commission  shall  be 
paid  prior  to  the  division  of  profits  between  the  members  of  this 
syndicate. 


1547  FORMS MISCELLANEOUS  §  1181 

If  there  shall  be  more  than  one  manager,  the  said  commission 
shall  be  divided  between  them  in  proportion  to  the  services  per- 
formed by  each  according  to  the  judgment  of  the  members  of  the 
syndicate. 

This  syndicate  shall  be  dissolved  when  the  said has  been 

purchased  and  resold,  or  if  the  said  purchase  has  not  been  con- 
summated within months  from  the  date  of  this  agreement. 

Upon  dissolution,  after  payment  of  expenses  and  commis- 
sions, the  net  profits  from  said  venture  and  the  residue  of  the 
capital  shall  be  equally  distributed  among  the  members. 

In  witness,  etc. 

(This  agreement  presupposes  an  equal  investment  of  capital, 
but  can  easily  be  varied  where  investments  of  capital  are  unequal, 
and  if  desired,  provision  can  be  made  for  each  member  to  have  a 
voting  power  in  proportion  to  the  capital  contributed. ) 

§  1181.     Preliminary    agreement    between    partners    as    to 
formation  of  corporation. 

Agreement  entered  into  this day  of ,  between  A  B, 

C  D  and  E  F,  partners  now  doing  business  under  the  firm  name  of 
B  D  and  Co. 

Witnesseth,  that  the  aforesaid  parties  are  desirous  of  incorpo- 
rating their  said  partnership  business,  and  hereby  agree  to  do  so 
upon  the  terms  and  conditions  following. 

The  name  of  the  corporation  shall  be  the  B-D  Co.  (thus  re- 
taining as  nearly  as  possible  the  old  firm  name). 

The  purpose  of  the  corporation  shall  be  the  manufacture  and 
sale  of  agricultural  implements. 

The  capital  stock  shall  consist  of  $30,000  common  stock,  and 
$20,000  preferred  stock,  bearing  interest  at  the  rate  of  five  per 
cent,  per  annum.  Of  this  stock,  $10,000  of  common  stock  shall 
be  transferred  by  the  corporation  to  A  B  in  return  for  his  inter- 
est in  the  partnership  business,  $10,000  of  common  stock,  and 
$10,000  of  preferred  stock  shall  be  transferred  to  C  D  in  return 
for  his  interest  in  the  partnership  business,  and  $10,000  of  com- 


§     1182  LAW    OF    PARTNERSHIP  1548 

mon  stock  and  $10,000  of  preferred  stock  to  E  F  in  return  for 
his  interest  in  the  partnership  business. 

The  directors  of  the  corporation  shall  be  A  B,  C  D,  and  E  F. 

A  B  shall  be  president  of  the  corporation,  C  D  shall  be  sec- 
retary and  treasurer,  and  E  F  shall  be  the  general  manager  of 
its  business,  and  each  shall  receive  a  salary  of  $2,000  per  year. 

The  policy  of  the  corporation  shall  be  determined  by  the  di- 
rectors, and  the  powers  of  each  officer  shall  be  those  exercised 
by  similar  officers  in  similar  corporations. 

It  is  agreed  by  each  party  that  he  will  fully  transfer  his  interest 
in  the  partnership  business  now  carried  on  by  the  parties,  to  the 
corporation  after  its  organization,  in  return  for  its  capital  stock 
to  be  issued  to  him  in  the  amounts  heretofore  provided,  and  it  is 
agreed  on  behalf  of  the  corporation  that  such  stock  will  be  issued 
in  the  amounts  heretofore  provided  in  return  for  the  transfer  by 
each  partner  of  his  interest  in  the  partnership  business  to  the  cor- 
poration. 

§  1182.  Promoter's  agreement  with  partners  to  form  corpo- 
ration. 

(a)  This  agreement  by  and  between  A  B  and  C  D,  parties  of 
the  first  part,  and  G  H,  party  of  the  second  part, 

Witnesseth,  that,  whereas  the  said  parties  of  the  first  part  now 
own  and  operate,  and  have  owned  and  operated  as  partners  for 

years  last  past,  a  certain  manufacturing  plant  located  at 

,  and  have  during  all  of  said  time  been  engaged  in  the  man- 
ufacture of  (here  state  nature  of  business)  ;  and,  whereas  said 
first  parties,  as  such  partners,  desire  to  change  said  partnership 
into  a  corporation,  and  continue  the  business  as  a  corporation 

with  a  capital  stock  of  $ ,  and  to  transfer  to  said  corporation 

the  said  manufacturing  plant,  and  all  property  and  assets  and  the 
good  will  of  said  partnership,  as  a  part  of  the  capital  stock  of  the 
proposed  corporation ;  and, 

Whereas,  the  said  party  of  the  second  part  proposes  to  under- 
take to  secure  subscriptions  from  outside  persons  to  the  capital 
stock  of  the  proposed  corporation : 


1549  FORMS MISCELLANEOUS  §  1182 

Now,  therefore,  it  is  mutually  agreed  that  in  consideration  of 
the  premises  the  said  parties  of  the  first  part  hereby  agree  and 
bind  themselves  to  convey,  transfer  and  assign  to  the  said  corpo- 
ration when  organized,  all  the  property,  assets  and  good  will  of 

the  said  partnership,  at  the  fixed  price  and  value  of  $ ,  and 

to  take  and  subscribe  of  the  capital  stock  of  said  proposed  corpo- 
ration an  amount  equal  in  its  face  value  to  the  said  value  of  the 
said  manufacturing  plant  and  good  will. 

In  consideration  of  the  premises  and  the  payment  to  be  made 
as  hereafter  provided,  the  said  party  of  the  second  part  under- 
takes and  agrees  to  secure  bona-fide  and  solvent  subscriptions  to 
the  capital  stock  of  said  proposed  corporation,  to  the  extent  of 
the  residue  thereof.  Said  subscriptions  to  be  secured  on  or  be- 
fore the day  of and  payable  as  follows :  (here  state 

terms  of  subscription). 

In  consideration  of  the  premises  and  of  the  services  to  be  per- 
formed by  said  G  H,  it  is  hereby  mutually  agreed  and  understood 

he  shall  have  and  receive  in  payment  of  his  said  services  

shares  of  the  capital  stock  of  said  corporation,  to  be  issued  to  him 
on  its  complete  organization;  and  the  acceptance  of  the  benefits 
of  this  agreement,  and  the  acceptance  of  a  conveyance  of  the  said 
above  described  property  by  the  proposed  corporation  when  its 
organization  is  complete,  shall  be  taken  and  regarded  as  suffi- 
cient to  compel  it  to  perform  the  conditions  of  this  agreement, 
and  to  issue  to  said  G  H  the  said  shares  of  stock  as  herein  pro- 
vided. 

In  witness  whereof,  etc. 

(Signed.) 

(b)  This  agreement  by  and  between  A  B,  of  the  first  part, 
known  as  the  promoter,  and  C  D,  E  F  and  G  H,  parties  of  the 
second  part,  known  as  the  subscribers, 

Witnesseth,  that  in  consideration  of  the  mutual  promise  and 
of  the  benefits  to  be  derived  therefrom,  it  is  proposed  and  agreed 

to  organize  a  corporation  under  the  laws  of  the  state  of ,  to 

be  known  and  named  as  (state  proposed  name) ,  or  other  name  as 
may  hereafter  be  agreed  upon,  the  purpose  of  which  shall  be  to 


§     1182  LAW    OF    TARTNERSHIP  1550 

transact  the  business  of  (here  state  general  nature  of  business), 
with  power  to  do  and  perform  all  things  necessary  directly  or 
indirectly,  to  carry  on  and  transact  such  business  pursuant  to  the 
statutes  of  said  state;  and, 

Whereas,  it  is  proposed  that  said  corporation  shall  have  a  capi- 
tal stock  of  $ ,  divided  into number  of  shares  of  $ 

each  (or  to  be  divided  into shares  of  preferred  stock  and 

shares  of  common  stock  of  the  par  value  of  $ each)  ; 

and  the  said  second  parties,  the  subscribers,  desire  to  become 
stockholders  in  said  corporation : 

Now,  therefore,  we,  the  said  subscribers,  in  consideration  of 
our  mutual  promises  and  of  the  benefits  to  be  derived  from  the 
organization  of  said  corporation  do  severally  agree  with  each 
other  and  with  the  said  A  B,  who  has  been  and  is  actively  inter- 
ested in  the  formation  of  said  corporation,  to  take  and  pay  for 
the  number  (and  kind)  of  shares  of  stock  in  said  proposed  cor- 
poration set  opposite  our  respective  names,  and  to  pay  thereafter 

the  sum  of  $ per  share;  payments  to  be  made  as  follows 

(here  state  terms  of  payment). 

It  is  further  agreed  that  in  consideration  of  the  premises  and 
on  full  payment  of  said  subscriptions  that  each  of  said  sub- 
scribers, or  his  assigns,  shall  on  the  organization  of  said  corpora- 
tion, receive  certificates  of  stock  therein  to  the  amount  of  his  sub- 
scription and  that  each  subscriber  hereto  on  full  payment  of  his 
said  subscription  shall  be  a  member  and  stockholder  in  said  cor- 
poration to  the  amount  and  extent  of  his  said  shares  so  subscribed 
and  paid. 

This  agreement  is  on  the  express  condition  that  the  said  A  B 

shall  procure  on  or  before  the day  of sufficient  solvent 

and  bona-fide  subscriptions,  which  together  with  the  subscrip- 
tions hereto  made  by  the  said  subscribers  shall  amount  to  $ , 

the  full  proposed  (or  some  stated  part)  of  the  capital  stock  of 
said  proposed  corporation. 

In  consideration  of  said  subscriptions  and  of  the  promise  of 
the  said  subscribers,  the  said  A  B  hereby  agrees  and  binds  him- 
self to  continue  the  active  operation  of  promoting  and  organizing 


1551  FORMS MISCELLANEOUS  §  1184 

said  corporation  and  to  procure  on  or  before  the  date  aforesaid 
bona  fide  and  solvent  subscriptions  to  the  capital  stock  of  said 
proposed  corporation  in  said  amount,  and  to  perfect  the  organiza- 
tion of  said  corporation  immediately  thereafter. 

And  in  consideration  of  the  premises  the  said  subscribers  agree 
and  bind  themselves,  upon  full  compliance  by  the  said  A  B,  to 
sign,  execute  and  make  any  petition,  application  or  certificate  or 
other  writing,  and  to  do  all  things  and  to  take  all  necessary  steps 
required  by  subscribers  in  completing  the  said  proposed  organiza- 
tion. 

In  consideration  of  the  premises  and  of  the  services  so  to  be 
performed  of  said  A  B,  it  is  mutually  agreed  and  understood  that 
the  said  A  B  shall  have  and  receive  for  and  in  payment  of  such 

services shares  of  the  capital  stock  of  said  corporation,  to 

be  issued  to  him  on  its  organization,  or  on'^ failure  of  the  said  cor- 
poration when  organized  so  to  do,  we,  the  subscribers,  each  agree 
and  bind  ourselves  to  assign  and  transfer  to  said  A  B  of  the 
shares  so  issued  to  us,  the  said  number  of  shares  in  proportion  to 
the  number  owned  by  each  of  us. 

In  testimony  whereof,  etc. 

Number  of        Kind  of 
Name  Residence.  Shares.  Shares. 


§1183.     Limited  partnership. 

It  is  not  deemed  advisable  to  give  many  general  forms  for  lim- 
ited partnerships  inasmuch  as  such  partnerships  are  generally  pro- 
vided for  by  statute,  in  which  the  essentials  are  provided  for,  and 
which  must  be  strictly  followed,  as  is  shown  in  the  chapter  on 
"Limited  Partnerships." 

§  1184.     Certificate  of  formation. 

State  of ,  County  of ,  ss. 

The  undersigned ,  and hereby  form  a  limited 


§    1185  LAW    OF    PARTNERSHIP  1552 

partnership  pursuant  to  the  statutes  of  the  state  of ,  and  for 

that  purpose  hereby  certify: 

That  the  name  of  said  hmited  partnership  shall  be ,  under 

which  said  partnership  shall  be  conducted. 

That  the  names,  both  Christian  and  surname,  and  respective 
places  of  residence  of  all  the  partners  herein  and  hereto  are  as 
follows : 

Christian  Name.  Surname,  Residence. 


That  the  aforesaid and are  general  partners  and  the 

aforesaid is  special  partner,  respectively,  herein. 

That  the  following  amounts  of  capital  have  been  contributed 

by  the  aforesaid  parties  and  partners,  respectively :  by ,  the 

sum  of dollars  ($ ),  by ,  the  sum  of dollars 

($ )  and  by ,  the  sum  of dollars  ($ ),  and  that 

each  of  said  sums  has  been  contributed  to  the  common  stock  of 
the  said  partnership. 

The  general  nature  of  the  business  to  be  transacted  by  such 
partnership  is (here  state). 

The  partnership  aforesaid  is  to  commence  on ,  19 — ,  and 

the  same  is  to  terminate  on ,  19 — . 

(Signatures  and  acknowledgment  as  in  deeds,  etc.) 

Limited  partnerships  are  commonly  provided  for  by  statute  in  the  vari- 
ous states.  The  certificate  of  formation  must  be  drafted  to  meet  the  statu- 
tory requirements.    The  above  form  will  answer  for  a  general  outline. 

Bankruptcy 

§  1185.     Proof  of  claim  in  bankruptcy  by  partnership — (Of- 
ficial form). 

United  States  of  America, ,  District  of , 

State  of ,  County  of ,  ss. 

At  ,  in  said  ,  district  of  ,  on  the  day  of 

A  D.  19 — ,  came ,  of ,  in  the  county  of ,  and 


state  of ,  and  made  oath (or,  affirmation)  and  says: 


1553  FORMS BANKRUPTCY  §     1186 

That  he  is  one  of  the  firm  of ,  consisting  of  himself  and 

-,  of ,  in  the  county  of and  state  of 


That ,  the  person (by  or  against)  whom  a  petition 

for  adjudication  of  bankruptcy  has  been  filed,  was  at  and  before 
the  filing  of  said  petition,  and  still  is  justly  and  truly  indebted  to 

this  deponent's  said  firm  in  the  sum  of dollars,  with  interest 

from ,  19 — ,  at per  cent,  per  annum ;  that  the  consider- 
ation of  said  debt  is  as  follows: ;  that  no  part  of  said  debt 

has  been  paid  (except)  ;  that  there  are  no  set-offs  or  coun- 
terclaims to  the  same  (except)  . 

That  said  claim  consists  of  an  open  account due  on 


(if  different  dates  give  average  due  date,  see  Order  XXI),  19 — ; 
that  no  note  has  been  received  for  such  account,  nor  has  any 
judgment  been  rendered  thereon. 

That  the  only  securities  held  by  this  deponent's  said  firm  for 
said  debt  are  the  following : . 

That  this  deponent  has  not,  nor  his  said  firm  nor  any  person 

by order  or  to  the  knowledge  or  belief  of  said  deponent,  for 

use  had  or  received  any  manner  of  security  for  said  debt 

whatever. 

And  this  deponent  further  says,  that  this  deposition  can  not  be 

made  by  the  claimant  in  person  because and  that  he  is  duly 

authorized  by  his  principal  to  make  this  affidavit,  and  that  it  is 
within  his  knowledge  that  the  aforesaid  debt  was  incurred  as  and 
for  the  consideration  above  stated,  and  that  such  debt,  to  the  best 
of  his  knowledge  and  belief,  still  remains  unpaid  and  unsatisfied. 


Subscribed  and  sworn  to  before  me  this  day  of 

A.  D.  19—.  

(Seal.) 


(Official  character.) 

§  1186.     Partnership  petition — (Official  form). 

To  the  honorable  ,  Judge  of  the  District  Court  of  the 

United  States  for  the district  of : 

The  petition  of respectfully  represents: 


§     1186  LAW    OF    PARTNERSHIP  1554 

That  your  petitioners  and have  been  partners  under 

the  firm  name  of ,  having  their  principal  place  of  busi- 
ness at ,  in  the  county  of ,  and  district  and  state  of 

,  for  the  greater  portion  of  the  six  months  next  immedi- 
ately preceding  the  filing  of  this  petition;  that  the  said  part- 
ners owe  debts  which  they  are  unable  to  pay  in  full;  that 
your  petitioners  are  willing  to  surrender  all  their  property 
for  the  benefit  of  their  creditors,  except  such  as  is  exempt  by 
law,  and  desire  to  obtain  the  benefit  of  the  acts  of  congress 
relating  to  bankruptcy. 

That  the  schedule  hereto  annexed,  marked  A,  and  verified 

by oath, (or,  affirmation)  contains  a  full  and  true 

statement  of  all  the  debts  of  said  partners,  and,  as  far  as  pos- 
sible, the  names  and  places  of  residence  of  their  creditors, 
and  such  further  statements  concerning  said  debts  as  are  re- 
quired by  the  provisions  of  said  acts. 

That  the  schedule  hereto  annexed,  marked  B,  and  verified 
by oath, (or,  affirmation)  contains  an  accurate  in- 
ventory of  all  the  property,  real  and  personal,  of  said  part- 
ners, and  such  further  statements  concerning  said  property 
as  are  required  by  the  provisions  of  said  acts. 

And  said further  states  that  the  schedule  hereto  an- 
nexed, marked  C,  and  verified  by  his  oath, (or,  affirma- 
tion) contains  a  full  and  true  statement  of  all  his  individual 
debts,  and,  as  far  as  possible,  the  names  and  places  of  resi- 
dence of  his  creditors,  and  such  further  statements  concern- 
ing said  debts  as  are  required  by  the  provisions  of  said  acts; 
and  that  the  schedule  hereto  annexed,  marked  D,  and  veri- 
fied by  his  oath, (or  affirmation)  contains  an  accurate 

inventory  of  all  his  individual  property,  real  and  personal, 
and  such  further  statements  concerning  said  property  as  are 
required  by  the  provisions  of  said  acts. 

And  said further  states  that  the  schedule  hereto  an- 
nexed, marked  E,  and  verified  by  his  oath, (or  affirma- 
tion) contains  a  full  and  true  statement  of  all  his  individual 
debts,  and,  as  far  as  possible,  the  names  and  places  of  residence 


1555  FORMS BANKRUPTCY  §    1186 

of  his  creditors,  and  such  further  statements  concerning  said 
debts  as  are  required  by  the  provisions  of  said  acts;  and  that 
the  schedule  hereto  annexed,  marked  F,  and  verified  by  his 

oath,  (or  affirmation)  contains  an  accurate  inventory 

of  all  his  individual  property,  real  and  personal,  and  such  fur- 
ther statements  concerning  said  property  as  are  required  by 
the  provisions  of  said  acts. 

And  said  further  states  that  the  schedule  hereto  an- 
nexed, marked  G,  and  verified  by  his  oath,  (or  affirma- 
tion) contains  a  full  and  true  statement  of  all  his  individual 
debts,  and,  as  far  as  possible,  the  names  and  places  of  residence 
of  his  creditors,  and  such  further  statements  concerning  said 
debts  as  are  required  by  the  provisions  of  said  acts;  and  that 
the  schedule   hereto  annexed,   marked   H,   and  verified  by  his 

oath,  (or  affirmation)   contains  an  accurate  inventory  of 

all  his  individual  property,  real  and  personal,  and  such  further 
statements  concerning  said  property  as  are  required  by  the  pro- 
visions of  said  acts. 

And  said  further  states  that  the  schedule  hereto  an- 
nexed, marked  J,  and  verified  by  his  oath,  (or  affirma- 
tion) contains  a  full  and  true  statement  of  all  his  individual 
debts,  and,  as  far  as  possible,  the  names  and  places  of  residence 
of  his  creditors,  and  such  further  statements  concerning  said 
debts  as  are  required  by  the  provisions  of  said  acts;  and  that 
the  schedule  hereto  annexed,   marked   K,   and  verified   by   his 

oath,  (or  affirmation)   contains  an  accurate  inventory  of 

all  his  individual  property,  real  and  personal,  and  such  further 
statements  concerning  said  property  as  are  required  by  the  pro- 
visions of  said  acts.^ 

Wherefore  your  petitioners  pray  that  the  said  firm  may  be 

1  There  are  two  schedules,  "A,"  and  "B,"  to  be  filed  with  petitions  for 
voluntary  bankruptcy.  In  the  case  of  partners  these  schedules  have  to  be 
filed  for  the  partnership  and  for  each  of  the  petitioning  members.  These 
schedules  in  the  form  for  partnership  petition,  prepared  by  the  Supreme 
Court,  are  marked  serially.  A,  B,  C,  D,  E,  etc.,  corresponding  to  said  sched- 
ules A  and  B,  which  schedules  should  be  used  and  the  lettering  changed 
accordingly. 


§     1186  LAW    OF    PARTNERSHIP  1556 

adjudged  by  a  decree  of  the  court  to  be  bankrupts  within  the  pur- 
view of  said  acts. 


Petitioners. 


Attorney  for  petitioners. 

United  States  of  America,  District  of  , 

State  of ,  County  of ,  ss : 

,  the  petitioning  debtors  mentioned  and  described  in  the 

foregoing  petition,  do  hereby  make  solemn  that  the  state- 
ments contained  therein  are  true,  according  to  the  best  of  their 
knowledge,  information,  and  belief. 


Petitioners. 


Subscribed  and  to  before  me,  this  day  of 

A  .D.  19—.  

(Seal.)  


(Official  character.) 

A  form  to  be  used  where  one  of  the  partners  fails  to  join  in 
the  bankruptcy  proceedings  may  be  made  by  inserting  a  clause 

that  "said  ,  a  partner  in  said  partnership,  whose  place  of 

residence  is  in ,  in  the  district  of ,  refuses  to  join  in  this 

petition,  that  he  is  not  a  wage-earner,  and  is  not  a  person  engaged 
chiefly  in  farming  or  tilling  the  soil ;  that  he  owes  debts  which  he 
is  unable  to  pay  in  full,"  and  by  adding  a  prayer  for  service  of 
the  petition  with  a  subpoena  against  the  nonconsenting  partner. 


1557  FORMS PLEADINGS  |     1188 

Pleadings  Generally 
§  1187.     Caption. 

No.  . 

(a)  X,  Y  and  Z,  plaintiff,  v.  A,  B  and  Co.,  defendant. 

In  the  court  of ,  county,  .  Petition  (or  com- 
plaint)   (or  answer)    (or  reply). 

OR 

No.  . 

(b)  X,  Y  and  Z,  partners  doing  business  as  Z  and  Company, 
plaintiffs,  v.  A  and  B,  partners  doing  business  as  A  and  B,  de- 
fendants. 

In  the  court  of , county,  .     Petition  (etc.). 

OR 

No.  . 

(c)  A  and  B,  partners  doing  business  as  B  and  Co.,  and  B 
and  Co.,  plaintiffs,  v.  X  and  Z,  partners  doing  business  as  X 
and  Co.,  and  X  and  Co.,  defendants. 

In  the  court  of , county,  .     Petition  (etc.). 

§1188.     Petition  for  accounting. 

(State  preliminary  allegations  as  in  petition  for  dissolution, 
and  add  thereto.) 

On  the  day  of  ,  it  was  agreed  between  plaintiff 

and  defendant  that  said  partnership  be  dissolved,  and  that  de- 
fendant should  have  charge  of  the  closing  of  said  business  of 
said  firm,  and  of  collecting  the  assets  and  paying  the  liabilities 
of  said  firm,  and  of  distributing  the  balance  thereafter  between 
said  partners  in  proportion  to  their  respective  interests  in  said 
partnership. 

Defendant  proceeded  to  settle  the  affairs  of  said  partnership, 
and  has  collected  a  large  amount  of  money  for  said  firm,  but 
has  neglected  and  refused  to  pay  the  debts  of  said  firm  there- 
with, or  to  account  therefor  to  plaintiff,  although  repeatedly 
-equested  to  do  so  by  said  plaintiff,  and  defendant  has  con- 
verted the  said  money  so  collected  to  his  own  use. 


§     1189  LAW    OF    PARTNERSHIP  1558 

Plaintiff  therefore  asks  that  said  defendant  may  be  compelled 
to  account  to  plaintiff  therefor,  and  ordered  to  pay  to  plaintiff 
any  balance  found  due  him  (or,  if  desired,  a  receiver  may  also 
be  asked  to  settle  up  the  debts,  etc.,  of  said  partnership). 

§  1189.     Petition  for  dissolution. 

Now  comes  plaintiff,  and  says  that  on  the day  of  ■ , 


,  he  entered  into  a  written  contract  of  partnership  with 

defendant  herein,  a  copy  of  which  written  contract  is  hereto 
attached,  marked  "Exhibit  A,"  by  the  terms  of  which  written 
contract  it  was  provided  that  (here  state  the  clauses  of  the  con- 
tract relied  upon  in  this  suit). 

On  the  same  day  the  said  parties  hereto  contributed  to  said 
partnership  the  amounts  of  their  several  contributions,  and 
opened  the  business  of  said  partnership,  all  in  accordance  with 
the  provisions  of  said  written  contract. 

On  the  day  of  ,  ,  said  defendant  (here  state 

causes  for  dissolution). 

Said  firm  has  assets,  composed  of  stock  in  trade,  real  estate, 
fixtures,  and  outstanding  accounts,  in  the  amount  of  $ ,  be- 
sides a  valuable  good  will,  and  has  liabilities,  consisting  of  bills 

and    accounts    payable,    amounting   to    $ ,    and    it    will    be 

for  the  best  interests  of  said  firm  that  the  said  assets  of  said 
firm  be  sold,  and  the  proceeds  of  said  sale,  after  the  debts  of 
said  partnership  be  sold,  be  divided  between  said  partners  in 
proportion  to  their  interests  in  said  firm. 

Wherefore,  plaintiff  prays  the  said  court  that  the  said  part- 
nership be  adjudged  dissolved,  and  that  a  receiver  be  appointed 
by  said  court,  to  close  the  affairs  of  said  partnership,  convert 
the  property  of  said  firm  into  money,  pay  all  the  debts  of  said 
firm,  and  distribute  the  residue  thereof,  if  any,  to  the  said  part- 
ners according  to  their  respective  rights,  and  for  such  other  and 
further  relief  as  is  just  and  proper. 


1559  FORMS PLEADINGS  §  1194 

Pleading  Causes  for  Dissolution 

§  1190.     Transfer  of  one  partner's  interest. 

That  said  ,  on  the  day  of  ,  without  the  con- 
sent of  plaintiff,   assigned  all  his   interest  in  said   partnership 

to  defendant ,  including  all  his  right  and  title  to  all  of  the 

property  of  every  description  of  said  partnership,  by  reason  of 
which  act  of  said  ,  said  partnership  became  dissolved. 

§  1191.     Assignment  for  benefit  of  creditors. 

Said  defendant,  on  the  day  of  ,  while  insolvent, 

assigned,  in  the  Probate  Court  of County,  all  his  property 

of  every  kind  and  description,  including  his  interest  in  and  to 
said  partnership,  and  in  and  to  all  the  property  of  every  kind  and 

description  of   said  partnership,  to  ,   as   assignee   for  the 

benefit  of  creditors. 

§  1192.     Breach  of  contract  by  one  partner. 

Said  defendant  ,  on  the  day  of  ,  violated  the 

provisions  of  said  contract  of  partnership  in  this,  to  wit: — (here 
state  breach),  and  has  ever  since,  and  now  does,  neglect  and 
refuse  to  carry  out  said  provisions  of  said  contract,  according  to 
the  terms  thereof. 

§  1193.     Dissolution  under  terms  of  contract. 

The  articles  of  partnership  aforesaid  provided  that  either  of 

said  partners,  upon  written  notice  of  at  least days,  should 

have  the  right  to  dissolve  said  partnership. 

Plaintiff  says  that  on  the  day  of  ,  ,  he,  the 

said  plaintiff,  desiring  to  so  dissolve  said  partnership,  served 
defendant,  according  to  said  partnership  agreement,  with  said 
written  notice  of  such  desire  and  intention. 

Answer 

§  1194.     Admission  an^^  general  denial. 

(a)   Defendant   admits   that    (here    specifically   designate   all 
matters  stated  in  the  petition,  If  any,  which  are  admitted),  and 

48 — Row.  ON  Partn. — Vol.  2 


§     1195  LAW    OF    PARTNERSHIP  1560 

denies  each  and  every  other  material   allegation   in  plaintiff's 
petition  contained. 

(b)  The  defendant  denies  each  and  every  material  allegation 
of  plaintiff's  complaint. 

§  1195.     Specific  denial. 

Defendant  denies  that  (here  state  in  detail  each  and  every 
allegation  of  plaintiff's  petition  to  be  controverted  by  defend- 
ant). 

Note  :  Certain  facts  may  be  admitted  either  when  coupled  with 
a  specific  denial  or  a  general  denial,  (a)  The  pleader  must  use 
his  own  discretion  as  to  whether  he  will  deny  generally  or  spe- 
cifically, which  must  depend  upon  the  circumstances  of  each  in- 
dividual case. 


APPENDIX 

Text  of  Uniform  Partnership  Act 
PART  I 

PRELIMINARY    PROVISIONS 

Section  1.  (Name  of  Act.)  This  act  may  be  cited  as  Uniform 
Partnership  Act. 

Sec.  2.  (Definition  of  Terms.)  In  this  act,  "Court"  includes 
every  court  and  judge  having  jurisdiction  in  the  case. 

"Business"  includes  every  trade,  occupation,  or  profession. 

"Person"  includes  individuals,  partnerships,  corporations,  and 
other  associations. 

"Bankrupt"  includes  bankrupt  under  the  Federal  Bankruptcy 
Act  or  insolvent  under  any  state  insolvent  act, 

"Conveyance"  includes  every  assignment,  lease,  mortgage,  or 
encumbrance. 

"Real  Property"  includes  land  and  any  interest  or  estate  in 
land. 

Sec.  3.  (Interpretation  of  Knowledge  and  Notice.)  (1)  A 
person  has  "knowledge"  of  a  fact  within  the  meaning  of  this  act 
not  only  when  he  has  actual  knowledge  thereof,  but  also  when  he 
has  knowledge  of  such  other  facts  as  in  the  circumstances  shows 
bad  faith. 

(2)  A  person  has  "notice"  of  a  fact  within  the  meaning  of 
this  act  when  the  person  who  claims  the  benefit  of  the  notice 

(a)  States  the  fact  to  such  person,  or 

(b)  Delivers  through  the  mail,  or  by  other  means  of  commu- 
nication, a  written  statement  of  the  fact  to  such  person  or  to  a 
proper  person  at  his  place  of  business  or  residence. 

Sec.  4.   (Rules  of  Construction.)    (1)   The  rule  that  statutes 

1561 


LAW    OF    PARTNERSHIP  1562 

in  derogation  of  the  common  law  are  to  be  strictly  construed 
shall  have  no  application  to  this  act. 

(2)  The  law  of  estoppel  shall  apply  under  this  act. 

(3)  The  law  of  agency  shall  apply  under  this  act. 

(4)  This  act  shall  be  so  interpreted  and  construed  as  to  effect 
its  general  purpose  to  make  uniform  the  law  of  those  states  which 
enact  it. 

(5)  This  act  shall  not  be  construed  so  as  to  impair  the  obliga- 
tions of  any  contract  existing  when  the  act  goes  into  effect,  nor 
to  affect  any  action  or  proceedings  begun  or  right  accrued  before 
this  act  takes  effect. 

Sec.  5.  (Rules  for  Cases  Not  Provided  for  in  This  Act.)  In 
any  case  not  provided  for  in  this  act  the  rules  of  law  and  equity, 
including  the  law  merchant,  shall  govern. 

PART  II 

NATURE  OF  A   PARTNERSHIP 

Section  6.  (Partnership  Defined.)  (1)  A  partnership  is  an 
association  of  two  or  more  persons  to  carry  on  as  co-owners  a 
business  for  profit. 

(2)  But  any  association  formed  under  any  other  statute  of 
this  state,  or  any  statute  adopted  by  authority,  other  than  the 
authority  of  this  state,  is  not  a  partnership  under  this  act,  un- 
less such  association  would  have  been  a  partnership  in  this  state 
prior  to  the  adoption  of  this  act ;  but  this  act  shall  apply  to  lim- 
ited partnerships  except  in  so  far  as  the  statutes  relating  to  such 
partnerships  are  inconsistent  herewith. 

Sec.  7.  (Rules  for  Determining  the  Existence  of  a  Partner- 
ship.) In  determining  whether  a  partnership  exists,  these  rules 
shall  apply : 

(1)  Except  as  provided  by  section  16  persons  who  are  not 
partners  as  to  each  other  are  not  partners  as  to  third  persons. 

(2)  Joint  tenancy,  tenancy  in  common,  tenancy  by  the  en- 
tireties, joint  property,  common  property,  or  part  ownership  does 


1563  APPENDIX 

not  of  itself  establish  a  partnership,  whether  such  co-owners  do 
or  do  not  share  any  profits  made  by  the  use  of  the  property, 

(3)  The  sharing  of  gross  returns  does  not  of  itself  establish 
a  partnership,  whether  or  not  the  persons  sharing  them  have  a 
joint  or  common  right  or  interest  in  any  property  from  which 
the  terms  are  derived. 

(4)  The  receipt  by  a  person  of  a  share  of  the  profits  of  a 
business  is  prima  facie  evidence  that  he  is  a  partner  in  the  busi- 
ness, but  no  such  inference  shall  be  drawn  if  such  profits  were 
received  in  payment : 

(a)  As  a  debt  by  instalments  or  otherwise, 

(b)  As  wages  of  an  employe  or  rent  to  a  landlord, 

(c)  As  an  annuity  to  a  widow  or  representative  of  a  deceased 
partner, 

(d)  As  interest  on  a  loan,  though  the  amount  of  payment 
vary  with  the  profits  of  the  business, 

(e)  As  the  consideration  for  the  sale  of  the  good  will  of  a 
business  or  other  property  by  instalments  or  otherwise. 

Sec.  8.  (Partnership  Property.)  (1)  All  property  originally 
brought  into  the  partnership  stock  or  subsequently  acquired,  by 
purchase  or  otherwise,  on  account  of  the  partnership,  is  part- 
nership property. 

(2)  Unless  the  contrary  intention  appears,  property  acquired 
with  partnership  funds  is  partnership  property. 

(3)  Any  estate  in  real  property  may  be  acquired  in  the  part- 
nership name.  Title  so  acquired  can  be  conveyed  only  in  the 
partnership  name. 

(4)  A  conveyance  to  a  partnership  in  the  partnership  name, 
though  without  words  of  inheritance,  passes  the  entire  estate  of 
the  grantor  unless  a  contrarv  intent  appears. 


LAW    OF    rARTNERSIIIP  1564 

PART  III 

RELATIONS  OF  PARTNERS  TO  PERSONS  DEALING  WITH  THE 
PARTNERSHIP 

Section  9.  (Partner  Agent  of  Partnership  as  to  Partnership 
Business.)  (1)  Every  partner  is  an  agent  of  the  partnership 
for  the  purpose  of  its  business,  and  the  act  of  every  partner, 
including  the  execution  of  the  partnership  name  of  any  instru- 
ment, for  apparently  carrying  on  in  the  usual  way  the  business 
of  the  partnership  of  which  he  is  a  member,  binds  the  partner- 
ship, unless  the  partner  so  acting  has  in  fact  no  authority  to 
act  for  the  partnership  in  the  particular  matter,  and  the  per- 
son with  whom  he  is  dealing  has  knowledge  of  the  fact  that 
he  has  no  such  authority. 

(2)  An  act  of  a  partner  v^hich  is  not  apparently  for  the  car- 
rying on  of  the  business  of  the  partnership  in  the  usual  way 
does  not  bind  the  partnership  unless  authorized  by  the  other 
partners. 

(3)  Unless  authorized  by  the  other  partners  or  unless  they 
have  abandoned  the  business,  one  or  more  but  less  than  all  of  the 
partners  have  no  authority  to : 

(a)  Assign  the  partnership  property  in  trust  for  creditors  or 
on  the  assignee's  promise  to  pay  the  debts  of  the  partnership, 

(b)  Dispose  of  the  good  will  of  the  business, 

(c)  Do  any  other  act  whizh  would  make  it  impossible  to  carry 
on  the  ordinary  business  of  the  partnership, 

(d)  Confess  a  judgment, 

(e)  Submit  a  partnership  claim  or  liability  to  arbitration  or 
reference. 

(4)  No  act  of  a  partner  in  contravention  of  a  restriction  on 
his  authority  shall  bind  the  partnership  to  persons  having  knowl- 
edge of  the  restriction. 

Sec.  10.  (Conveyance  of  Real  Property  of  the  Partnership.) 
(1)  Where  title  to  real  property  is  in  the  partnership  name, 
any  partner  may  convey  title  to  such  property  by  a  conveyance 
executed  in  the  partnership  name;  but  the  partnership  may  re- 


1 565  APPENDIX 

cover  such  property  unless  the  partner's  act  binds  the  partner- 
ship under  the  provisions  of  paragraph  (1)  of  section  9,  or  un- 
less such  property  has  been  conveyed  by  the  grantee  or  a  person 
claiming  through  such  grantee  to  a  holder  for  value  without 
knowledge  that  the  partner,  in  making  the  conveyance,  has  ex- 
ceeded his  authority. 

(2)  Where  title  to  real  property  is  in  the  name  of  the  part- 
nership, a  conveyance  executed  by  a  partner,  in  his  own  name, 
passes  the  equitable  interest  of  the  partnership,  provided  the  act 
is  one  within  the  authority  of  the  partner  under  the  provisions 
of  paragraph  (1)  of  section  9. 

(3)  Where  the  title  to  real  property  is  in  the  name  of  one  or 
more  but  not  all  the  partners,  and  the  record  does  not  disclose 
the  right  of  the  partnership,  the  partner  in  whose  name  the  title 
stands  may  convey  title  to  such  property,  but  the  partnership 
may  recover  such  property  if  the  partner's  act  does  not  bind 
the  partnership  under  the  provisions  of  paragraph  (1)  of  sec- 
tion 9,  unless  the  purchaser  or  his  assignee  is  a  holder  for  value 
without  knowledge. 

(4)  Where  the  title  to  real  property  is  in  the  name  of  one  or 
more  or  all  the  partners,  or  in  a  third  person  in  trust  for  the 
partnership,  a  conveyance  executed  by  a  partner  in  the  partner- 
ship name,  or  in  his  own  name,  passes  the  equitable  interest  of 
the  partnership,  provided  the  act  is  one  within  the  authority  of 
the  partner  under  the  provisions  of  paragraph  (1)  of  section  9. 

(5)  Where  the  title  to  real  property  is  in  the  names  of  all 
the  partners  a  conveyance  executed  by  all  the  partners  passes 
all  their  rights  in  such  property. 

Sec.  11.  (Partnership  Bound  by  Admission  of  Partner.)  An 
admission  or  representation  made  by  any  partner  concerning 
partnership  affairs  within  the  scope  of  his  authority  as  conferred 
by  this  act  is  evidence  against  the  partnership. 

Sec.  12.  (Partnership  Charged  with  Knowledge  or  Notice  to 
Partner.)  Notice  to  any  partner  of  any  matter  relating  to  part- 
nership affairs,  and  the  knowledge  of  the  partner  acting  in  the 
particular  matter,  acquired  wliile  a  partner  or  then  present  to 


LAW    OF    PARTNERSHIP  1566 

his  mind,  and  the  knowledge  of  any  other  partner  who  reason- 
ably could  and  should  have  communicated  it  to  the  acting  part- 
ner, operate  as  notice  to  or  knowledge  of  the  partnership,  except 
in  the  case  of  a  fraud  on  the  partnership  committed  by  or  with 
the  consent  of  that  partner. 

Sec.  13.  (Partnership  Bound  by  Partner's  Wrongful  Act.) 
Where,  by  any  wrongful  act  or  omission  of  any  partner  acting 
in  the  ordinary  course  of  the  business  of  the  partnership,  or 
with  the  authority  of  his  copartners,  loss  or  injury  is  caused 
to  any  person,  not  being  a  partner  in  the  partnership,  or  any 
penalty  is  incurred,  the  partnership  is  liable  therefor  to  the  same 
extent  as  the  partner  so  acting  or  omitting  to  act. 

Sec.  14.  (Partnership  Bound  by  Partner's  Breach  of  Trust.) 
The  partnership  is  bound  to  make  good  the  loss : 

(a)  Where  one  partner  acting  within  the  scope  of  his  appar- 
ent authority  receives  money  or  property  of  a  third  person  and 
misapplies  it;  and 

(b)  Where  the  partnership  in  the  course  of  its  business  re- 
ceives money  or  property  of  a  third  person  and  the  money  or 
property  so  received  is  misapplied  by  any  partner  while  it  is  in 
the  custody  of  the  partnership. 

Sec.  15.  (Nature  of  Partner's  Liability.)  All  partners  are 
liable : 

(a)  Jointly  and  severally  for  everything  chargeable  to  the 
partnership  under  sections  13  and  14. 

(b)  Jointly  for  all  other  debts  and  obligations  of  the  partner- 
ship; but  any  partner  may  enter  into  a  separate  obligation  to 
perform  a  partnership  contract. 

Sec.  16.  (Partner  by  Estoppel.)  (1)  VVlien  a  person,  by 
words  spoken  or  written  or  by  conduct,  represents  himself,  or 
consents  to  another  representing  him  to  any  one,  as  a  partner 
in  an  existing  partnership  or  with  one  or  more  persons  not  actual 
partners,  he  is  liable  to  any  such  person  to  whom  such  repre- 
sentation has  been  made,  who  has,  on  the  faith  of  such  repre- 
sentation, given  credit  to  the  actual  or  apparent  partnership, 
and  if  he  has  made  such  representation  or  consented  to  its  being 


1567  APPENDIX 

made  in  a  public  manner,  he  is  liable  to  such  person,  whether 
the  representation  has  or  has  not  been  made  or  communicated  to 
such  person  so  giving  credit  by  or  with  the  knowledge  of  the 
apparent  partner  making  the  representation  or  consenting  to  its 
being  made. 

(a)  When  a  partnership  liability  results,  he  is  liable  as  though 
he  were  an  actual  member  of  the  partnership. 

(b)  When  no  partnership  liability  results,  he  is  liable  jointly 
with  the  other  persons,  if  any,  so  consenting  to  the  contract  or 
representation  as  to  incur  liability,  otherwise  separately. 

(2)  When  a  person  has  been  thus  represented  to  be  a  partner 
in  an  existing  partnership,  or  with  one  or  more  persons  not 
actual  partners,  he  is  an  agent  of  the  persons  consenting  to  such 
representation  to  bind  them  to  the  same  extent  and  in  the  same 
manner  as  though  he  were  a  partner  in  fact,  with  respect  to  per- 
sons who  rely  upon  the  representation.  Where  all  the  members 
of  the  existing  partnership  consent  to  the  representation,  a  part- 
nership act  or  obligation  results ;  but  in  all  other  cases  it  is  the 
joint  act  or  obligation  of  the  person  acting  and  the  persons  con- 
senting to  the  representation. 

Sec.  17.  (Liability  of  Incoming  Partner.)  A  person  admitted 
as  a  partner  into  an  existing  partnership  is  liable  for  all  the  ob- 
ligations of  the  partnership  arising  before  his  admission  as 
though  he  had  been  a  partner  when  such  obligations  were  in- 
curred, except  that  this  liability  shall  be  satisfied  only  out  of 
partnership  property. 

PART  IV 

RELATIONS   OF   PARTNERS   TO   ONE   ANOTHER 

Section  18.  (Rules  Determining  Rights  and  Duties  of  Part- 
ners.) The  rights  and  duties  of  the  partners  in  relation  to  the 
partnership  shall  be  determined,  subject  to  any  agreement  be- 
tween them,  by  the  following  rules : 

(a)  Each  partner  shall  be  repaid  his  contributions,  whether 
by;  way  of  capital  or  advances  to  the  partnership  property,  and 


LAW    OF    PARTNERSHIP  1568 

share  equally  in  the  profits  and  surplus  remaining  after  all  liabil- 
ities, including  those  to  partners,  are  satisfied;  and  must  con- 
tribute toward  the  losses,  whether  of  capital  or  otherwise,  sus- 
tained by  the  partnership  according  to  his  share  in  the  profits. 

(b)  The  partnership  must  indemnify  every  partner  in  respect 
of  payments  made  and  personal  liabilities  reasonably  incurred  by 
him  in  the  ordinary  and  proper  conduct  of  its  business,  or  for 
the  preservation  of  its  business  or  property. 

(c)  A  partner  who,  in  aid  of  the  partnership  makes  any  pay- 
ment or  advance  beyond  the  amount  of  capital  which  he  agreed 
to  contribute,  shall  be  paid  interest  from  the  date  of  the  payment 
or  advance. 

(d)  A  partner  shall  receive  interest  on  the  capital  contributed 
by  him  only  from  the  date  when  repayment  should  be  made. 

(e)  All  partners  have  equal  rights  in  the  management  and 
conduct  of  the  partnership  business. 

(f)  No  partner  is  entitled  to  remuneration  for  acting  in  the 
partnership  business,  except  that  a  surviving  partner  is  entitled 
to  reasonable  compensation  for  his  sei-vices  in  winding  up  the 
partnership  affairs. 

(g)  No  person  can  become  a  member  of  a  partnership  with- 
out the  consent  of  all  the  partners. 

(h)  Any  difference  arising  as  to  ordinary  matters  connected 
with  the  partnership  business  may  be  decided  by  a  majority  of 
the  partners;  but  no  act  in  contravention  of  any  agreement  be- 
tween the  partners  may  be  done  rightfully  without  the  consent 
of  all  the  partners. 

Sec.  19.  (Partnership  Books.)  The  partnership  books  shall 
be  kept,  subject  to  any  agreement  between  the  partners,  at  the 
principal  place  of  business  of  the  partnership,  and  every  partner 
shall  at  all  times  have  access  to  and  may  inspect  and  copy  any  of 
them. 

Sec.  20.  (Duty  of  Partners  to  Render  Information.)  Part- 
ners shall  render  on  demand  true  and  full  information  of  all 
things  affecting  the  partnership  to  any  partner  or  the  legal  rep- 


1569  APPENDIX 

resentative  of  any  deceased  partner  or  partner  under  legal  dis- 
ability. 

Sec.  21.  (Partner  Accountable  as  Fiduciary.)  (1)  Every 
partner  must  account  to  the  partnership  for  any  benefit,  and 
hold  as  trustee  for  it  any  profits  derived  by  him  without  the 
consent  of  the  other  partners  from  any  transaction  connected 
with  the  formation,  conduct  or  liquidation  of  the  partnership  or 
from  any  use  by  him  of  its  property. 

(2)  This  section  applies  also  to  the  representatives  of  a  de- 
ceased partner  engaged  in  the  liquidation  of  the  affairs  of  the 
partnership  as  the  personal  representative  of  the  last  surviving 
partner. 

Sec.  22.  (Right  to  an  Account.)  Any  partner  shall  have  the 
right  to  a  formal  account  as  to  partnership  affairs : 

(a)  If  he  is  wrongfully  excluded  from  the  partnership  busi- 
ness or  possession  of  its  property  by  his  copartners, 

(b)  If  the  right  exists  under  the  terms  of  any  agreement, 

(c)  As  provided  by  section  21, 

(d)  Whenever  other  circumstances  render  it  just  and  reason- 
able. 

Sec.  23.  (Continuation  of  Partnership  Beyond  Fixed  Term.) 
(1)  When  a  partnership  for  a  fixed  term  or  particular  under- 
taking is  continued  after  the  termination  of  such  term  or  par- 
ticular undertaking  without  any  express  agreement,  the  rights 
and  duties  of  the  partners  remain  the  same  as  they  were  at  such 
termination,  so  far  as  is  consistent  with  a  partnership  at  will. 

(2)  A  continuation  of  the  business  by  the  partners  or  such 
of  them  as  habitually  acted  therein  during  the  term,  without  any 
settlement  or  liquidation  of  the  partnership  affairs,  is  prima  facie 
evidence  of  a  continuation  of  the  partnership. 

PART  V 

PROPERTY  RIGHTS  OF  A   PARTNER 

Sec.  24.  (Extent  of  Property  Rights  of  a  Partner  )  The 
property  rights  of  a  partner  are  (1)  his  rights  in  specific  partner- 


LAW    OF    PARTNERSHIP  1570 

ship  property,   (2)  his  interest  in  the  partnership,  and  (3)  his 
right  to  participate  in  the  management. 

Sec.  25.  (Nature  of  a  Partner's  Right  in  Specific  Partnership 
Property. ) 

( 1 )  A  partner  is  co-owner  with  his  partners  of  specific  part- 
nership property  holding  as  a  tenant  in  partnership. 

(2)  The  incidents  of  this  tenancy  are  such  that: 

(a)  A  partner,  subject  to  the  provisions  of  this  act  and  to  any 
agreement  between  the  partners,  has  an  equal  right  with  his  part- 
ners to  possess  specific  partnership  property  for  partnership  pur- 
poses ;  but  he  has  no  right  to  possess  such  property  for  any  other 
purpose  without  the  consent  of  his  partners. 

(b)  A  partner's  right  in  specific  partnership  property  is  not 
assignable  except  in  connection  with  the  assignment  of  the  rights 
of  all  the  partners  in  the  same  property. 

(c)  A  partner's  right  in  specific  partnership  property  's  not 
subject  to  attachment  or  execution,  except  on  a  claim  against  the 
partnership.  When  partnership  property  is  attached  for  a  part- 
nership debt  the  partners,  or  any  of  them,  or  the  representatives 
of  a  deceased  partner,  can  not  claim  any  right  under  the  home- 
stead or  exemption  laws. 

(d)  On  the  death  of  a  partner  his  right  in  specific  partnership 
property  vests  in  the  surviving  partner  or  partners,  except  where 
the  deceased  was  the  last  sun^iving  partner,  Avhen  his  right 
in  such  property  vests  in  his  legal  representatives.  Such  surviv- 
ing partner  or  partners,  or  the  legal  representative  of  the  last 
surviving  partner,  has  no  right  to  possess  the  partnership  prop- 
erty for  any  but  a  partnership  purpose. 

(e)  A  partner's  right  in  specific  partnership  property  is  not 
subject  to  dower,  curtesy,  or  allowances  to  widows,  heirs,  or  next 
of  kin. 

Sec.  26.  (Nature  of  Partner's  Interest  in  the  Partnership.) 
A  partner's  interest  in  the  partnership  is  his  share  of  the  profits 
and  surplus,  and  the  same  is  personal  property. 

Sec.  27.  (Assignment  of  Partner's  Interest.)  (1)  A  con- 
veyance by  a  partner  of  his  interest  in  the  partnership  does  not  of 


1571  APPENDIX 

itself  dissolve  the  partnership,  nor,  as  against  the  other  partners 
in  the  absence  of  agreement,  entitle  the  assignee,  during  the  con- 
tinuance of  the  partnership,  to  interfere  in  the  management  or 
administration  of  the  partnership  business  or  afifairs,  or  to  re- 
quire any  information  or  account  of  partnership  transactions,  or 
to  inspect  the  partnership  books ;  but  it  merely  entitles  the  as- 
signee to  receive  in  accordance  with  his  contract  the  profits  to 
which  the  assigning  partner  would  otherwise  be  entitled. 

(2)  In  case  of  a  dissolution  of  the  partnership,  the  assignee  is 
entitled  to  receive  his  assignor's  interest  and  may  require  an  ac- 
count from  the  date  only  of  the  last  account  agreed  to  by  all  the 
partners. 

Sec.  28.  (Partner's  Interest  Subject  to  Charging  Order.) 
( 1 )  On  due  application  to  a  competent  court  by  any  judgment 
creditor  of  a  partner,  the  court  which  entered  the  judgment, 
order,  or  decree,  or  any  other  court,  may  charge  the  interest  of 
the  debtor  partner  with  payment  of  the  unsatisfied  amount  of 
such  judgment  debt  with  interest  thereon ;  and  may  then  or  later 
appoint  a  receiver  of  his  share  of  the  profits,  and  of  any  other 
money  due  or  to  fall  due  to  him  in  respect  of  the  partnership,  and 
make  all  other  orders,  directions,  accounts  and  inquiries  which 
the  debtor  partner  might  have  made,  or  which  the  circumstances 
of  the  case  may  require. 

(2)  The  interest  charged  may  be  redeemed  at  any  time  before 
foreclosure,  or  in  case  of  a  sale  being  directed  by  the  court  may 
be  purchased  without  thereby  causing  a  dissolution : 

(a)  With  separate  property,  by  any  one  or  more  of  the  part- 
ners, or 

(b)  With  partnership  property,  by  any  one  or  more  of  the 
partners  with  the  consent  of  all  the  partners  whose  interests  are 
not  so  charged  or  sold. 

(3)  Nothing  in  this  act  shall  be  held  to  deprive  a  partner  of 
his  right,  if  any,  under  the  exemption  laws,  as  regards  his  in- 
terest in  the  partnership. 


LAW    OF    PARTNERSHIP  1572 

PART  VI 

DISSOLUTION   AND   WINDING   UP 

Sec.  29.  (Dissolution  Defined.)  The  dissolution  of  a  part- 
nership is  the  change  in  the  relation  of  the  partners  caused  by 
any  partner  ceasing  to  be  associated  in  the  carrying  on  as  distin- 
guished from  the  winding  up  of  the  business. 

Sec.  30.  (Partnership  Not  Terminated  by  Dissolution.)  On 
dissolution  the  partnership  is  not  terminated,  but  continues  until 
the  winding  up  of  partnership  affairs  is  completed. 

Sec.  31.    (Causes  of  Dissolution.)     Dissolution  is  caused: 

(1)  Without  violation  of  the  agreement  between  the  partners, 

(a)  By  the  termination  of  the  definite  term  or  particular  un- 
dertaking specified  in  the  agreement, 

(b)  By  the  express  will  of  any  partner  when  no  definite  term 
or  particular  undertaking  is  specified, 

(c)  By  the  express  will  of  all  the  partners  who  have  not  as- 
signed their  interests  or  suffered  them  to  be  charged  for  their 
separate  debts,  either  before  or  after  the  termination  of  any  spec- 
ified term  or  particular  undertaking, 

(d)  By  the  expulsion  of  any  partner  from  the  business  bona 
fide  in  accordance  with  such  a  power  conferred  by  the  agreement 
between  the  partners ; 

(2)  In  contravention  of  the  agreement  between  the  partners, 
where  the  circumstances  do  not  permit  a  dissolution  under  any 
other  provisions  of  this  section,  by  the  express  will  of  any  part- 
ner at  any  time ; 

(3)  By  any  event  which  makes  it  unlawful  for  the  business 
of  the  partnership  to  be  carried  on  or  for  the  members  to  carry 
it  on  in  partnership ; 

(4)  By  the  death  of  any  partner ; 

(5)  By  the  bankruptcy  of  any  partner  or  the  partnership; 

(6)  By  decree  of  court  under  section  32. 

Sec.  32.  (Dissolution  by  Decree  of  Court.)  (1)  On  appli- 
cation by  or  for  a  partner  the  court  shall  decree  a  dissolution 
whenever : 


1573  APPENDIX 

(a)  A  partner  has  been  declared  a  lunatic  in  any  judicial  pro- 
ceeding or  is  shown  to  be  of  unsound  mind, 

(b)  A  partner  becomes  in  any  other  way  incapable  of  per- 
forming his  part  of  the  partnership  contract, 

(c)  A  partner  has  been  guilty  of  such  conduct  as  tends  to  af- 
fect prejudicially  the  carrying  on  of  the  business, 

(d)  A  partner  wilfully  or  persistently  commits  a  breach  of  the 
partnership  agreement,  or  otherwise  so  conducts  himself  in  mat- 
ters relating  to  the  partnership  business  that  it  is  not  reasonably 
practicable  to  carry  on  the  business  in  partnership  with  him, 

(e)  The  business  of  the  partnership  can  only  be  carried  on  at 
a  loss, 

(f)  Other  circumstances  render  a  dissolution  equitable, 

(2)  On  the  application  of  the  purchaser  of  a  partner's  interest 
under  sections  28  or  29 : 

(a)  After  the  termination  of  the  specified  term  or  particular 
undertaking, 

(b)  At  any  time  if  the  partnership  was  a  partnership  at  will 
when  the  interest  was  assigned  or  when  the  charging  order  was 
issued. 

Sec.  33.  (General  Effect  of  Dissolution  on  Authority  of 
Partner.)  Except  so  far  as  may  be  necessary  to  wind  up  part- 
nership affairs  or  to  complete  transactions  begun  but  not  then 
finished,  dissolution  terminates  all  authority  of  any  partner  to 
act  for  the  partnership, 

( 1 )  With  respect  to  the  partners, 

(a)  When  the  dissolution  is  not  by  the  act,  bankruptcy  or 
death  of  a  partner ;  or 

(b)  When  the  dissolution  is  by  such  act,  bankruptcy  or  death 
of  a  partner,  in  cases  where  section  34  so  requires. 

(2)  With  respect  to  persons  not  partners,  as  declared  in  sec- 
tion 35. 

Sec.  34.  (Right  of  Partner  to  Contribution  From  Copartners 
After  Dissolution.)  Where  the  dissolution  is  caused  by  the  act, 
death  or  bankruptcy  of  a  partner,  each  partner  is  liable  to  his  co- 
partners for  his  share  of  any  liability  created  by  any  partner  act- 


LAW    OF    PARTNERSHIP  1574 

ing  for  the  partnership  as  if  the  partnership  had  not  been  dis- 
solved, unless 

(a)  The  dissolution  being  by  act  of  any  partner,  the  partner 
acting  for  the  partnership  had  knowledge  of  the  dissolution,  or 

(b)  The  dissolution  being  by  the  death  or  bankruptcy  of  a 
partner,  the  partner  acting  for  the  partnership  had  knowledge  or 
notice  of  the  death  or  bankruptcy. 

Sec.  35.  (Original.)  (Power  of  Partner  to  Bind  Partner- 
ship to  Third  Persons  After  Dissolution.)  (1)  If  the  partner- 
ship is  not  dissolved  because  it  has  become  unlawful  to  carry  on 
the  business,  a  partner  can  not,  after  dissolution,  bind  the  part- 
nership to  third  persons  by  any  act  which  is  not  necessary  to 
wind  up  the  partnership  affairs  or  to  complete  transactions  then 
unfinished  unless 

(a)  Such  third  person,  having  had  relations  with  the  partner- 
ship by  which  a  credit  was  extended  upon  the  faith  of  the  part- 
nership, has  had  no  knowledge  or  notice  of  the  dissolution ;  or 

(b)  Such  third  person,  not  having'had  business  relations  with 
the  partnership  by  which  credit  was  extended  to  the  partnership, 
has  no  knowledge  or  notice  of  the  dissolution,  and  the  fact  of  dis- 
solution has  not  been  advertised  in  a  newspaper  of  general  circu- 
lation of  the  place  (or  of  each  place  if  more  than  one)  at  which 
the  partnership  business  was  regularly  carried  on. 

(2)  The  partnership  is  in  no  case  bound  by  the  acts  of  a  part- 
ner who  has  become  bankrupt ;  but  this  provision  does  not  affect 
the  liability  of  any  person  who,  as  declared  by  section  16,  after 
bankruptcy,  has  represented  himself,  or  consented  to  another's 
representing  him  to  be  a  partner  of  the  bankrupt. 

Note — Section  35  of  the  Uniform  Partnership  Act  as  it  was  adopted  in 
Pennsylvania  and  Wisconsin  was  amended  later  by  the  drafters  of  the  act. 
See  29  Harv.  L.  Rev.  312. 

The  amended  section  follows : 

Section  35.  (As  Amended.)  "After  dissolution  a  partner  can  bind  the 
partnership  except  as  provided  in  paragraph    (3) 

(a)  By  any  act  appropriate  for  winding  up  partnership  affairs  or  com- 
pleting transactions  unfinished  at  dissolution  ; 

(b)  Bj'  any  transaction  which  would  bind  the  partnership  if  dissolution 
had  not  taken  place  provided  the  other  party  to  the  transaction: 

(I)  Had  extended  credit  to  the  partnership  prior  to  dissolution  and  had 
no  knowledge  or  notice  of  the  dissolution;  or 


1575  APPENDIX 

Sec.  36.  (Effect  of  Dissolution  on  Partner's  Existing  Liabil- 
ity.) (1)  The  dissolution  of  the  partnership  does  not  of  itself 
discharge  the  existing  liability  of  any  partner. 

(2)  A  partner  is  discharged  from  any  existing  liability  upon 
dissolution  of  the  partnership  by  an  agreement  to  that  effect  be- 
tween himself,  the  partnership  creditor  and  the  person  or  part- 
nership continuing  the  business ;  and  such  agreement  may  be  in- 
ferred from  the  course  of  dealing  between  the  creditor  having 
knowledge  of  the  dissolution  and  the  person  or  partnership  con- 
tinuing the  business. 

(3)  Where  a  person  agrees  to  assume  the  existing  obligations 
of  a  dissolved  partnership,  the  partners  whose  obligations  have 
been  assumed  shall  be  discharged  from  any  liability  to  any  cred- 
itor of  the  partnership  who,  knowing  of  the  agreement,  consents 
to  a  material  alteration  in  the  nature  or  time  of  payment  of  such 
obligations. 

(4)  The  individual  property  of  a  deceased  partner  shall  be  lia- 


(II)  Though  he  had  not  so  extended  credit,  had  nevertheless  known  of 
the  partnership  prior  to  dissolution,  and  having  no  knowledge  or  notice  of 
dissolution,  the  fact  of  dissolution  had  not  been  advertised  in  a  newspaper 
of  general  circulation  in  the  place  (or  in  each  place  if  more  than  one),  at 
which  the  partnership  business  was  regularly  carried  on. 

(2)  The  liability  of  a  partner  under  paragraph  (lb)  shall  be  satisfied 
out  of  partnership  assets  alone  when  such  partner  had  been  prior  to  dis- 
solution ; 

(a)  Unknown  as  a  partner  to  the  persons  with  whom  the  contract  is 
made ;  and 

(b)  So  far  unknown  and  inactive  in  partnership  affairs  that  the  business 
reputation  of  the  partnership  could  not  be  said  to  have  been  in  any  degree 
due  to  his  connection  with  it. 

(3)  The  partnership  is  in  no  case  bound  by  any  act  of  a  partner  after 
dissolution : 

(a)  Where  the  partnership  is  dissolved  because  it  is  unlawful  to  carry 
on  the  business,  unless  the  act  is  appropriate  for  winding  up  partnership  af- 
fairs ;  or, 

(b)  Where  the  partner  has  become  bankrupt;  or 

(c)  Where  the  partner  has  no  authority  to  wind  up  partnership  affairs, 
except  by  a  transaction  with  one  who 

(I)  Had  extended  credit  to  the  partnership  prior  to  dissolution  and  had 
no  knowledge  or  notice  of  his  want  of  authority;  or 

(II)  Had  not  extended  credit  to  the  partnership  prior  to  dissolution,  and, 
having  no  knowledge  or  notice  of  his  want  of  authority,  the  fact  of  his 
want  of  authority  has  not  been  published  as  provided  in  paragraph  (Ibll) 

(4)  Nothing  in  this  section  shall  affect  the  liability  under  section  16  of 
any  person  who,  after  dissolution,  represents  himself  or  consents  to  another 
representing  him  as  a  partner  in  a  partnership  engaged  in  carrying  on  busi- 
ness." 

49— Row.  ON  Partn. — Vol.  2 


LAW    OF    PARTNERSHIP  1576 

ble  for  all  obligations  of  the  partnership  incurred  while  he  was  a 
partner  but  subject  to  the  prior  payment  of  his  separate  debts. 

Sec.  Z7 .  (Right  to  Wind  Up.)  Unless  otherwise  agreed,  the 
partners  who  have  not  wrongfully  dissolved  the  partnership  or 
the  legal  representative  of  the  last  surviving  partner,  not  bank- 
rupt, has  the  right  to  wind  up  the  partnership  affairs ;  provided, 
however,  that  any  partner,  his  legal  representative,  or  his  as- 
signee, upon  cause  shown,  may  obtain  winding  up  by  the  court. 

Sec.  Z'&.  (Rights  of  Partners  to  Application  of  Partnership 
Property.)  (1)  When  dissolution  is  caused  in  any  way,  except 
in  contravention  of  the  partnership  agreement,  each  partner,  as 
against  his  copartners  and  all  persons  claiming  through  them  in 
respect  of  their  interest  in  the  partnership,  unless  otherwise  agreed, 
may  have  the  partnership  property  applied  to  discharge  its  liabili- 
ties, and  the  surplus  applied  to  pay  in  cash  the  net  amount  owing 
to  the  respective  partners.  But  if  dissolution  is  caused  by  expul- 
sion of  a  partner,  bona  fide  under  the  partnership  agreement,  and 
if  the  expelled  partner  is  discharged  from  all  partnership  liabili- 
ties, either  by  payment  or  agreement  under  section  36  (2),  he 
shall  receive  in  cash  only  the  net  amount  due  him  from  the  part- 
nership. 

(2)  When  dissolution  is  caused  in  contravention  of  the  part- 
nership agreement  the  rights  of  the  partners  shall  be  as  follows : 

(a)  Each  partner  who  has  not  caused  dissolution  wTongfully 
shall  have, 

I.  All  the  rights  specified  in  paragraph  ( 1 )  of  this  section,  and 

II.  The  right,  as  against  each  partner  who  has  caused  the  dis- 
solution wrongfully,  to  damages  for  breach  of  the  agreement. 

(b)  The  partners  who  have  not  caused  the  dissolution  wrong- 
fully, if  they  all  desire  to  continue  the  business  in  the  same  name, 
either  by  themselves  or  jointly,  with  others,  may  do  so,  during  the 
agreed  term  for  the  partnership  and  for  that  purpose  may  possess 
the  partnership  property,  provided  they  secure  the  payment  by  bond 
approved  by  the  court,  or  pay  to  any  partner  who  had  caused  the 
dissolution  wrongfully,  the  value  of  his  interest  in  the  partner- 
ship at  the  dissolution,  less  any  damages  recoverable  under  clause 


1577  APPENDIX 

(2aII)    of   this    section,    and    in    like    manner   indemnify   him 
against  all  present  or  future  partnership  liabiHties. 

(c)  A  partner  who  has  caused  the  dissolution  wrongfully  shall 
have: 

I.  If  the  business  is  not  continued  under  the  provisions  of  par- 
agraph (2b)  all  the  rights  of  a  partner  under  paragraph  (1),  sub- 
ject to  clause  (2aII),  of  this  section, 

II.  If  the  business  is  continued  .under  paragraph  (2b)  of  this 
section  the  right  as  against  his  copartners  and  all  claiming 
through  them  in  respect  of  their  interests  in  the  partnership,  to 
have  the  value  of  his  interest  in  the  partnership,  less  any  damages 
caused  to  his  copartners  by  the  dissolution,  ascertained  and  paid 
to  him  in  cash,  or  the  payment  secured  by  bond  approved  by  the 
court,  and  to  be  released  from  all  existing  habilities  of  the  part- 
nership, but  in  ascertaining  the  value  of  the  partner's  interest  the 
value  of  the  good-will  of  the  business  shall  not  be  considered. 

Sec.  39.  (Rights  Where  Partnership  is  Dissolved  for  Fraud 
or  Misrepresentation. )  Where  a  partnership  contract  is  rescinded 
on  the  ground  of  the  fraud  or  misrepresentation  of  one  of  the 
parties  thereto,  the  party  entitled  to  rescind  is,  without  prejudice 
to  any  other  right,  entitled, 

(a)  To  a  lien  on,  or  right  of  retention  of,  the  surplus  of  the 
partnership  property  after  satisfying  the  partnership  liabilities  to 
third  persons  for  any  sum  of  money  paid  by  him  for  the  purchase 
of  an  interest  in  the  partnership  and  for  any  capital  or  advances 
contributed  by  him ;  and 

(b)  To  stand,  after  all  liabilities  to  third  persons  have  been 
satisfied,  in  the  place  of  the  creditors  of  the  partnership  for  any 
payments  made  by  him  in  respect  of  the  partnership  liabilities ;  and 

(c)  To  be  indemnified  by  the  person  guilty  of  the  fraud  or 
making  the  representation  against  all  debts  and  liabilities  of  the 
partnership. 

Sec.  40.  (Rules  for  Distribution.)  In  settling  accounts  be- 
tween the  partners  after  dissolution,  the  following  rules  shall  be 
observed,  subject  to  any  agreement  to  the  contrary : 

(a)   The  assets  of  the  partnership  are: 


LAW    OF    PARTNERSHIP  1578 

I.  The  partnership  property, 

II.  The  contributions  of  the  partners  necessary  for  the  pay- 
ment of  all  the  liabilities  specified  in  clause  (b)  of  this  paragraph. 

(b)  The  liabilities  of  the  partnership  shall  rank  in  order  of 
payment,  as  follows : 

I.  Those  owing  to  creditors  other  than  partners, 

II.  Those  owing  to  partners  other  than  for  capital  and  profits, 

III.  Those  owing  to  partners  in  respect  of  capital, 

IV.  Those  owing  to  partners  in  respect  of  profits. 

(c)  The  assets  shall  be  applied  in  the  order  of  their  declara- 
tion in  clause  (a)  of  this  paragraph  to  the  satisfaction  of  the 
liabilities. 

(d)  The  partners  shall  contribute,  as  provided  by  section  18 
(a)  the  amount  necessary  to  satisfy  the  liabilities;  but  if  any,  but 
not  all,  of  the  partners  are  insolvent,  or,  not  being  subject  to 
process,  refuse  to  contribute,  the  other  partners  shall  contribute 
their  share  of  the  liabilities,  and,  in  the  relative  proportions  in 
which  they  share  the  profits,  the  additional  amount  necessary  to 
pay  the  liabilities. 

(e)  An  assignee  for  the  benefit  of  creditors  or  any  person  ap- 
pointed by  the  court  shall  have  the  right  to  enforce  the  contribu- 
tions specified  in  clause  (d)  of  this  paragraph. 

(f )  Any  partner  or  his  legal  representative  shall  have  the  right 
to  enforce  the  contributions  specified  in  clause  (d)  of  this  para- 
graph, to  the  extent  of  the  amount  which  he  has  paid  in  excess  of 
his  share  of  the  liability. 

(g)  The  individual  property  of  a  deceased  partner  shall  be  lia^ 
ble  for  the  contributions  specified  in  clause  (d)  of  this  paragraph. 

(h)  When  partnership  property  and  the  individual  properties 
of  the  partners  are  in  the  possession  of  a  court  for  distribution, 
partnership  creditors  shall  have  priority  on  partnership  property 
and  separate  creditors  on  individual  property,  saving  the  rights 
of  lien  or  secured  creditors  as  heretofore. 

(i)  Where  a  partner  has  become  bankrupt  or  his  estate  is  in- 
solvent the  claims  against  his  separate  property  shall  rank  in  the 
following  order : 


1579  APPENDIX 

I.  Those  owing  to  separate  creditors, 

II.  Those  owing  to  partnership  creditors, 

III.  Those  owing  to  partners  by  way  of  contribution. 

Sec.  41.  (LiabiHty  of  Persons  Continuing  the  Business  in 
Certain  Cases. )  ( 1 )  When  any  new  partner  is  admitted  into  an 
existing  partnership,  or  when  any  partner  retires  and  assigns  (or 
the  representative  of  the  deceased  partner  assigns)  his  rights  in 
partnership  property  to  two  or  more  of  the  partners,  or  to  one  or 
more  of  the  partners  and  one  or  more  third  persons,  if  the  busi- 
ness is  continued  without  hquidation  of  the  partnership  affairs, 
creditors  of  the  first  or  dissolved  partnership  are  also  creditors  of 
the  partnership  so  continuing  the  business. 

(2)  When  all  but  one  partner  retire  and  assign  (or  the  repre- 
sentative of  a  deceased  partner  assigns)  their  rights  in  partner- 
ship property  to  the  remaining  partner,  who  continues  the  busi- 
ness without  liquidation  of  partnership  affairs,  either  alone  or 
with  others,  creditors  of  the  dissolved  partnership  are  also  cred- 
itors of  the  person  or  partnership  so  continuing  the  business. 

(3)  When  any  partner  retires  or  dies  and  the  business  of  the 
dissolved  partnership  is  continued  as  set  forth  in  paragraphs  ( 1 ) 
and  (2)  of  this  section,  with  the  consent  of  the  retired  partners 
or  the  representative  of  the  deceased  partner,  but  without  any 
assignment  of  his  right  in  partnership  property,  rights  of  cred- 
itors of  the  dissolved  partnership  and  of  the  creditors  of  the  per- 
son or  partnership  continuing  the  business  shall  be  as  if  such  as- 
signment had  been  made. 

(4)  When  all  the  partners  or  their  representatives  assign  their 
rights  in  partnership  property  to  one  or  more  third  persons  who 
promise  to  pay  the  debts  and  who  continue  the  business  of  the 
dissolved  partnership,  creditors  of  the  dissolved  partnership  are 
also  creditors  of  the  person  or  partnership  continuing  the  busi- 
ness. 

(5)  When  any  partner  wrongfully  causes  a  dissolution  and 
the  remaining  partners  continue  the  business  under  the  provi- 
sions of  section  38  (2b),  either  alone  or  with  others,  and  with- 
out liquidation  of  the  partnership  affairs,  creditors  of  the  dis- 


LAW    OF    PARTNERSHIP  1580 

solved  partnership  are  also  creditors  of  the  person  or  partnership 
continuing  the  business. 

(6)  When  a  partner  is  expelled  and  the  remaining  partners 
continue  the  business  either  alone  or  with  others,  without  liqui- 
dation of  the  partnership  affairs,  creditors  of  the  dissolved  part- 
nership are  also  creditors  of  the  person  or  partnership  continuing 
the  business. 

(7)  The  liability  of  a  third  person  becoming  a  partner  in  the 
partnership  continuing  the  business,  under  this  section  to  the 
creditors  of  the  dissolved  partnership  shall  be  satisfied  out  of 
partnership  property  only. 

(8)  When  the  business  of  a  partnership  after  dissolution  is 
continued  under  any  conditions  set  forth  in  this  section  the  cred- 
itors of  the  dissolved  partnership,  as  against  the  separate  creditors 
of  the  retiring  or  deceased  partner  or  the  representative  of  the 
deceased  partner,  have  a  prior  right  to  any  claim  of  the  retired 
partner  or  the  representative  of  the  deceased  partner  against  the 
person  or  partnership  continuing  the  business,  on  account  of  the 
retired  or  deceased  partner's  interest  in  the  dissolved  partnership 
or  on  account  of  any  consideration  promised  for  such  interest  or 
for  his  right  in  partnership  property. 

(9)  Nothing  in  this  section  shall  be  held  to  modify  any  right 
of  creditors  to  set  aside  any  assignment  on  the  ground  of  fraud. 

(10)  The  use  by  the  person  or  partnership  continuing  the 
business  of  the  partnership  name,  or  the  name  of  a  deceased  part- 
ner as  part  thereof,  shall  not  of  itself  make  the  individual  prop- 
erty of  the  deceased  partner  liable  for  any  debts  contracted  by 
such  person  or  partnership. 

Sec.  42.  (Rights  of  Retiring  or  Estate  of  Deceased  Partner 
When  the  Business  is  Continued.)  When  any  partner  retires  or 
dies,  and  the  business  is  continued  under  any  of  the  conditions 
'set  forth  in  section  41  (1,  2,  3,  5,  6),  or  section  38  (2b),  without 
any  settlement  of  accounts  as  between  him  or  his  estate  and  the 
person  or  partnership  continuing  the  business,  unless  otherwise 
agreed,  he  or  his  legal  representative  as  against  such  persons  or 
partnership  may  have  the  value  of  his  interest  at  the  date  of  dis- 


1581  •  APPENDIX 

solution  ascertained,  and  shall  receive  as  an  ordinary  creditor  an 
amount  equal  to  the  value  of  his  interest  in  the  dissolved  partner- 
ship with  interest,  or,  at  his  option  or  at  the  option  of  his  legal 
representative,  in  lieu  of  interest,  the  profits  attributable  to  the 
use  of  his  right  in  the  property  of  the  dissolved  partnership;  pro- 
vided that  the  creditors  of  the  dissolved  partnership  as  against 
the  separate  creditors,  or  the  representative  of  the  retired  or  de- 
ceased partner,  shall  have  priority  on  any  claim  arising  under  this 
section,  as  provided  by  section  41  (8)  of  this  act. 

Sec.  43.  (Accrual  of  Actions.)  The  right  to  an  account  of 
his  interest  shall  accrue  to  any  partner,  or  his  legal  representative, 
as  against  the  w^inding  up  partners  or  the  surviving  partners  or 
the  person  or  partnership  continuing  the  business,  at  the  date  of 
dissolution,  in  the  absence  of  any  agreement  to  the  contrary. 


PART  VII 

MISCELLANEOUS   PROVISIONS 

Sec.  44.  (When  Act  Takes  Effect.)  This  act  shall  take  effect 
on  the day  of one  thousand  nine  hundred  and . 

Sec.  45.  (Legislation  Repealed.)  All  acts  or  parts  of  acts 
inconsistent  with  this  act  are  hereby  repealed. 


GENERAL  INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

A 
ABANDONMENT, 

partnership  agreement,  753. 

by  refusal  to  perform,  386. 
joint  adventure,  981. 

ACCEPTANCE, 

bills  by  partner,  425. 

obligation  of  one  partner  to  discharge  all,  499. 

ACCOMMODATION  NOTES, 
execution  by  partner,  427. 

ACCOUNTING, 

See  Action  for  Accounting  and  Dissolution. 

accounting  or  action  without  dissolution,  651. 
accounting  where  partnership  illegal,  655,  656. 
action  between  adventurers,  990,  991. 

between  partners,  774. 
actions  for,  715-733. 
apportionment  of  losses,  670. 

assumption  of  firm  debts,  indemnity  and  suretyship,  676. 
by  surviving  partner,  641. 
claims  against  partner  held  by  firm,  661. 

compensation  for  services  and  expenses  of  winding  up  business,  667. 
determining  partner's  share,  664. 
discharge  of  partnership  liability,  665. 
dissolution  usually  essential,  650. 
distribution  generally,  662. 
division  of  profits,  673,  674. 
evidence,  928. 

1583 


1584  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ACCOUNTING— Conhnw^d. 

firm  liabilities  to  be  discharged  before  distribution,  665. 
form  of  petition,  1188. 
good  will  of  firm,  660. 
inclusion  of  bad  debts,  658. 

of  matters  of  previous  partnership,  661. 
interest,  668. 

lien  for  advances  or  balances,  669. 
miscellaneous  matters  to  be  included,  661. 
on  dissolution  of  limited  partnership,  1037. 
order  of  distribution  on  dissolution,  662. 
parties  to  action,  767. 
partition  of  assets,  672. 

pleading  defenses  in  suits  between  partners,  858. 
pleading  in  action  between  joint  adventurers,  993. 

by  partner,  850. 
private  settlements,  675. 
profits  from  independent  transactions,  654. 

competing  businesss  of  partner,  395. 
proportionate  shares  of  partners  in  profits,  674. 
provision  for  final  accounting  in  articles,  1130. 
repayment  of  advances,  666. 

of  capital,  671. 
right  by  one  not  a  partner,  60. 
right  of  partner,  369. 

right  to  accounting  derived  from  law  merchant,  7. 
right  to  demand  as  fixing  partnership  relation,  82. 

as  test  of  partnership,  82. 
right  to  should  not  make  creditor  a  partner,  60. 
rules  for  distribution,  663. 

under  uniform  partnership  act,  663. 
secret  profits,  395,  652,  653. 
settlements  by  arbitration,  677. 
unauthorized  partnership  with  corporation,  196. 
waiver  of  right  to  accounting,  657. 
what  property  must  be  accounted  for,  659. 
where  partnership  refers  to  illegal  matters,  175. 
who  may  require  accounting,  657. 
who  must  account,  658. 

ACCOUNTS, 

duty  of  partner  to  keep  partnership  accounts,  388. 
provisions  for    keeping  in  partnership  contracts,  1109,  1110. 

ACCOUNT  STATED, 

action  between  partners,  751.  , 


GENERAL    INDEX  1585 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

accrual; 

action   for  accounting  or  dissolution,  718. 
actions  on  death  of  partner,  643. 

ACKNOWLEDGMENT, 

certificate  of  limited  partnership,  1007. 
execution  by  single  partner,  453. 

ACQUIESCENCE, 

ratification  of  unauthorized  act  of  partner,  471,  473. 
use  of  good  will  by  vendee  of  place  of  business,  328. 


ACTING  PARTNER, 

See  Managing  Partner. 
notice  to,  469. 

ACTIONS, 

See  Actions  Between  Partners;  Actions  for  Accounting  and  Disso- 
lution; Appeal;  Assumpsit;  Burden  of  Proof;  Costs;  Decrees; 
Evidence;  Execution;  Injunctions;  Judgment;  Parties;  Pleading; 
Presumptions  ;  Process  ;  Receivers  ;  Set-Off  and  Counterclaim  ;  Trial. 

accounting  without  dissolution,  651. 

accrual  on  death  of  partner,  643. 

after  change  in  membership,  834. 

against  estate  of  deceased  partner  for  misappropriated  funds,  631. 

firm  after  death  of  partner,  835. 

joint  tort-feasors,  505. 

principal  and  surety,  493n. 
agreement  to  bear  costs  as  creating  partnership  relation,  11. 
annulment  of  partnership,  590. 
appearance,  818. 

arbitration  as  bar  to  suit  for  breach  of  partnership  agreement,  370. 
arrest,  822. 

attachment  and  garnishment,  820. 
between  joint  adventurers,  990-994. 

partners,  740-789. 
by  or  against  estate  of  surviving  partner,  835. 

joint  adventurers,  995.  ^ 

joint  stock  company,   1058. 

limited  partnership,  1030. 
by  receivers,  722. 


1586  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ACTIO'i:^S— Continued. 

by  surviving  partner  to  recover  debts  due  firm,  617. 

by  third  persons  against  partnership,  502. 

charging  partners'  interest  under  uniform  act,  821. 

collusion  of  third  parties  and  partners,  800. 

defendants  generally,  806. 

defenses,  824. 

dismissal  and  discontinuance,  819. 

dormant  and  nominal  partners  as  defendants,  810. 

as  plaintiffs,  798. 
enforcement  of  liability  on  assumption  of  debt  contract,  564. 
equitable  actions,  814. 
evidence  to  establish  partnership,  903. 
execution,  827. 

general  rule  as  to  plaintiffs,  796. 
injunction  against  enforcement  of  judgment  against  firm,  828. 

sale  under  levy  against  one  partner,  829. 
injunction  and  receiver,  823. 
injunctions  to  prevent  commencement,  784. 
judgment,  826. 

levy  on  firm  property  for  individual  debt,  830,  833. 
litigation  instigated  by  single  partner,  456. 
nominal  partners  as  plaintiffs,  797. 
nonjoinder  of  defendants  in  contract  obligations,  811. 

defendants  in  tort,  812. 
on  contract  made  in  name  of  one  partner,  802. 
one  partner  suing  for  all,  801. 
on  good  -will  alone,  324. 

on  joint  and  joint  and  several  contracts,  493,  494. 
outgoing  and  incoming  partners  as  defendants,  809. 
parties  generally,  795-815. 

in  equitable  suits,  815. 
plaintiffs  in  tort  actions,  805. 
plaintiffs  where  contract  assigned,  803. 
power  of  individual  partner  to  instigate  litigation,  456. 
proceedings  against  estate  of  deceased  partner,  836. 
process  and  service,  817. 

representative  of  deceased  partner  as  defendant,  808. 
right  of  partner  to  sue  firm  or  copartner  for  negligence  as  to  indi- 
vidual property,  368. 
sale  of  partners'  interest  for  one  partner's  debt,  831,  832. 
suit  against  one  partner,  813. 

suits   by   corporators   against   individual   members   of   pretended   cor- 
porations, 253. 
suits  in  partnership  name,  265n. 
surety  on  partnership  bond,  837. 


GENERAL    INDEX  1587 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  61S-1195.] 

ACTIONS— Continued. 

surviving  partner  as  plaintiff,  804. 

trial,  825. 

venue,  816. 

wife  of  partner  as  defendant,  807. 

wrongdoing  partners  as  plaintiffs,  799. 

ACTIONS  BETWEEN  PARTNERS, 
accounting  and  dissolution,  774. 
after  dissolution,  760. 
arrest  in  civil  action,  762. 
assumpsit,  755. 

attachment  and  garnishment,  761. 
between  firm  and  partner,  741. 
between  firms  having  common  partner,  742. 
between  partners  generally,  743. 
conversion,  759. 
damages   for  breach  of  partnership  agreement,  768. 

or  abandonment  of  agreement,  753. 
damages  for  fraud  of  partner,  756. 
defenses,  763. 
demand,  765. 

equitable  actions  generally,  773. 
evidence,  902. 
injunction  generally,  780. 

against  commencing  legal  action,  784. 

relating  to  dissolution,  785-787. 

to  prevent  breach  of  agreement,  781. 

to  restrain  charge  in  application  of  profits,  782. 
judgment  and  execution,  772. 
laches,  765. 

matters  outside  partnership,  744. 
measure  of  damages,  768-771. 
on  account  stated  or  balance  due,  751. 
on  agreement  for  contribution  to  partnership  fund,  749. 
on  express  stipulation,  746. 

on  personal  promises  of  pay  for  services,  750. 
on  preliminary  agreement,  747. 
on  promissory  note,  752. 
on  unadjusted  claim,  754. 
parties,  767. 
partition,  757. 

partnership  for  single  transaction,  748. 
profits  as  measure  of  damages,  769. 
receiverships,  788,  789. 


1588  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ACTIONS  BETWEEN  PARTNERS— Continued. 
reformation  of  partnership  contract,  777. 
rescission  of  partnership  contract,  775,  776. 
set-off  and  counterclaim,  764. 

specific  performance  of  partnership  contract,  778,  779. 
suits  involving  real  estate,  757. 
time  to  sue,  766. 
tort  actions,  758. 

transactions  not  including  an  accounting,  745. 
trespass,  trover  and  conversion,  759. 
trial,  767. 
venue,  766. 


ACTIONS  FOR  ACCOUNTING  AND  DISSOLUTION, 

See  Accounting. 

appeal,  733. 

appointment  of  receiver,  721. 

burden  of  proof,  724. 

charges  and  credits,  729. 

conclusiveness  of  judgment,  733. 

contribution,  666. 

conversion  of  assets  into  cash,  728. 

costs,  732. 

decision,  730. 

decree,  731. 

defenses,  717. 

demand  as  condition  precedent,  715. 

form  of  remedy,  716. 

injunction,  720. 

jurisdiction,  716. 

manner  of  dravfing  account,  726. 

matters  vi^arranting  reversal  of  decree,  733. 

nature  of  proceeding,  715. 

parties,  719. 

partnership  books  and  accounts,  727. 

powers  and  duties  of  receiver,  722. 

procedure  at  trial,  723. 

profits  as  charge,  729. 

reference,  725. 

time  to  sue  and  limitation  of  actions,  718. 

venue,  716. 

what  account  should  contain,  726. 

who  may  institute,  715. 


GENERAL    INDEX  1589 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ADMINISTRATION, 

firm  affairs  by  partner  after  dissolution,  593-607. 

ADMINISTRATORS, 

See  Executors  and  Administrators,  633. 

ADMISSION  OF  PARTNERS, 

See  Change  of  Membership. 


ADMISSIONS, 

by   judgment   as    evidence,   893. 
by  partners   as   evidence,   888,   889. 

to   prove  existence  of  partnership,  886. 
by  single  partner  to  bind  firm,  466-468. 
by  surviving  partner,  928. 
competency  to  prove  partnership,  466. 
evidence  after   dissolution,   927. 
in  answer  to  pleading,   1195. 
partner   after   dissolution   of    firm,   600. 
representations   against  interest  as   evidence,   891,   892. 


ADVANCES, 

clause  in   contract    for   advances   by  partner,    1088. 

to   partners,    1085. 
interest  on   advances  by  partner,  665,  668. 

to   joint   adventure,   986. 
lien   of   partner,   537. 

on  dissolution,  669. 
repayment   on    dissolution   of   firm,   666. 

to  partner,   358. 
right  of  partner  to  interest,  361. 
settlement   of    joint   adventure,   987. 
to  partner  as  charges,  666. 
to  partnership   capital   defined,   358. 


ADVENTURERS, 

See  Joint  Adventures. 

corporate  not  liable  as  partners,  241. 


1590  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ADVERTISEMENTS, 

estoppel  by  use  of  partnership  name  in  advertising,  92. 

evidence  to   show  partnership,   475,   887,   896. 

right  to  advertise  that  new  firm  is  successor  of  old  firm,  329. 


AFFIDAVITS, 

execution   by    single   partner,    453. 

payment    of    contribution    of    limited    partner,    1011. 

power  of  firm  to  execute,  268. 


AGENCY, 

application  of  principle  to  trading  and  nontrading  partnerships,   151. 

authority  of   partner,  411. 

basis  of  liability  of  firm   for  tort,  508. 

commercial  partnerships,   151. 

compensation   to   partner   acting  as   agent   for   firm,   355. 

each  partner  principal  as  well  as  agent,  411. 

effect  on   authority  of   change  in   firm  name,   597. 

liability  of  principal  for  tort  of  agent,  503. 

liquidating  partner  on  dissolution,  607. 

matters   within   apparent   scope   of   partners'   authority,   413, 

mutual  agency  as  test  of  partnership,  85. 

necessity  of  relation  to  hold  firm  for  violation  of  law  by  one  part- 
ner, 515. 

notice  of   relation  to  one  partner,  469. 

partner   for  firm,   594,  895. 

under  Uniform  Act,   12. 

partner's  authority  to  create  debts,  423. 

partnership   in    relation    of    undisclosed   principal,   486. 

partner    to    execute    negotiable    paper,    500. 

power   of   agent  to   assent   for   his   principal   to   the    formation   of   a 
partnership,   214. 

power    of    agent    to    bind    firm    in    matters    in    apparent    scope    of 
authority,  487. 

power   of  agent  to   make  principal   a  partner,    199. 

power  of  partnership  to   act  as  agent,  268. 

power   of    single   partner   to    appoint   agents,   448. 

ratification    of    agreements    entered    into    with    agents,    199. 

relation  as  test  of  partnership,  45,   114. 

relation   of   partner   toward   other   members   of   firm,   342. 

sufficiency   of   notice   of   dissolution   to    agent,    596. 

termination  by  dissolution,   597,   599. 

where  agent  paid  by  share  in  profits,  75. 


GENERAL    INDEX  1591 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  11,  §§  615-1195. 1 

AGREEMENTS, 

See  Articles  of  Partnership;  Contracts. 


ALABAMA, 

sharing   losses   as    test   of   partnership   relation,    71. 


ALIENATION, 

See  Conveyances  ;  Deeds  ;  Mortgages. 

power  on   death   of  partner,  620. 


ALIENS, 

capacity  as  partners,   186. 


ALTERATIONS, 

articles  of  partnership,   386. 

business    of    limited    partnership    by    change    of    business    or    loca- 
tion, 1027. 
certificate   of    limited   partnership,    1013. 
contracts  by  single  partner,  452. 
firm  notes,  437. 

power   of   partner   to   contract   for  alteration   of   building,   413. 
power  of  single  partner  to  change  place,  time  or  date,  437. 


AMENDMENT, 

partnership    agreement,    1135. 
pleading  to   cure   defects,   847. 


AMERICAN  LAW, 

cases  opposing  net  profit  rule  as  test  of  partnership,  68. 

equitable   conversion   of   realty   into   personalty,   289,   290. 

intention  as  test  of  partnership,  88,  89. 

profit  sharing  as  test  of  partnership,  51-64. 

right  of   retiring  partner  to   solicit  old  customers,   318. 

ANALYSIS   OF   PARTNERSHIP, 

See  Tests  of  Partnership. 

ANNUITIES, 

enforcing  payment,  779. 

50 — Row.  ON  Partn. — Vol.  2 


1592  GENERAI>    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.1 


ANNULMENT, 

partnership,    590. 


ANSWERS, 

defenses   in   actions   involving  partnerships,   857,   858. 
issue  under  general  denial,  854. 

manner   of   raising   issue   of   partnership   existence,   854. 
pleading  in  actions  involving  partnership,  854,  855. 

APPEAL, 

actions  for  accounting  and  dissolution,  72>Z. 
liability  of  firm  on  bonds  after  dissolution,  602. 
sureties   on   bonds,   837. 

APPEARANCE, 

authority  of   partner  to   enter,   818. 
in    actions    involving    partnerships,    818s 
single  partner   to  bind   firm,   456. 
waiver  of  defects  in  process,  818. 

APPLICATION   OF   PARTNERSHIP   ASSETS, 
assignments    for  benefit  of   creditors,   530. 
by  courts,  533. 
by  partners,  527. 

to   individual   debts,   528. 
creditors   of    different   firms    having   common   partner,   539. 
creditors   without   lien,    526. 

duty  of  lender  to  oversee  application  of  borrowed  money,  424. 
individual  assets  of  partner,  532. 
mortgage   of  firm  property  by  partners,   529. 
partner  as  firm  creditor,  537. 

partners  or  firm  as  creditors  of  individual  partners,   538. 
priority  of  creditors   in  cases  of  ostensible  partnerships,  54L 
priority  of  creditors  on  change  of  membership,  540. 
right  of   firm   creditors   in   assets   of   individual   partners,   535. 
right  of  partner  to  have  property  applied  to  payment  of  debts,  525. 
rights  of   creditors  of   individual  partners,   536. 
rights   of   firm  creditors,   534. 
transfer  of  property  to  partner  or  new  firm,  53L 

APPOINTMENT, 

See  Bankruptcy  ;  Receivers. 

agents  by  one  member  of   firm,  448. 


GENERAL    INDEX  1593 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol,  II,  §§  615-119S.] 


APPORTIONMENT, 

losses   on   dissolution,   670. 
responsibility   for  wrong,  505. 


ARREST, 

-  in  actions  involving  partnership,  822. 
partner  in  civil  action,  762. 


ARBITRATION, 

appointment  under  articles,    1178. 

award,  677. 

clauses  in  partnership  contract,   1136. 

differences  between  partners,  370. 

form  of  award,   1179. 

power   of    single   partner,   459-462. 

settlement  on  dissolution,  677. 


ARTICLES   OF  INCORPORATION, 

partnership  liability  on   failure  to  file  according  to  law,  231. 
on   failure  of   incorporators   to   sign,  231. 


ARTICLES  OF  PARTNERSHIP, 

acquiescence  in   alterations,   386. 

action  between  partners   for  breach   or  abandonment,  753. 
action   on  preliminary  agreements,   747. 
agreement  must  be  voluntary,  210. 
between  carriers,  220. 
breach  as  ground   for  dissolution,  586. 
cases  where  agreement  held  to  create  partnership,  216,  217. 
change  by  majority,  416. 

consent  to   admission   of   new   members,   201. 
consideration,  215. 

construction  as  between  partners,  386. 

contravention    of    agreement    as    ground    for    dissolution,    576. 
customary   form  of   agreement,  211. 
damages   for  breach  of  contract,  768. 
dealing  in   real   estate,   218. 

death  of  party  before  consummation   of   partnership,  221. 
duty  of   conformity  by  partner,   385. 
effect   of   indefiniteness,   214. 

effect    of    naming   one    as    partner    in    articles    to    create    relation    of 
partnership,  92. 


1594  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-119S.] 

ARTICLES  OF  PARTNERSHIP— ConhnMed. 

enlargement  by   customs   and   usages,   414. 

formal  requisites,  211. 

formation  of  relation,  210. 

form  of  body  of  contract,  1066. 

implied  contract,  213. 

joint  adventures,  976. 

joint  stock  companies,  1052. 

limitation  on  partnership  liability,  882. 

mutual  assent,  214. 

necessity  of  publication  of  statutory  notice,  231. 

necessity  of  reduction  to  writing,  211,  212. 

office  to  fix  rights,  duties  and  liabilities  of  parties,  211. 

parol   evidence   to   explain   ambiguities,   881. 

parties   to   executory  partnership   agreement,   221. 

partnership   liability  on   defective   incorporation,  231. 

pleading  in  action  by  partner,  850. 

proof,  882-885. 

provision    against   dissolution    by    admission    of    new    members,    540. 

provisions  as  to  effect  of  admission  of  new  members,  550. 

as  to   rights  of   continuing  partners,   555. 

for  continuation  of  business  on  death  of  partner,  615,  638. 

for  disposal  of  good  will,  315. 

for  distribution  on  dissolution,  662. 

for  majority  rule,  416. 
reformation   of   partnership   contract,   777. 

regulation  of  right  of  partner  to  engage  in  other  business,  348. 
rescission   of  contract,   775,  lid. 
restrictions  on  power  of  partners,  418. 
rules  of   construction,  211. 

sale  of  good  will  in  absence  of  restrictive  covenant,  316. 
sole  criterion  as  to  firm  purpose,  250. 
specific  performance  of   contract,   778. 
statement   of   commencement   of   relation,    223. 

of  duration  of  firm,  224. 
statute  of  frauds,  218,  219. 

strictness  of  proof  of  consent  or  ratification,  884. 
verbal  contract,  212,  218. 


ASSAULTS, 

partnership  liability  for  offense  by  single  partner,  518. 


GENERAL    INDEX  1595 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ASSENT, 

all  partners  to  suretyship  contract,  427. 

mutual  assent  to   formation  of  partnership,  214. 

necessity  of  mutual  assent  to  formation  of  partnership,  214. 

to  partnership  articles,  882,  884. 


ASSESSMENTS, 

shares  in  joint  stock  company,  1053. 


ASSETS, 

See  Application  of  Partnership  Assets. 


ASSIGNEE, 

party  to  action  for  accounting,  657,  719. 


ASSIGNMENT, 

See  Conveyances;  Deeds;  Sales;  Transfer. 

good  will,  316-328. 
leaseholds,  1174. 

mortgage  by  single  member  of  firm,  444. 
parties  where  firm  contract  assigned,  803. 
provision   for  assignment  of   partner's   share,    1114. 
right  of   single   partner   to   assign    firm   property,   415. 
shares  on  retirement  of  partner,   1164-1166. 
transfer  of  firm  paper  by  one  partner,  430. 


ASSIGNMENT   FOR   CREDITORS, 
by    limited    partnerships,    1033. 
by  one  partner  after  dissolution,  599. 
by  partners,  530. 

by   surviving  partner   to   transfer  jurisdiction,   836. 
effect  to  dissolve  partnership,  580. 
execution  by  managing  partner,  417. 

by   single   partner,   458. 

by    surviving   partner,   621. 
forms,  1173. 
grounds,  458. 
-"leading  as  cause  for  dissolution,   1191. 


1596  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ASSOCIATIONS, 

See    Corporations;    Joint    Stock    Companies;    Voluntary    Associations. 

for  purposes  other  than  pecuniary  profit,   166. 

members    of    unincorporated    associations    as    partners,    156. 

partnership   associations,    148. 

partnership  between,  25. 


ASSUMED   NAMES, 

for  partnership,  263. 
validity  of   contracts,  264. 


ASSUMPSIT, 

action  between  partners,  755. 

action   for  wrongful  dissolution,  753. 


ASSUMPTION, 

breach  of   contract  to   assume  obligations  of  old  firm,   564. 

consideration  for  assumption  of  debts  of  old  firm,  557. 

debts  of  old  firm  by  incoming  partners,  557. 

effect   of    statute   of    frauds   on    assumption   of    debts   by    succeeding 

corporation,   961. 
firm  debts,   indemnity  and  suretyship  on  dissolution,  676. 
individual  debts  by  firm,  270. 

notice  to  bind  purchaser  on  assumption  of  old  firm's  debts,  558. 
partnership    debts   by    succeeding   corporation,    958,    959. 
payment  of  debts  by  partner  on  dissolution,  602. 


ATTACHMENT, 

action  between  partners,  761. 

against   surviving  partner,   835. 

damages  for  wrongful  attachment,  820. 

dissolution  by  insolvency  of  partner,  820. 

firm  property   for   debt  of   one  partner,  831. 

fraud   as   ground,   820. 

in  actions   involving  partnerships,   820. 

interest  of  partner  in  firm,  291,  292. 

levy  on  firm  property  as  ground    for   dissolution,   581. 

provisions   in   partnership   contract,    1103. 


GENERAL    INDEX  1597 

[Referenceg  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ATTORNEYS, 

business   subject  of   partnership,   426. 

clauses   for   reference  to   attorneys   in   partnership   contract,    1137. 

dissolution  of  firm  by  election  of  member  to  bench,  577. 

division  of   fees   as  creating  partnership   relation,  11. 

duties  of  receiver  of  law  firm,   722. 

duties  to  client  on  death  of  partner,  618. 

employment  by  one  member  of  firm,  449. 

firm   liability   for   misapplication   of   collections,   517. 

forms   of   partnership   agreements,    1153,    1154. 

liability  of  partnership   for  malpractice   of  one  member,   509. 

partnership  in   conduct  of  particular   litigation,   217. 

partnerships  nontrading,  151. 

recovery  for  services  by  unlicensed  attorneys,  200. 

right  of   one  member   of   firm   to   perform   gratuitous   services,   267. 


AUTHORITY, 

See  Agency  ;  Bills  and  Notes  ;   Contracts  ;    Partners  ;   Partner's  Power 

TO    Bind   Firm. 

partner  to  bind   firm,   410-476. 

AWARD, 

See  Arbitration. 

on   reference  to   settle  terms   of    dissolution,    1179. 


B 


BABYLON, 

law  of  partnership,  2. 


BAD  DEBTS, 

disposition   in  accounting  on   dissolution,  658. 


BAD  JUDGMENT, 

liability  of  partner  for  exercise,  383. 

BALANCES, 

lien   on   dissolution,  669. 

right  of  partner  to  interest,  362. 


1598  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


BANKING  ACCOUNT, 

form  of  bond  to  secure,  1170. 


BANKRUPTCY, 

See  Application  of  Partnership  Assets. 

act  by  filing  voluntary  petition,   691. 
acts  of  bankruptcy,  701,  702. 
administration   of   firm   affairs  by  partner,   598. 
administration    of    partner's    individual    estate,    687. 
appointment  and   powers   of  trustee,   688,   705. 
authority   to   adjudge   partnership    bankrupt,    690. 
commencement   of   proceedings,   691. 
consideration  of  partnership  as  legal  entity,   121. 
costs  of  partnership  petition,  699. 
discharge,  706,  707. 

effect  of  discharge  of  individual  partner,  706. 
effect  of  partial  joinder  of  partners,  692. 
effect  to  dissolve  partnership,  708. 
entity   doctrine,    685. 

exemptions   in   partnership   proceedings,   704, 
firm  not  insolvent  where  any  partner   solvent,  686. 
general  assignment  as   act  of   bankruptcy,   702. 
good  will  on  bankruptcy  of  firm,  322. 
ground   for  dissolution  of  partnership,  580. 

liability   of   member   of    family   as    active   partner    in    bankrupt   con- 
cern under   Chinese  law,   5. 
misconduct  as   affecting   right   to    discharge,    707. 
necessity   for   notice   of   dissolution    for   bankruptcy,   594. 
omission  of  rules   from  Uniform   Partnership  Act,   11. 
order  of  proof  of  debts,  694. 
partnership  and  individual  interests,  688,  689. 
partnership  petition,   1186. 
place  of  commencing  proceedings,   703. 
preferences,   693. 

by  single  partner  as  act  of  bankruptcy,  702. 

of    outside    creditors    over    indebtedness    of    individual    part- 
ner, 455. 
proof  against  both   estates,  697. 

between   estates,  698. 
proof  of  claim,   1185. 

rights  of  infant  member  of  bankrupt  firm,   188. 
schedule  of   firm   and   individual   debts,   706. 
separate  petitions   for  firm   srid   individual  partners,  691. 


GENERAL    INDEX  1599 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

BANKRUPTCY— Continued. 
test  of  solvency,  686. 

text  of  section  five  and  general  order  number  eight,  685n. 
time  within  which  firm  may  be  adjudged,   700. 
voluntary    and    involuntary   proceedings,    691. 
where  no  partnership  estate  and  all  partners  insolvent,  695,  696. 


BANKS, 

corporate  partnership  liability  of  stockholders  on  defective  corpora- 
tion, 240. 

distinction  between  private  and  national  banks  under  bankruptcy 
laws,  690. 

place  of  taxation,  939. 


BEECHER  V.  BUSH, 

intention  test  of  partnership,  65. 


BELGIAN  LAW, 

partnership  a  juristic  person,  122. 


BENEFICIARIES, 

deceased  partner  in  succeeding  corporation,  963. 

BENEFITS, 

acceptance  to    work   estoppel   to   question    authority   of   partner,   419. 
receipt  by  new  firm  as  assumption  of  debt  of  old  firm,  559. 
reception  as  ratification  of  act  of  partner,  472. 

BENEVOLENT   SOCIETIES, 

sometimes  partnerships,   167. 

BIDS, 

validity  of  partnership  to   stifle  competitive  bidding,   173. 

BILLS  AND  NOTES, 

actions  between  partners  on  notes,  752. 

acceptance  of  note  of  single  partner  to  release  all,  499. 

authority  of  partner  to  give  firm  note  for  individual  debt,  435. 

authority  to   renew   after   dissolution,  925. 

bona-fide  holders  of  paper  executed  after  dissolution,  602. 


1600  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

BILLS  AND  NOTES— Continued. 
burden  of  proof,  876. 

of   partnership   existence,  854. 
effect  of  execution  in  firm  name,  895. 
execution  and  effect  of   dissolution,  604-606. 
execution  by  managing  partner,  417. 
extension  by  officers  of  succeeding  partnership,  604, 
firm   liability  on  note  of  individual  partner,  433. 
firm  notes  endorsed  by  one  partner,  689. 
form  of  firm  signature,  437. 
fraudulent  transfer  by  one  partner,  431. 
guaranty   or   suretyship   by   single  partner,   454. 
indorsement   after   dissolution,   604. 
indorsement  as   accommodation   or   surety,   427. 
liability  of   surviving  partner  on   firm  notes,  629. 
liability  on  change  of  firm  to  corporation,  960. 
necessity  of  execution  for  partnership  purposes,  895. 
necessity    of    express    authorization    for    execution    of    paper    after 

dissolution,  605. 
note   for  individual  debt  before  formation  of  firm,  43i). 
note  of  firm  by  single  partner  to  discharge  debt,  434. 
pleading  in  action  on  partnership  note,  848. 
power  of  one  partner  to  transfer  firm  paper,  430. 
pow^er  of  partner  to  execute  and  indorse,  425-436. 

after  dissolution,  438. 
power  of  partner  to  make  sealed  note,  436. 

as  to  presentment  and  protest,  439. 
provisions   in  partnership   articles,    1098. 
recovery  by  creditor   on   firm   negotiable   paper,   501. 
renewal  after   dissolution,  602. 

by  managing  partner,  417. 
rights  of  bona-fide  purchasers,  429. 
signature  by  partner  for  firm,  878. 
unauthorized   signature,  476. 
use  of  partner's  note  by  firm,  398. 
validity  of  note  for  interest  in  partnership,  551. 


BILLS  OF  EXCHANGE, 

power  of  single  partner  to  draw,  426. 


BILLS  OF  LADING, 

partnership   of   carriers   by   issuance   of   through   bills   of   lading,   220. 


GENERAL    INDEX  1601 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-119S.1 

BLACKSTONE, 

little   reference   made   to   subject  of   partnership   in   commentaries,   7. 


BLOXHAM  V.  PELL, 

test  of  profit  sharing,  36. 


BONA-FIDE  PURCHASER, 

duty  of  inquiry  of  purchaser  of  firm  paper  from  single  partner,  432. 

evidence  of  bad   faith  to  put  purchaser  on  notice,  432. 

holders   of   mortgages   on   firm   property,   442. 

notes  of  firm,  429. 

what  will  put  purchaser  of  firm  paper  on  inquiry,  432. 


BONA  FIDES, 

See  Good  Faith. 


BONDS, 

execution  by  firm,  42L 
execution  by  one  partner,  454. 
form  of  bond  of  partner,   1091. 

in  partnership  relation  generally,  1168-1171. 
indemnity   to    retiring   partner   against   debts,    1168. 
partnership    liability   on   joint   bonds,   490. 
sureties  on  appeal  bonds,  837. 
surety  on  partnership  bond,  837. 


BONDS  AND   SECURITIES, 

provisions   in   partnership   articles,    1099. 


BOOKMAKING, 

vaHdity  of   partnership  engaged   in  business,    172. 


BOOKS, 

admissibility  as  evidence,  912,  914-918. 

compelling  production,  913. 

fraudulent  entries,  760. 

presumption  of  access,  915. 

right  of  partner  to  inspection,  727. 

right  of  partner  to  the  keeping  of  accurate  accounts,  369. 

use  in  proceedings  for  accounting  and  dissolution,  727. 


1602 


GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

BORROWING   MONEY, 

necessity   for   lender   to    see   to   application,   424. 
power  of   majority  to   direct,  416. 
power  of  managing  partner,  417. 
power  of  partner,  424. 

BREACH   OF   CONTRACT, 

See  Contracts. 

BROKERS, 

partnership  based  on  office  sharing,  217. 
partnership  with  bank  financing  transaction,  70. 

BULLEN  V.  SHARP, 

English  test  of  partnership,  45. 

BURDEN  OF  PROOF, 

accounting,  929. 

actions    for  accounting  and   dissolution,   724. 

actions    involving   partnership    generally,   876. 

actions  on  firm  contracts,  876. 

corporate  existence,  254. 

existence  of  limited  partnership,   1031. 

existence  of  partnership,  854,  876. 

partnership   liability  of  corporators,  254. 

prima   facie   case  of   partnership,   876. 

restriction  on  power  of  partner,  418. 

wife's  interest  as  partner  of  husband,  876. 

BY-LAWS, 

joint  stock  companies,   1052. 


CANADA, 

doctrine  of  equitable  conversion,  288. 

CANCELATION, 

See  Alteration. 

insurance  policy  by  single  member  of   firm,  447. 


GENERAL    INDEX  1603 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

CAPACITY, 

See  Partners. 


CAPITAL   AND    PROPERTY, 
addition  of  profits,  673. 
advances  as  contribution  to  capital,  358. 
clauses    in    partnership    contract,    1073-1076. 

relating    to    increase,    1077. 
consent  to   increase   or  diminution   of   capital,   275. 
conveyance   of    firm   realty  under   uniform    act,   305. 
corporation  payable  in  money  or  property,  232. 
definition,  275. 

dower  and  homestead  rights  in  partnership  realty,  296. 
effect  of  increase  without  filing  certificate,  233. 
equitable   conversion    of    realty   into   personalty,   288-290. 
impairment  of  limited  partnership,   1028. 
insurance    of    partnership    property,    298-300. 
intention,   282. 

interest  of  partner  in  firm  property,  291,  292. 
joint   stock   companies,    1055. 
judgments  in  favor  of  firm,  278. 
land  purchased  by  realty  firm,  285,  286. 
leases   of   firm   property,   278. 
loss  of  right  to  return  on  dissolution,  671. 
majority  without  power  to  change  capital,  416. 
mortgage  by  one  partner,   302. 
mortgage   of   partnership   personalty,   304. 

of    partnership    realty,   301. 

of  partner's  separate  property  for  firm  debt,  303. 
partnership   liability  of  corporators   where   stock  not  paid,   232. 

where  increase   made   without   filing  certificate,   235. 
partnership  real  estate  under  Uniform  Partnership  Act,  287. 
patents  and  trade-marks,  279. 
possession   of   firm   property,   294. 
power  of  single  partner  to  sell  firm  property,  444. 
presumption   of   equal   contribution   of   partners,   275. 
primary    fund    for   payment   of   losses,   662. 
property  acquired  in  exercise  of  partnership  rights,  278. 

with   partnership    funds,   276,   280. 
property  of  partner  used  in  firm  business,  277. 
property  under  Uniform  Partnership  Act,  280. 
proportionate  shares  of  partners,  295. 
provision  for  interest  in  partnership  contract,  1079. 
repayment  of  capital  by  partner,  357. 

on   dissolution,  671. 


1604  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  1§  1-608;  Vol.  II,  §§  615-119S.1 

CAPITAL  AND  PROPERTY— Continued. 

right  of  partner  to  division  in  kind,  292. 

right  of   partner  to  interest  on   advances,   359-361. 

to   interest  on   dissolution,   668. 
rights  of  partner  in  firm  property,  345. 
right  to  exemptions  in  partnership  property,  297. 
taxation,  306. 

tenancy  in  partnership  under  Uniform  Partnership  Act,  293. 
title  in   firm  name,  284. 
title  in  partners  as  individuals,  283. 
transfer  of  property  from  firm  to  partner,  307. 
undivided   profits   not   capital,   275. 
when  real  estate,  partnership  property,  281. 

CAPTION, 

forms,    1187. 
pleadings,  846. 

CARDS, 

evidence  to  show  partnership,  887,  895,  896. 


CARRIERS, 

See  Railroads  ;  Steamboats. 

partnership    agreements    between    carriers,    220. 
partnership  by  issuance   of   through   bills   of   lading,   220. 
partnership  liability  for  loss  of  goods,  509. 
transportation    by   connecting   carriers,    220. 

CATTLE, 

partnership  where  contract  to  divide  increase,  217. 

CAVEAT  EMPTOR, 

application    to    persons    bargaining    with    each    other     for    partner- 
ship,  381n. 

CERTIFICATES, 

conclusiveness,    237. 
duration  of  limited  partnership,   1014. 
formation   of  partnership,   1184. 
joint   stock   companies,    1055. 
limited   partnerships,    1006-1010. 


GENERAL    INDEX  1605 

[References  are  to  sections— Vol.  I,  §§  l-608j  Vol.  II,  §§  615-1195.] 

CERTIFICATES— Con^mw^rf. 

partnership     liability     on     failure     to     record     corporate     certificate, 

233,  239. 
proof  of  partnership  agreement,  885. 
renewal  of  limited  partnership,   1026. 
statutes  requiring  certificate  of  partnership,  885. 


CHAFFRAIX  v.  LAFITTE, 

intention  test  of  partnership,  66. 

CHANGE  OF  MEMBERSHIP, 

See  Surviving  Partners. 

assumption  of  debts  of  old  firm,  557. 

competition   by   retiring  partner,   553. 

effect  on  entity,   120. 

firm  name,  553. 

form  of  articles  for  admission  of  new  partner,  1157. 

good  will,  553. 

liability  of  continuing  partners   for  obligations  of  old  firm,  559. 

under  Uniform  Partnership  Act,  560. 
liability  of  incoming  partners  on  old  debts,  561. 
liability  of  retiring  partner   for  new  firm's  obligations,   563. 

for  obligations  of  old  firm,  556. 

on  breach  of   assumption   agreement,  564. 
novation,  562. 

provision  for  admission  of  son  of  partner  into  firm,  1115,  1160. 
provisions  in  contract  that  dissolution  does  not  result,  540. 
retiring  partner  as  surety  for  old  firm,  558. 

rights  of  continuing  partner  and  new  firm  in  assets  of  old  firm,  555. 
rights  of  creditors,  540. 

rights  of  retiring  partner  in  assets  of  old  firm,  554. 
transfer  of  partner's  interest  to  copartner,  551. 

to  third  party,  552. 
whether  works  dissolution,  550. 


CHARGES, 

advances  made  to  partner,  666. 
in  proceedings  for  accounting,  729. 


CHARTERS, 

effect  of  including  powers  in  excess  of  those  conferred  by  statute,  247. 
partnership  liability  imposed  on  corporations  by  charter,  252. 
statutes  validating  defective  corporate  charters,  235. 


1606  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

CHATTEL  MORTGAGES, 

ratification  of  unauthorized  execution  by  one  partner,  471. 


CHEESE  MAKING  ASSOCIATION, 
members  not  partners,  167. 

CHILDREN, 

compensation  for  services  of  children  of  partner,  355. 


CHILIAN  LAW, 

partnership  a  juristic  person,  122. 

CHINA, 

law  of  partnership,  5. 

CHOICE, 

See  Delectus  Personarum. 

firm  name,  261,  262. 

CHOSE  IN  ACTION, 

interest  of  partner  in  firm,  291. 
sale  by  single  partner,  444. 

CIVIL  LAW, 

definition  of  partnership,  25n. 
intention  as  test  of  partnership,  66,  90. 
^       partnership  as  entity,   121. 

view  of  separate  entity  question,  119. 

CLAIMS, 

authority  of  single  partner  to  settle  disputed  claims,  451. 
purchase  by  partner  of  claims  against  firm,  390. 

CLASSIFICATION, 

partnerships,  135-160. 

CLERGYMAN, 

prohibition  on  trading,  154. 

CLUBS, 

nature  and  characteristics,  157. 


GENERAL    INDEX  1607 

CODIFICATION, 

law  of  partnership,  9. 

COLLATERAL  ATTACK, 

existence  of  corporation,  237. 

judgments  for  nonjoinder  or  misjoinder,  796. 

COLLECTIONS, 

by  partner  after  dissolution,  602. 

conversion  by  one  member  of  firm,  511. 

partnership  liability  for  torts  in  collection  of  debts,  514. 

power  of  single  partner  to  make,  450. 

COLLUSION, 

ground  for  appointment  of  receiver,  789. 
of  third  parties  and  partners,  800. 

COMITY, 

recognition  of  foreign  corporations,  249. 

COMMENDA, 

form  of  partnership  in  middle  ages,  6. 

COMMERCIAL  PARTNERSHIPS, 

See  Partnership. 

agency  relation  of  partners,  412. 
examples,  426. 

COMMISSIONS, 

accounting  for  secret  profits,  652. 

collection  of  secret  commissions  by  partner,  395. 

division  of  broker's  commissions  as  creation  of  partnership  relation,  17. 

COMMON  LAW, 

jurisdiction  of  accounting,  716. 

COMMON-LAW  WIFE. 

partnership  in  property  of  deceased  husband,  173. 

COMMON  PARTNER. 

actions  between  firms  having  common  partner,  742. 
contracts  between  firms  having  common  partner,  420. 

51 — Row.  ON  Partn. — Vol.  2 


1608  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

COMMUNISTIC  SOCIETIES, 
members  not  partners,  166. 

COMMUNITY  OF  INTEREST, 

distinction  between  joint  interest  and  common  interest  in  profits,  115. 

element  of  partnership,  115. 

essential  of  community  of  interest  in  profits,  115. 

what  included,  115. 

COMMUNITY  OF  PROFITS, 

See  Profits  and  Losses. 

COMPENSATION, 

action  between  partners  on  contracts  for  services,  750. 

extra  services  performed  by  partner,  356. 

fraud  of  partner  to  defeat,  356. 

implied  contract  for  compensation  of  partner,  354. 

managing  partner,  350. 

partner  for  services  for  firm,  350-355. 

services  and  expenses  of  winding  up,  667. 

services  rendered  by  partner  in  other  capacity  than  partner,  355. 

settling  business  on  death  of  partner,  637. 

surviving  partner   for  services,  353. 

winding  up  partnership,  637. 

COMPETITIVE  BIDDING, 

validity  of  partnership  to  stifle,  173. 

COMPETITIVE  BUSINESS, 
by  retiring  partner,  553. 
injunction  against  conduct  by  partner,  786. 
provisions  in  partnership  contract,   1094. 
right  of  partner  to  conduct,  348,  396. 
unfair  competition  in  use  of  firm  name,  266. 

COMPLAINT, 

See  Pleading. 


COMPOSITION  AGREEMENTS, 
forms,  1172. 


GENERAL    INDEX  1609 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


COMPROMISES, 

by  partner  after  dissolution,  602. 

by  single  partner,  451. 

fraud  of  partner  in  securing,  514. 


CONCEALMENT, 

fraud  by  partner,  384. 


CONCLUSIONS, 

effect  of  pleading,  852. 


CONDEMNATION, 

See  Eminent  Domain. 


CONDITIONS  PRECEDENT, 

action  by  retiring  partner  on  indemnity  contract,  564. 
increase  or  diminution  of  capital,  275. 


CONFESSION  OF  JUDGMENT, 

by  partner  under  Uniform  Partnership  Act,  415. 
by  single  partner,  457. 

after  dissolution,  599. 


CONFIDENTIAL  RELATION, 

partner  toward  other  members  of  firm,  341,  342. 
trust  relation  in  partnership,  116,  120. 


CONNECTING  CARRIERS, 

partnership  by  issuance  of  through  bills  of  lading,  220. 


CONSENT, 

basis  of  partnership  relation,  882. 

contracts  requiring  unanimous  consent  of  partners,  415. 

increase  or  diminution  of  capital,  275. 

partners  to  incoming  members  of  firm,  201. 


CONSIDERATION, 

agreement  of  partnership,  215. 


1610  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.1 

CONSIDERATION— Cow^nwctf. 

assumption  by  new  firm  of  debts  of  old,  557. 

assumption  of  partner's  debt  by  firm,  270. 

failure  as  defense  in  actions  between  partners,  16Z. 

joint  adventure,  976. 

recovery  where  partnership  terminated  by  fraud,  215. 

to  support  private  settlement,  675. 

transfer  of  firm  property  to  single  partner,  307. 


CONSPIRACY, 

action  between  partners,  759. 


CONSTITUTION, 

joint  stock  companies,  1052. 

CONSTITUTIONAL  LAW, 

partnership  liability  on  incorporation  under  invalid  law,  248. 

CONSTRUCTION, 

partnership  agreements,  386. 

where  intention  ambiguous,  386. 


CONSULTATION, 

duty  of  consultation  between  partners  on  firm  matters,  402. 


CONTINUATION, 

See  Death  of  Partner. 

business  of  firm  on  death  of  partner,  638,  639. 
business  of  limited  partnership,  1026. 
partnership  relation,  225. 
provisions  in  partnership  articles,  1127. 

CONTINUING  PARTNER, 

See  Change  of  Membership, 

liability  for  old  firm's  obligations,  559. 
liability  under  uniform  partnership  act,  560. 
rights  in  assets  of  old  firm,  555. 


GENERAL    INDEX  1611 

[References  are  to  sections— Vol.  I,  §§  l-608j  Vol.  II,  §§  615-1195.] 

CONTRACTS, 

See  Articles  of  Partnership  ;  Bills  and  Notes  ;  Conveyances  ;  Deeds  ; 
Joint  Adventures;  Joint  Stock  Companies;  Limited  Partnerships; 
Mortgages  ;  Pledges. 

accounting  for  profits  of  illegal  contracts,  655. 

action  against  partner   for  breach  of  noncompetitive  agreement,   760. 

actions  between  partners  on  express  stipulations,  746. 

agreement  by  partner  not  to  compete,  320. 

alteration  by  single  partner,  452. 

apparent  scope  of  partners'  authority,  487. 

application  of  general  principles  in  formation  of  partnership,  210. 

authority  of  majority,  416. 

of  officers  of  joint  stock  company,  1057. 

of  single  partner  to  alter,  452. 
basis  of  partnership  relation,  127. 
between  firms  having  common  partner,  420. 
between  partners  themselves,  399. 

breach  of  contract  to  assume  obHgations  on  change  of  membership,  564. 
breach  of  noncompetitive  contract  by  retiring  partner,  320. 
commencement  and  termination  of  partnership  liability,  498. 
completion  on  death  of  partner,  618. 
consideration  to  support  articles  of  partnership,  215. 
construction  to  reach  intention  of  parties,  675. 
continuance  of  firm  business  to  execute  on  death  of  partner,  616. 
damages  for  breach  of  contract  of  partnership,  768. 

for  breach  of  contract  to  pay  firm  debts,  771. 

for  wrongful  cancelation  by  partner,  768. 
dissolution  of  firm  to  terminate  contract  of  agency,  597. 
distinction  between  joint  and  joint  and  several  contracts,  489. 
diversion  of  profits  by  partner  from  copartner,  391. 
effect  of  death  of  partner  on  employes'  contracts,  619. 
effect  of  dissolution,  592, 

enforcement  of  contracts  after  dissolution,  779. 
estoppel  by  entry  into  contracts   under  partnership  name,  92. 
execution  in  individual  names  of  partners,  421. 
express  and  implied  agreements  of  partnership,  213. 
firm  liability  for  ratified  acts,  485. 

implied  contracts  for  payment  for  partner's  services,  354. 
liability  generally  of  partners  to  third  persons,  486. 
liability  of  firm  on  individual  contracts,  419. 
liability  of  limited  partnerships,  1020,  1021. 
liability  of  partners  on  firm  contract,  495-497. 

on  joint  and  joint  and  several  contracts,  489-495. 
liability  to  retiring  partner  on  breach  of  agreement  to  assume  firm 
debts.  564. 


1612  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II.  §§  615-1195.] 

CONTRACTS— Confm«^(f. 

limit  on  contracts  of  partner  in  articles,  1097. 

nature  of  liability  of  partner  to  third  persons,  488. 

necessity  of  unanimous  consent,  415. 

one  partner  without  power  to  enter  into  unlawful  contract,  413. 

parties  in  actions  on  firm  contracts,  802,  803. 

performance  after  dissolution,  599. 

power  of  dormant  partners,  464. 

power  of  joint  stock  company,  1057. 

power  of  partners  to  bind  each  other  under  ancient  Jewish  laws,  3. 

power  of  partner  to  execute  after  dissolution,  603. 

power  of  partner  to  borrow  money,  424. 

power  of  partner  to  execute  instrument  under  seal,  422. 

to  incur  firm  debt,  423. 

to  sign  firm  name,  421. 
release  of  all  obligors  by  release  of  one,  491. 
renewal  by  partner  in  individual  name,  394. 
rescission  of  partnership  agreement,  775. 
restrictions  of  partners'  authority  to  execute,  418. 
rules  of  construction  applicable  to  articles  of  partnership,  211. 
subscription  to  stock  of  joint  stock  company,  1055. 
tests  of  partnership  relation,  35-104. 
validity  where  assumed  name  employed,  264. 
verbal  contracts  of  partnership,  212. 


CONTRIBUTION, 

action  on  agreement  for  contribution  to  firm  fund,  749. 

apportionment  of  losses  on  dissolution,  670. 

between  partners  where  firm  debt  paid  by  one  partner,  497. 

duty  of  partner  to  share  outlays  and  losses,  401. 

enforcement  on  dissolution,  666. 

estate  of  deceased  partner  to  pajonent  of  firm  debts,  635. 

joint  adventure,  984. 

limited  partner,  1015,  1016. 

necessity  for  settlement,  651. 

on  dissolution  of  firm,  666. 

partners  to  losses  under  Uniform  Act,  12. 

presumption  of  equal  contribution  to  partnership  capital,  275. 

right  of  partner,  364,  365. 


CONVERSION, 

action  between  partners,  758,  759. 

collections  by  one  member  of  firm,  511. 

demand  as  condition  to  action  between  partners,  765. 


GENERAL    INDEX  1613 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

CONVERSION— Continued. 

doctrine  of  out  and  out  conversion  of  firm  realty,  623. 

equitable  conversion  of  partnership  realty  into  personalty,  288-290. 

firm  funds  by  partner,  405. 

firm  liability  for  conversion  of  trust  funds  by  single  partner,  517. 

firm  realty  on  death  of  partner,  623-625. 

parties  plaintifif  in  action,  805. 

partnership  assets  into  cash,  664,  728. 

partnership  liability  generally,  511. 

when  conversion  of  firm  realty  takes  place  on  death  of  partner,  625. 


CONVEYANCES, 

See  Contracts  ;  Deeds  ;  Mortgages. 

alienatioa  of  firm  property  on  death  of  partner,  620. 

firm  property  to  single  partner,  307. 

partnership  property,  305. 

transfer  of  partnership  property  to  partner  or  new  firm,  531. 

transfer  of  property  from  firm  to  partner,  307. 


CONVICTS, 

capacity  as  partners,  187. 

property  no  longer  forfeited  to  the  crown,  187. 

COOLEY, 

liability  of  joint  wrongdoers,  505. 
views  on  separate  entity  question,  119n. 


COPARTNERSHIP, 

See  Partnership. 

CORPORATIONS, 

See  Defective  Incorporations  ;  Joint  Stock  Companies. 
advantages  as  between  partnership  and  corporate  operation,  950. 
assumption  of  debts  of  predecessor  partnership,  958. 
capacity  as  partners,  193-197. 
changing  partnership  into  corporation,  951. 
characteristics,  127. 
citizens  under  federal  laws,  1046. 

creditor's  rights  where  firm  property  transferred  to  corporation,  967. 
defective  incorporation  to  create  partnership,  155. 
dissolution  of  partnership  by  formation  of  corporation,  591. 
distinct  entity,  117. 


1614  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

CORFORATIONS— Continued. 

distinguished  from  joint  stock  companies,  1046. 
distinguished  from  partnership,  127. 

division  of  stock  on  formation  of  corporation  from  firm,  952. 
effect  of  dealing  with  corporation  under  beHef  that  it  is  a  partner- 
ship, 253. 
effect  of  doing  business  under  name  of  projected  corporation,  230. 
effect  of  purchase  of  interest  in  firm,  193. 
formation  as  dissolution  of  partnership,  962. 

form  of  preliminary  agreement  among  partners  to  organize,  1181,  1182. 
liabilities  of  partners  after  incorporation,  965. 
liability  for  debts  of  predecessor  partnership,  953-955,  959. 
liability  for  debts  of  predecessor  partnership  without  express  assump- 
tion, 959. 
liability  for  injuries  on  steamboat  operated  under  partnership  agree- 
ment, 194. 
necessity  of  express  power  to  enter  partnership,  193. 
partnership  between,  25. 
partnership  liability  imposed  by  charter,  252. 

by  statute,  251. 
partnership    liability    of    corporators    under    statutes    imposing    stock- 
holders' liability,  230. 

of  promoters  and  corporators,  244. 
on  failure  to  file  articles  of  incorporation,  231, 
where  contract  within  scope  of  corporate  purpose,  195. 
where  corporation  for  unauthorized  business,  247. 
where    corporation    organized    under    void    or    unconstitutional 
law,  248. 
partnership   relation   sustained   where   injustice   would   otherwise   re- 
sult, 194. 
partnership  under  agreement  to  incorporate,  100. 
payment  for  stock  in  money  or  property,  232. 
power  to  become  co-owner  of  property,  197. 
power  to  enter  into  partnership  under  Uniform  Act,  194. 
power  to  enter  into  partnership  with  other  corporation,  193. 
presumption  as  to  liability  for  debts  of  predecessor  partnership,  960. 
pretended  officers  liable  as  partners,  246. 

property  of  partnership  transferred  to  corporation  to  defraud  cred- 
itors, 968. 
protection  of  minority  on  change  of  partnership,  952, 
right  of  corporation  partner  to  accounting,  657. 
rights  acquired  by  corporation  succeeding  partnership,  963. 
rights  of  partners  among  themselves  after  incorporation,  966. 
rights   of   beneficiaries   of   deceased   partner    in    succeeding   corpora- 
tion, 964. 


GENERAL   INDEX  1615 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol,  II,  §§  615-1195.] 

CORPORATIONS— Con^mM^rf. 

right  to  manufactured  product  by  succeeding  corporation,  966. 
statute   of    frauds   as   affecting   assumption   of   debts   of   predecessor 

firm,  961. 
statutes  validating  defective  charters,  235. 
successors  to  partnerships,  244. 
tenants  in  common  with  individuals,  197. 

transfer  of  partnership  assets  to  succeeding  corporation,  956,  957. 
ultra  vires  acts,  193. 


COSTS, 

bankruptcy  petition,  699,  702. 

indemnity  in  case  of  unauthorized  suit  by  single  partner,  456. 

payment  out  of  firm  assets  on  accounting,  732. 

payment  out  of  firm  funds,  112. 

priority  on  distribution,  662. 

proceedings  for  accounting  and  dissolution,  1Z2. 

COUNTERCLAIM, 

See  Set-Off  and  Counterclaim. 

COURSE  OF  DEALING, 

effect  on  authority  of  single  partner,  414. 
evidence  to  show  partnership,  887. 

COVENANTS, 

against  sale  of  good  will,  316. 

damages  for  breach  of  covenants  in  partnership  agreement,  753. 

provision  in  contract  of  retiring  partner  as  to  debts,  1133. 

COX  v.  HICKMAN, 

partnership  test  of  intention,  43,  44. 

CREDITORS, 

See  Application  of  Partnership  Assets. 

property  to  which  they  may  look  to  satisfy  claims,  40. 

CREDITS, 

in  partnership  account,  729. 

pledge  of  firm  credit  by  single  partner,  445. 


1616  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

CRIMES, 

accounting  for  profits  arising  from  crime,  655. 

by  partner  against  firm,  405. 

criminality  of  partner  as  ground  for  dissolution,  585. 

liability  of  partners  under  criminal  laws,  518. 

sharing  profits,  172. 

CROP  SHARING, 

partnership  relation,  126. 

CROSS-COMPLAINT, 

actions  involving  partnership,  856. 
rules  for  determining  validity,  856. 

CUSTOMS  AND  USAGES, 

duty  of  third  persons  to  take  notice,  414. 
effect  on  authority  of  partner,  414. 
effect  on  partnership  articles,  414. 


D 

DAMAGES, 

breach  of  contract  of  partnership,  768. 

exemplary  damages  for  breach  of  partnership  contract,  768. 
fraud  of  partner,  756. 
illegal  expulsion  of  partner,  575. 

measure  in  actions  for  breach  of  contract  of  partnership,  753,  768-770. 
profits  as  element  on  breach  of  partnership  agreement,  769. 
recovery   of    all   damages   in    one   action    for   breach    of    firm    agree- 
ment, 771. 
w^rongful  attachment,  820. 
wrongful  cancelation  of  firm  contract  by  partner,  768. 


DATE, 

authority  of  single  partner  to  change  date  of  instrument,  437. 


DEATH  OF  PARTNER, 

accounting  by  surviving  partner,  641. 

accrual  of  actions  against  firm,  643. 

alienation  of  firm  property  by  surviving  partner,  620. 

as  dissolution  of  partnership,  579. 

as  ground  for  receivership,  721. 


GENERAL    INDEX  1617 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DEATH  OF  PARTNER— Continued. 

assignment  for  creditors  by  survivor,  621. 

compensation  for  administration  of  business  after  death,  637. 

compensation  of  surviving  partner,  353. 

continuation  of  business  by  survivor,  638. 

control  of  property  by  survivors,  617. 

disposition  of  interest  and  profits  of  business,  636. 

dissolution  of  limited  partnership,  1035. 

dissolution  or  continuation  of  business,  615. 

duty  of  partner  to  estate  of  copartner,  403. 

duty  of  survivor  to  account,  658. 

effect  of  death  of  joint  contractor,  492. 

of  lavir  partner,  618. 

of  member  before  partnership  consummated,  221. 

of  member  of  mining  partnership,  579. 

of  partner  on  guaranty  insurance,  300. 

on  contract  with  employe,  619. 
effect  to  dissolve  joint  stock  company,  147. 
executors  of  deceased  partner,  640. 

form  of  clause  in  contract  governing  continuance  of  firm,  1070. 
liability  of  estate  and  survivor  on  firm  indebtedness,  630. 
limitation  of  action  against  survivor,  644. 
necessity  of  dissolution  for  death  of  partner,  594. 
of  special  partner  to  dissolve  partnership,  579. 
on  pending  actions,  804. 

partnership  administrator  under  statute,  634. 
partnership  liability  of  estate  of  deceased  partner,  496. 
payments  to  and  by  surviving  partner,  622. 
power  of  surviving  partner  to  complete  contracts,  618. 
provision  in  contract  for  sale  of  deceased  partner's  interest,  1124,  1125. 
right  of  beneficiaries  of  dead  partner  on  change  to  corporation,  964. 
right  of  estate  to  compel  enforcement  of  firm  obligations,  835. 
right   of    survivor   to   sue   estate    for   misappropriations   by   deceased 

partner,  631. 
rights  and  liabilities  of  estate  for  continuation  of  business,  639. 
rights  in  firm  realty  under  uniform  act,  629. 
rights  of  creditors,  642. 

rights  of  heirs  and  devisees  in  firm  realty,  627,  628. 
rights  of  survivor  against  estate  of  deceased,  631. 
status  of  firm  realty,  623-626,  629. 
surviving  partner,  616. 

and  good  will  of  business,  632, 
surviving  partner  as  executor  or  administrator,  633. 
termination  of  joint  adventure,  988. 
winding  up  business,  635. 


1618  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DEBTS, 

See  Application  of  Partnership  Assets  ;   Bills  and  Notes  ;   Mortgages. 
discharge  by  note  given  after  dissolution,  606. 
ground  for  dissolution,  589. 
torts  of  partner  in  collecting,  514. 
unfair  competition  in  use  of  firm  name,  266. 

DECISION, 

See  Judgments. 
in  action  for  accounting  and  dissolution,  729. 

DECLARATION, 

See  Pleading. 
as  evidence,  889. 

competency  to  prove  partnership,  466,  889,  892. 
operation  as  estoppel  to  deny  partnership  relation,  475. 

DECREES, 

See  Judgments. 
dissolution,  582. 
on  partial  settlements,  731. 
proceedings  for  accounting  and  dissolution,  731. 


DEEDS, 

alienation  of  firm  property  on  death  of  partner,  620. 
conveyances  by  and  to  firm  under  uniform  act,  287. 
conveyance  of  firm  assets  to  succeeding  corporation,  957. 

of  firm  realty  under  uniform  act,  305. 
deed  of  partner  to  firm,  398. 
form  of  habendum  clause,  1175. 

joinder  of  wives  of  partners  in  conveyances,  296,  625. 
method  of  execution  by  firm,  269. 
partnership  as  parties,  269. 
partnership  property  generally,  305. 
partnership  property  taken  in  firm  name,  285,  287. 
power  of  partnership  to  execute,  268,  269. 
quitclaim  deed  of  surviving  partner,  626. 
to  partnership  should  recite  names  of  partners,  269. 
use  of  firm  name  in  conveyances,  265. 


DE  FACTO  CORPORATIONS, 

partnership  liability  of  stockholders,  237. 

status  of  incorporators  who  fail  to  create  a  de  facto  corporation,  213. 


GENERAL    INDEX  1619 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


DEFAMATION, 

parties  to  actions,  805. 

partnership  liability  for  acts  of  one  partner,  513. 


DEFECTIVE  INCORPORATION, 

adventurers  not  liable  as  partners,  241. 
collateral  attack,  237. 

conflicting  theories  of  partnership  liability  of  corporators,  245. 
dealing  with  corporation  under  belief  that  it  was  a  partnership,  253. 
effect  of  failure  to  publish  notice  of  articles,  231. 
effect  of  failure  to  record  certificate  of  incorporation,  239. 
estoppel  of  creditor  contracting  with  corporation,  238. 
estoppel  of  creditors  to  hold  corporators  as  partners,  238. 
evidence  to  fix  liability  as  partners,  254. 
extent  of  stockholders'  liability  under  statutes,  236. 
necessity  that  evidence  show  defective  incorporation  at  time  of  con- 
tract, 230. 
not  liable  as  partners,  241. 

partnership  liability  of  stockholders  of  de  facto  corporation,  237. 
partnership  liability  before  complete  organization,  230. 
partnership  liability  imposed  by  charter,  252. 
partnership  liability  imposed  by  statute,  251. 
partnership  liability  of  promoters  and  corporators,  244. 
partnership  liability  as  between  associates  themselves,  242. 
partnership    liability    on    failure    to    comply    with    statutory    require- 
ments, 235. 

on  failure  to  file  certificate  of  incorporation,  233. 

on  incomplete  incorporation,  239. 

on  increase  of  capital  stock  in  violation  of  law,  235. 

on  ineffectual  organization,  243. 

where  capital  stock  not  paid,  232. 

where  corporation  is  for  unauthorized  business,  247. 

where    corporation    organized    in   one   state   to    do    business    in 
another  state,  249. 

where    corporation    organized    under    void    or    unconstitutional 
law,  248. 

where  corporators  do  business  under  style  of  corporation  with- 
out existence,  240. 

where  failure  to  comply  with  corporation  laws,  231. 

where  no  effort  to  incorporate,  240. 
partnership  liable  for  ultra  vires  acts,  242. 
right  of  creditors  to  sue  corporators  as  individuals,  253. 
theories  of  partnership  liability,  242. 


1620  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DEFENSES, 

actions  between  partners,  763. 

actions  for  accounting  and  dissolution,  717. 

actions  involving  partnership,  824. 

inurement  of  defense  of  one  partner  to  all  partners,  857. 

limited  partnership,  1030. 

nonexistence  of  partnership,  857. 

pleading  in  actions  involving  partnerships,  857,  858. 

DEFINITIONS, 

annulment  of  partnership,  590. 

arbitration,  462. 

capital,  275. 

departure,  860. 

difficulty  of  defining  partnership,  26. 

dormant  partner,  139,  500,  922. 

firm  name,  260. 

good  will,  315. 

joint  adventure,  160,  975. 

joint  and  joint  and  several  contracts,  489. 

joint  stock  companies,  1045. 

limited  partnerships,  146,  1000. 

meaning  of  word  "business"  in  Uniform  Partnership  Act,  25. 

net  profits,  982. 

nominal  partners,  920, 

notice  and  knowledge  in  uniform  act,  595. 

partnership,  25-28. 

by  various  text  writers,  25n. 

in  English  Partnership  Act,  48. 

in  Prussian  code,  25n. 

under  Montana  Code,  115. 

under  Roman  law,  4. 
partnership  liability  the  real  question  in  determining  relation,  27. 
partner's  separate  estate,  532. 
property,  275. 
silent  or  sleeping  partners,  140. 

DELAY, 

unreasonable  as  laches,  765. 

DELECTUS  PERSONARUM, 

basis  of  partnership  relation,  579. 
inference  of  consent  from  silence,  20L 
right  to  choose  partner,  201. 


GENERAL    INDEX  1621 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DEMAND, 

accrual  of  demand  for  accounting,  718. 
condition  precedent  to  action  for  accounting,  715. 
effect  where  made  on  one  member  of  firm,  469. 
prerequisite  in  action  between  partners,  765. 


DEMURRER, 

pleadings  involving  partnerships,  863. 
question  of  proper  parties,  796. 


DENTISTS, 

effect  of  attempt  to  incorporate  business  where  no  statutory  author- 
ity, 247. 
violation  of  noncompetitive  agreement  by  retiring  partner,  318. 


DEPARTURE, 

defined,  860. 
pleadings,  860. 


DEPOSITIONS, 

notice  to  take  given  to  one  partner,  469. 


DEPOSITS, 

provision  in  contract  for  deposit  of  firm  moneys,  1081. 

DEPRECIATION, 

apportionment  on  dissolution,  670. 


DESCENT, 

interest  of  deceased  partner,  627. 


DEVISEES, 

rights  in  firm  property  on  death  of  partner,  627,  628. 


DILIGENCE, 

by  party  to  deny  partnership  relation,  475. 

duty  to  make  inquiry  as  to  partner's  authority,  487. 


1622  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DIRECTORS, 

joint  stock  companies,  1054. 

partners  on  defective  incorporation,  231. 


DISAGREEMENTS  BETWEEN  PARTNERS, 
ground  for  dissolution,  587. 

DISCHARGE, 

debt  by  firm  note  executed  by  one  partner,  434. 

effect  of  misconduct  of  one  partner  in  bankruptcy  proceedings,  706. 

firm  debts  by  notes  after  dissolution,  606. 

partnership  liability  on  dissolution,  665. 

under  bankruptcy  laws,  706,  707. 


DISCOVERY, 

bill  against  partner,  775. 

DISCRETION, 

exercise  by  partners,  383. 


DISHONESTY, 

partner  as  ground  for  dissolution,  585. 


DISMISSAL, 

actions  involving  partnerships,  819. 


DISPLAY, 

firm  name,  261. 


DISSENSIONS, 

as  ground  for  dissolution,  715. 


DISSOLUTION, 

See  Action  for  Accounting  and  Dissolution;  Death  of  Partner. 

accounting,  settlement  and  distribution,  650-677. 
actions  against  partner  after  dissolution,  834. 
actions  between  partners,  774. 

after  dissolution,  760. 
actions  for,  715-733. 


GENERAL    INDEX  1623 

[References  are  to  sections— Vol.  I.  §§  1-608;  Vol.  II,  §§  615-1195.] 

DISSOLUTION— Con^wM^f/. 

admissions  of  partner  after  dissolution,  600,  927. 

agreement  of  partners,  574. 

annulment  of  partnership,  590. 

assumpsit  as  remedy  for  wrongful  dissolution,  753. 

bankruptcy,  580,  708. 

binding  effect  of  admissions  of  single  partner  after  dissolution,  467,  468. 

breach  of  partnership  agreement,  586. 

business  carried  on  at  a  loss,  588. 

by  change  in  membership,  120. 

by  formation  of  corporation,  962. 

by  judicial  decree  or  operation  of  law,  582. 

character  of  notice  required,  596. 

compensation  of  partner  for  services  after  dissolution,  352. 

consideration  for  assumption  of  debts  of  old  firm,  557. 

continuance  of  partnership  after  dissolution,  571. 

damages  for  wrongful  dissolution,  768. 

death  of  member  of  joint  stock  company,  147. 

death  of  partner,  579,  615. 

each  partner  entitled  to  draw  out  according  to  contribution,  275. 

effect  of  allowing  new  firm  to  use  old  firm  name,  596. 

effect  of  bankruptcy  of  one  partner,  708. 

effect  on  contracts,  599. 

effect  to  terminate  contract  of  agency,  597. 

events  making  partnership  unlawful,  575. 

evidence  of  notice,  926. 

evidence  to  show  authority  of  partner  after  dissolution,  925. 

evidence  to  support,  926. 

executor's  sale  of  property,  581. 

expiration  of  term,  572. 

express  will  of  partner,  573,  574. 

firm  by  change  of  membership,  550. 

by  sale  of  partner's  interest,  225. 
firm  note  for  individual  debt  after  dissolution,  435. 
form  of  notice,  1144. 

of  petition,  1189. 

of  pleading  cause  for  dissolution,  1190-1193. 
fraud  in  inception  of  relation,  589. 
fraudulent  misconduct  of  partner  as  ground,  715. 
grounds  for  setting  aside  agreement,  675. 
holding  out  as  partner  after  dissolution,  608. 
incapacity  of  partner,  584. 
injunction  to  prevent,  785. 
insanity  of  partner,  583. 
joint  adventure,  988. 
joint  stock  companies,  1059. 

52 — Row.  ON  Partn. — Vol.  2 


1624  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DISSOLUTION— Continued. 

law  firm  by  election  of  member  to  bench,  577. 
law  making  purpose  of  partnership  illegal,  577. 
levy  of  attachment,  581. 
liability  for  future  taxes,  306. 
limited  partnerships,  1027,  1035-1037. 
liquidating  partner,  607. 
marriage  of  woman  partner,  578. 
mining  partnership,  153,  1048. 

by  formation  of  corporation,  962. 
nature  and  grounds,  571. 
necessity  to  accounting,  650,  651. 
neglect  of  duty  by  partner  as  ground,  387. 
note  given  after  dissolution  as  discharge  of  debt,  606. 
notice  of  dissolution,  594. 

from  notoriety,  596. 

of  limited  partnership,  1035. 
notice  to  creditors  and  customers,  596. 

to  firm  debtor  after  dissolution,  1147. 
parties  to  agreement,  574. 
partnership  at  will,  573. 
partnership  by  formation  of  corporation,  591. 

by  insanity  of  member,  189. 
partnership  under  Roman  law,  4. 
performance  of  firm  contracts,  599. 
persons  entitled  to  notice,  596. 

pleading  in  action  by  partner,  850,  851.  ' 

power  of  partner  as  to  firm  notes  after  dissolution,  438. 
power  of  partner  to  administer  firm  affairs,  598,  599. 
power  over  firm  property,  601. 

negotiable  paper,  604,  605. 
power  to  collect,  pay  or  compromise  firm  debt,  602. 
power  to  make  new  contracts,  603. 
prejudicial  conduct  of  member  of  firm,  585. 
proof  of  notice,  926. 

provision  for  division  of  property  on  dissolution,  1129. 
provision  in  contract  for  dissolution  in  case  of  loss,  1118. 

on  bankruptcy  of  partner,  1120. 
provisions  for  purchase  by  one  partner,  1131,  1132. 
provisions  for  under  Uniform  Act,  12. 
receivership  where  dissolution  not  asked,  788. 
right  to  good  will,  326. 

several  liability  on  dissolution  by  death,  497. 
status  of  partnership  after  dissolution,  592. 
taxation  after  dissolution,  942. 
transfer  of  partner's  interest,  591. 


GENERAL    INDEX  1625 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DISSOLUTION— Continued. 

uniform  partnership  act,  571. 

after  dissolution  and  notice,  595. 
war,  575. 
when  further  concerted  action  impracticable,  587. 

DISTRIBUTION, 

See  Accounting;  Accounting,  Settlement  and  Distribution. 

injunction  to  prevent  wrongful  distribution  of  partnership  property, 

782. 

DIVERSION, 

profits  from  copartner,  391. 

DIVIDENDS, 

joint  stock  companies,  1055. 

DIVISION, 

provision  for  division  on  dissolution,  1129. 

DORMANT  PARTNER, 
defined,  139,  500,  922. 

discharge  of  liability  by  note  of  ostensible  partner,  434. 
evidence  to  estabhsh  liability,  922,  923. 
form  of  agreement  where  one  partner  dormant,  1155. 
liability  on  firm  contracts,  486. 
liability  to  third  persons,  500. 
merger  of  judgments,  826. 
nature  and  characteristics,  139. 
notice  of  dissolution,  594. 
parties  defendant,  810. 
parties  plaintiff,  798. 
power  over  firm  contracts,  464. 
provision  for  share  on  dissolution,  1121. 
provision  in  partnership  contract,  1089. 
term  synonymous  with  secret  partner,  139. 

DOWER, 

in  firm  property,  296,  625,  629. 

right  in  realty  converted  into  personalty,  296. 


1626  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

DOWER— Continued. 

right  of  widow  of  deceased  partner,  627. 
right  of  wife  in  partnership  property,  807. 


DRUGGISTS, 

liability  of  firm  for  negligent  filling  of  prescription  by  partner,  509. 


DURATION, 

form  of  clause  governing  in  contract,  1068,  1069. 
joint  adventure,  988. 
limited  partnership,  1014. 
partnership,  223-225. 

fixed  by  articles,  211. 

DURESS, 

settlement  with  retiring  partner,  554. 

validity  of  partnership  where  consent  coerced,  222. 


EASTMAN  V.  CLARK, 

tests  of  partnership,  58-64. 

ELECTION, 

infant  to  avoid  contracts,  188. 
joint  stock  companies,  1054. 
trustees  in  bankruptcy,  705. 


ELECTION  OF  REMEDIES, 

actions  on  joint  and  several  obligations,  493. 

between  rescission  and  reformation  of  partnership  agreement,  777. 

on  breach  of  partnership  agreement,  778. 

ELEMENTS  OF  PARTNERSHIP, 

community  of  interest,  115. 

distinguished  from  corporation,  127. 

distinguished  from  joint  purchase,  124. 

distinguished  from  joint  tenancy  and  tenancy  in  common,  125. 

distinguished  from  relation  of  landlord  and  tenant,  126. 

distinguished  from  trust,  128. 

essential  elements,  110. 

intention,  113. 


GENERAL   INDEX 
[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ELEMENTS  OF  FARTNERSHIF— Continued. 
mutual  agency,  114. 
sharing  of  losses,  112. 
sharing  of  profits.  111. 
trust  relation,  116. 
under  uniform  partnership  act,  123. 
whether  distinct  entity,  117-123. 


ELLIOTT, 

definition  of  partnership,  25. 


1627 


EMBEZZLEMENT, 

funds  by  partner,  405. 


EMINENT  DOMAIN, 

assessment  of  good  will,  324. 

EMPLOYES, 

power  of  single  partner  to  engage,  449. 


ENGLISH  LAW, 

early  English  law  of  partnership,  7. 

equitable  conversion  of  realty  into  personalty,  288. 

intention  as  test  of  partnership,  87. 

later  developments  in  English  law  of  partnership,  8. 

profit  sharing  as  test  of  partnership,  35-40. 

provision  governing  capacity  of  partners,  185. 

right  of  retiring  partner  to  solicit  old  customers,  317. 

summary  on  partnership  tests,  50. 


ENGLISH  PARTNERSHIP  ACT, 

conversion  of  firm  realty  on  death  of  partner,  628. 

definition  of  partnership,  25n. 

duration  of  partnership  relation,  224. 

purpose,  9. 

test  of  partnership,  48. 

ENTITY, 

change  of  firm  name  as  affecting,  120. 

confusion  of  decisions  on  questions  of  partnership  entity,  117, 

doctrine  under  bankruptcy  laws,  685,  686. 

effect  of  death  of  partner  to  dissolve  partnership,  118. 


1628  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.1 

ENTITY— Continued. 

firm  for  tax  purposes,  306. 
joint  stock  associations,  1046. 
partnership  as  entity,  117-123. 
theory  under  equity  rules,  121. 

EQUITABLE  CONVERSION, 

partnership  realty  into  personalty,  288-290. 

EQUITY, 

See  Injunction. 

jurisdiction  of  accounting  and  dissolution  proceedings,  715-716. 
jurisdiction  of  action  between  partners,  773. 
procedure  in  suits  for  accounting  and  dissolution,  723. 
suits  involving  partnerships,  813-815. 

ERRORS  OF  JUDGMENT, 

liability  of  partner  for  exercise,  383. 

ESTATES, 

See  Executors  and  Administrators. 

ESTOPPEL, 

application  of  principle  of  acquiescence,  238. 

between  partner  and  firm  creditors,  689. 

corporation  to  question  right  to  enter  into  partnership,  196. 

creditors  contracting  with  corporation,  238. 

creditors  to  hold  corporators  as  partners,  238. 

essential  to  estoppel  to  deny  liability  as  partner,  475. 

formation  of  partnership,  210. 

former  partnership,  99. 

holding  out  as  partnership,  37,  907,  909. 

lending  name  as  fixing  partnership  relation,  39. 

limited  partners,  1022. 

nature  of  acts  or  conduct  creating  estoppel,  92. 

necessity  of  change  of  position  for  worse,  475. 

necessity  that  creditor  be  misled  by  misrepresentations,  95. 

partnership  relation  dependent  on  time  of  making  representations,  96. 

proof  to  establish  partnership  relation,  909. 

receipt  of  benefits  of  unauthorized  act  of  partner,  419. 

recitals  in  articles  of  partnership,  92. 

reliance  upon  representations  as  element,  475. 


GENERAL   INDEX  1629 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

ESTOPPEL— ConimM^J. 

test  of  partnership,  49,  91,  99. 

to  question  authority  of  single  partner,  475,  476. 

to  question  corporate  existence  by  dealing  with  corporation  as  such, 

237,  238. 
to  question  right  of  corporation  to  enter  into  partnership,  193. 
to  question  settlement  by  receiving  benefits,  675. 
under  uniform  partnership  act,  101. 

EVIDENCE, 

See    Admissions  ;    Burden    of    Proof  ;    Declarations  ;    Depositions  ;    Pre- 
sumptions. 
accounting,  929. 
actions  between  joint  adventurers,  994. 

between  partners,  767. 
admission  by  judgment,  893. 

by  partners,  888,  889. 
admissions  after  dissolution,  927. 
admissions  and  representations  by  partner,  466. 
admissions  of  partner  after  dissolution,  600. 

of  surviving  partner,  928. 

to  prove  partnership,  466. 
advertisements  and  signs  to  show  partnership,  887. 
authority  of  partner,  919,  924. 
authority  of  partner  after  dissolution,  925. 
authority  to  assign  for  creditors,  458. 
burden  of  proof  generally,  876. 

in  action  for  accounting  and  dissolution,  724. 

of  liability  of  corporators  as  partners,  254. 

of  partnership  existence,  854. 

that  corporation  is  partnership,  254. 
continuation  of  partnership,  225. 
course  of  dealing  to  show  partnership,  887. 

direct  evidence  of  partnership  not  required,  902.  ' 

dissolution,  926. 

existence  of  limited  partnership,  1031. 
general  principles,  875. 

hearsay  evidence  to  establish  partnership,  910. 
holding  out,  905-908. 
in  suits  against  third  persons,  903. 

between  partners,  902. 
intention,  103,  904. 
liability  of  dormant  partners,  922,  923. 

of  nominal  partner,  920,  921. 
mixed  questions  of  law  and  fact,  879. 


1630  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

EVIDENCE — Continued. 
novation,  562. 
parol  proof  to  establish  partnership,  886,  887. 

establish  partnership  to  sell  real  estate,  218,  219. 
partnership  books,  727,  912-918. 

partnership  existence  mixed  question  of  law  and  fact,  879. 
partnership  in  individual  name,  911. 
partnership  liability  by  estoppel,  909. 
presumption  of  correctness  of  firm  books,  127. 

as  to  partnership  matters,  878. 

from  method  of  firm  dealing,  878. 
previous  dealings  to  determine  scope  of  partnership,  267. 
profit  sharing  as  evidence  of  partnership,  104. 
proof  of  facts  generally,  880,  881. 

firm  name  as  prima  facie  evidence  of  partnership,  895. 

liability  to  third  persons,  901. 

partnership,  877. 

partnership  agreement,  882-885. 

partnership  by  reputation,  910. 

profit  sharing,  897-900. 

to  establish  partnership  relation,  217. 

to   establish    partnership    in    business    conducted    in    individual 
name,  911. 

universal  partnership,  880. 
quantum  of  proof  to  estabhsh  partnership  relation,  877,  880. 
rebuttal  of  evidence  as  to  profit  sharing,  899. 
records  and  pleadings  in  former  cases,  894. 
representations  made  by  partner,  890-892. 
scope  of  partnership,  267. 
to  sustain  estoppel,  476. 

undisputed  evidence  question  for  court,  825. 
use  of  individual  names  in  firm  name,  896. 


EXECUTION, 

against  joint  stock  company,  1058. 

in  actions  involving  partnerships,  827. 

injunction  against  levy,  829. 

interest  taken  by  purchaser  upon  sale  of  firm  property  for  partner's 

debt,  832. 
levy  on  assets  of  limited  partnership,  1024. 

on  partnership  property  for  partner's  debt,  830-833. 

on  partner's  property  for  firm  debt,  497. 

on  interest  of  partner  in  firm,  291,  292. 

on  interest  of  single  partner,  830. 
levy  under  void  judgment,  510. 


GENERAL    INDEX  1631 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

EXECUTION— Continued. 

on  judgments  in  actions  between  partners,  772. 

on  what  property  levied,  827. 

procedure  on  sale  of  partner's  interest  for  one  partner's  debt,  831. 

sale  of  firm  property  as  ground  for  dissolution,  581. 

unauthorized  levy  at  direction  of  one  partner,  514. 

EXECUTORS  AND  ADMINISTRATORS, 

actions  against  estate  of  deceased  partner,  836. 

authority  to  convey  deceased  partner's  interest  in  firm  realty,  627. 

continuance  of  firm  business,  638. 

deceased  partner,  633,  634,  640. 

executor  as  partner,  640. 

liability  of  estate  for  firm  debt,  496. 

liability  on  joint  contract  of  decedent,  492. 

parties  defendant  in  actions  involving  partnership,  808. 

parties  to  actions  for  accounting,  719. 

rights  against  surviving  partners,  158. 

rights  and  liabilities  on  continuation  of  business,  639. 

right  to  accounting,  657. 

surviving  partner  as  executor,  640. 

time  for  presentation  of  claims  of  creditors,  630. 

whether  partners  in  firms  to  which  decedent  belongs,  158. 

EXEMPTIONS, 

farm  partnership   from  bankruptcy  laws,  704. 
necessity  of  claim  in  bankruptcy  proceedings,  704. 
right  of  partner  to  claim  after  receivership,  297. 
rights  to  exemption  in  partnership  property,  297. 
under  bankruptcy  laws,  704. 
waiver  of  homestead,  425. 

EXHIBITS, 

attachment  to  pleadings,  850. 

EXPENSES, 

clause  in  partnership  contract,  1082,  1087. 
reimbursement  of  partner,  349. 
settlement  of  joint  adventure,  985. 
winding  up  firm  business,  667. 

EXPRESS  WILL, 

dissolution  of  partnership,  573,  574. 


1632  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

EXPULSION, 

damages  for  illegal  expulsion,  575. 

notice  to  partner  of  intention  to  expel,  1142. 

partner  from  firm,  344,  575. 

as  dissolution  of  firm,  575. 

provisions  in  partnership  contract,  1112. 

EXTENSION, 

See  Continuation. 

form  of  agreements  for  continuation  of  business,  1156,  1157. 


EXTRA  SERVICES, 

compensation  for  extra  services  performed  by  partner,  356. 


F 
FARMERS'  UNIONS, 

members  not  partners,  167. 


FARMING, 

accounting  between  operating  partners,  861. 

business  subject  of  partnership,  426. 

exemption  from  bankruptcy  laws,  704. 

form  of  farm  partnership  agreement,  1148. 

power  of  farming  partnership  to  carry  on  store,  267. 


FELLOW  SERVANTS, 

partner  as  fellow  servant  of  employe,  509. 

FELONS, 

capacity  as  partners,  187. 

FERRIES, 

partnership  in  ferry  franchise,  216. 

FICTITIOUS  NAMES, 

partners  containing  nominal  or  ostensible  partners,  138. 

statutory  prohibition,  262,  263. 

title  to  realty  taken  in  fictitious  firm  name,  284. 


GENERAL    INDEX  1633 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


FIDUCIARY  RELATION, 

between  joint  adventurers,  978. 
between  members  of  firm,  341,  342. 
trust  relation  of  partnership,  116,  120. 


FILING, 

certificate  of  limited  partnership,  1010. 


FIRM  NAME, 

See  Names. 

actions  against  partnership  in  firm  name,  502,  806. 

as  part  of  good  will,  329. 

change  as  affecting  authority  of  agent,  597. 

change  of  membership  of  firm,  553. 

choice  and  failure  to  display,  261. 

defined,  260.      . 

designation  under  laws  of  middle  ages,  6. 

estoppel  to  deny  partnership  relation  where  consent  to  use  of  name 

is  established,  475. 
fictitious  and  assumed  names,  263. 
firms  doing  business  under  trade  name,  263. 
form  in  partnership  articles,  1067,  1069. 
laws  requiring  registration,  262. 
limitations  on  choice,  26L 
limited  partnerships,  1019. 
necessity,  260. 

necessity  of  signs  displaying  names,  262. 
necessity  of  use  of  names  of  partners,  262. 
notice  of  dissolution  implied  from  change,  596. 
origin  of  system,  260. 
power  of  partner  to  sign,  421. 
proof  as  prima  facie  evidence  of  partnership,  895. 
requisites,  25. 

right  of  partner  to  bind  firm  by  other  than  firm  name,  265. 
right  of  single  firm  to  use  more  than  one  name,  260. 
right  to  use  after  dissolution,  329. 
sale  by  retiring  to  remaining  partner,  307. 
statement  in  articles  of  partnership,  261. 
statutory  regulation,  262. 

suits  by  and  against  partnership  in  firm  name,  795,  796. 
suits  in  firm  name,  265. 
taxation  of  firm  property,  306,  935. 


1634  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

FIRM  NAME — Continued. 

title  of  property  in  firm  name,  284. 

title  to  realty  taken  in  fictitious  firm  name,  284. 

unfair  competition,  266. 

unknown  to  ancient  Jewish  laws,  3. 

use,  265. 

by  one  partner  after  dissolution,  599. 

by  surviving  partner,  631. 
use  in  advertising  as  estoppel,  92. 

use  of  individual  names  of  partners  in  firm  name,  896. 
use  of  word  "limited,"  1018. 
use  of  "&  Co.,"  262. 

use  prima  facie  evidence  of  existence  of  firm,  265. 
validity  of  contracts  under  assumed  name,  264. 

FIRM  POLICY, 

duty  of  consultation,  402. 


FIRMS, 

See  Partners  ;   Partnership. 

term  synonymous  with  partnership,  25. 


FIXTURES, 

mortgages  covering,  440. 

FOREIGN  PARTNERSHIPS, 
suits  by,  863. 

FORFEITURE. 

stock  in  joint  stock  company,  1055. 

FORGERY, 

firm  liability  for  forgery  by  one  partner,  516. 
firm  name  by  partner,  405. 

FORMS, 

additional  money  contributed  by  one  partner,  1076. 
admission  and  general  denial  in  pleading,  1194, 
admission  of  new  partner,  1158,  1159. 

of  partner's  legatee  into  firm,  1161. 


GENERAL    INDEX  1635 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  61S-119S.] 

FORMS— Continued. 

of  partner's  son  into  firm,  1115,  1160. 
advances  to  firm,  1088. 

to  partners,  1085. 
agreement  for  joint  adventure  or  ssmdicate,  1180. 

for  sale  of  interest  of  retiring  partner  to  incoming  partner,  1163. 
agreement  where  one  partner  dormant,  1155. 
amending  partnership  agreement,  1135. 
appointment  of  arbitrator,  1178. 
arbitration  clauses,  1136. 

assignment  by  retiring  partner  to  continuing  partner,  1164. 
assignment  for  benefit  of  creditors,  1173. 

assignment  of  deceased  partner's  share  to  surviving  partner,  1165. 
assignment  of  leasehold,  1174. 
award  on  reference  to  settle  dissolution,  1179. 
body  of  contract,  1066. 
bond  by  surviving  partner  to  secure  payment  of   share  of  deceased 

partner,  1169. 
bond  for  protection  of  secret  process,  1171. 
bond  indemnifying  retiring  partner  against  debts,  1168. 
bond  of  partner,  1091. 
bonds  and  securities,  1099. 
bond  to  secure  banking  account,  1170. 
capital,  1073. 

caption  to  pleading,  1187. 
causing  attachment  of  property,  1103. 
certificate  of  formation,  1184. 
charge  on  partner's  profits,  1167. 
close  of  articles,  1138. 
complete  agreements,  1148-1186. 

composition  agreement  between  partners  and  firm  creditors,  1172. 
continuance  of  partnership  on  death  of  partner,  579. 

by  representatives  of  deceased  partner,  1127. 

under  new  agreement,  1157. 
conveyance  of  share  of  retiring  partner  to  copartners,  1166. 
deposit  of  partnership  moneys,  1081. 
dissolution  in  case  of  loss,  1118. 
dissolution  on  bankruptcy  of  partner,  1120. 
division  of  profits  and  losses,  1083. 
division  of  property  on  dissolution,  1129. 
dormant  partner,  1089. 

dormant  partner's  share  on  dissolution,  1121. 
duration,  1068,  1069. 
engaging  in  other  business,  1094. 
expense  accounts,  1087. 
expenses,  1082. 


1636  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

FORMS — Continued. 

expulsion  of  partner,  1112. 

extending  credit,  1101, 

extension  of  partnership  term,  1156. 

farm  partnership  agreement,  1148. 

final  accounting,  1130. 

firm  name,  1067,  1069. 

giving  information,  1106. 

good  will,  1122. 

guaranty  of  profits,  1084. 

habendum  clause  in  deed  to  firm,  1175. 

hiring  employes,  1105. 

increase  of  capital,  1077. 

indemnity  against  individual  debts,  1107. 

indemnity  to  retiring  partner,  1134. 

interest  on  capital,  1079. 

keeping  accounts,  1109. 

keeping  trade  secrets,  1108. 

limited  partnership,  1183. 

limit  upon  contracts  by  one  partner,  1097. 

majority  rule,  1111. 

managing  partner,  1095. 

mercantile  partnership  contract,  1149-1151. 

mortgage  of  partner's  interest,  1176. 

negotiable  paper,  1098. 

notice  of  demand  for  inspection  of  business,  1143. 

of  desire  to  sell,  1140. 

of  dissolution,  1144. 

of  intention  to  expel,  1142. 

of  intention  to  purchase,  1141. 

of  intention  to  withdraw,  1139. 

of  retirement  of  partner,  1145. 

of  sale  of  business,  1146. 

to  firm  debtor  after  dissolution,  1147. 
one  partner  furnishing  capital,  1074. 
one  partner  without  capital,  1075. 

option  to  one  partner  to  buy  partnership  property,  1177. 
overdrawing  accounts,  1056. 
partnership  agreement  under  Babylonian  law,  2. 
partnership  petition  in  bankruptcy,  1186. 
partnership  to  continue  after  retirement  or  death,  1070. 
patents  as  partnership  property,   1078. 

payment  of  deceased  partner's  share  to  his  representatives,  1126. 
petition  for  accounting,  1188. 

for  dissolution,  1189. 
place  of  carrying  on  business,  1071. 


GENERAL    INDEX  1637 

[References  are  to  sections— Vol,  I,  §§  1-608;  Vol.  II,  §§  61S-1195.] 

FORMS — Continued. 

pleading  assignment  for  creditors,  1191. 

breach  of  contract  by  one  partner,  1192. 

dissolution  under  terms  of  contract,  1193. 

specific  denial,  1195. 

transfer  of  one  partner's  interest,  1190. 
pledging  credit,  1102. 
preliminary  agreement,  1181. 
professional  partnership  contract,  1152-1154. 
promoter's  agreement  with  partners  to  form  corporation,  1182. 
proof  of  claim  in  bankruptcy,  1185. 
purchase  by  one  partner  on  dissolution,  1131. 
purchase  of  deceased  partner's  share  by  surviving  partner,  1117. 
purchase  of  partner's  share  in  good  will,  1123. 
purchase  of  retiring  partner's  interest,  1132,  1162. 
purchase  of  share  of  deceased  or  bankrupt  partner,  112S. 
purposes  of  partnership,  1072. 

reference  to  attorney  to  settle  disputed  rights,  1137. 
regular  meetings,  1090. 
release  of  debts,  1104. 
rent  paid  to  one  partner,  1080. 
retiring  partner  not  to  compete,  1114. 
retiring  partner's  covenant  as  to  debts,  1133. 
salary  to  come  only  from  profits,  1096. 
sale  of  interest  of  deceased  partner,  1124. 
sale  or  assignment  of  partner's  share,  1113. 
suretyship,  1100. 
survivorship,  1116. 
taking  accounts,  1110. 
time  to  be  devoted  to  firm,  1092. 
vacations,  1093. 
winding  up  business,  1128. 
withdrawal  of  partner,  1119. 


FRAUD, 

accounting  for  profits  in  fraudulent  business,  655. 

accrual  of  action  for  accounting,  718. 

book  entries,  760. 

burden  of  proof  in  action  for  accounting,  724. 

in  settlement,  924. 
collusion  of  third  parties  and  partners,  800. 
conveyances  by  surviving  partners,  626. 
damages  for  fraud  of  partner,  756. 
defense  in  action  between  partners,  763. 
effect  of  fraud  of  infant  partner,  188. 


1638  GENERAL    INDEX 

[References  are  to  sections — Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

FRAUD — Continued. 

ground  for  dissolution  of  limited  partnership,  1035. 

ground  to  set  aside  private  settlement,  675. 

in  inception  of  relation  as  ground  for  dissolution,  589. 

liability  of  firm  for  fraud  of  absconding  partner,  508. 

liability  of  firm  for  fraud  of  partner,  508. 

liability  of  partner,  384. 

net  profit  rule  not  needed  to  prevent  fraud,  62. 

one  partner  as  ground  for  attachment,  820. 

overvaluation  of  property  turned  over  to  partnership,  384. 

parties  to  fraud  as  parties  to  action  for  accounting,  719, 

partner  in  obtaining  release  of  mechanic's  lien,  451. 

partnership  agreement  induced  by  fraud,  222. 

partnership  liability  of  corporators  engaged  in  unlawful  business,  247. 

pleading  in  actions  by  or  against  surviving  partner,  849. 

purchase  of  copartner's  interest  through  third  person,  384. 

receipt  of  secret  commissions  by  partner,  395. 

setting  aside  mortgage  in  fraud  of  copartners,  440. 

settlement  with  retiring  partner,  554. 

speculation  by  partner  with  firm  funds,  392. 

to  defeat  compensation  of  partner,  356. 

unfair  competition  in  use  of  firm  name,  266. 

use  of  firm  note  to  pay  individual  debt  of  partner,  384. 


FRAUDULENT  CONVEYANCES, 

conveyance  of  firm  property  to  corporation,  968. 

firm  property  to  single  partner,  307. 

ground  for  attachment,  820. 

omission  from  Uniform  Partnership  Act,  11. 

setting  aside  conveyance  to  succeeding  corporation,  967. 

transfer  of  firm  assets  to  satisfy  debt  of  individual  partner,  528. 

transfer  of  firm  property  to  partner  or  new  firm,  531. 


FRAUDULENT  MISREPRESENTATION, 

partnership  liability,  508. 


FRAUDULENT  TRANSFER, 

firm  paper  by  single  partner,  431. 


FRENCH  LAW, 

partnership  as  a  legal  person,  122. 


^  GENERAL    INDEX  1639 

[References  are  to  sections— Vol.  I,  §§   1-608;  Vol.  II,  §§  615-1195.] 

G 

GAIN, 

primary  purpose  of  partnership,   165. 

GAMBLING, 

accounting  for  profit  in  business,  655. 
validity  of  partnerships,  172. 

GARNISHMENT, 

action  between  partners,  761. 

in  actions  involving  partnerships,  820. 

service  of  notice,  820. 


GENERAL  DENIAL, 

form  of  pleading,  1194. 
issue,  854. 


GENERAL  PARTNERS, 

See  Limited  Partnerships. 
nature  and  characteristics,  136. 


GENERAL  PARTNERSHIPS, 
under  Roman  law,  4. 


GERMAN  LAW, 

right  of  action  by  and  against  partnerships,  122. 


GILMORE, 

definition  of  partnership,  25n. 

GOOD  FAITH, 

between  prospective  partners,  341. 

dealing  of  partner  with  his  firm,  398. 

duty  of  partner  to  exercise  in  purchase  of  copartner's  interest,  400. 

joint  adventures,  978. 

necessity  between  partners,  116,  341,  342,  381. 

purchase  of  claims  against  firm  by  partner,  390. 

purchase  of  interest  of  deceased  partner  by  survivor,  635. 

53 — Row.  ON  Partn. — Vol.  2 


1640  '  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

GOOD  FAITH— Continued. 

reliance  as  element  of  estoppel,  476. 
secret  commissions  of  partner,  395. 
test  of  partnership  relation,  775,  778. 
transactions  of  partner  in  individual  capacity,  391. 


GOOD  WILL, 

accounting,  660. 

action  between  partners  for  loss,  760. 

action  on  good  will  alone,  325. 

agreements  by  partners  not  to  compete,  320. 

a  partnership  asset,  278. 

breach  of  noncompetitive  agreement  by  entering  employ  of  another,  321. 

business  of  firm  on  death  of  partner,  632. 

change  of  membership,  553. 

conversion  into  cash  on  dissolution,  660. 

definition,  315. 

firm  name  as  part  of  good  will,  329. 

impairment,  315. 

implied  disposal  by  sale  of  place  of  business,  328. 

injunction  against  impairment,  787. 

not  the  same  as  trade-mark,  315. 

partnership  rights  in  trade  secrets,  330. 

personal  skill  as  good  will,  323. 

professional  partnership,  331. 

provision  in  partnership  contract,  1122,  1123. 

receivership  to  save  good  will,  327. 

retiring  partner  soliciting  old  customers,  317-319. 

rights  of  surviving  partner  in  good  will,  326. 

sale  at  involuntary  sale,  322. 

sale  by  single  partner,  415. 

sale  in  absence  of  restrictive  covenant,  316. 

taxation,  324,  936. 


GRACE  V.  SMITH, 

English  test  of  profit  sharing,  38. 


GRAND  ARMY  POSTS, 

members  not  partners,  166. 

GRANGES, 

partnership  liability  of  members,  247. 


GENERAL    INDEX  1641 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


GRATUITIES, 

to  secure  influence  of  partner,  393. 


GROSS  PROFITS, 
defined,  41. 


GROSS  RECEIPTS, 

sharing  as  creation  of  partnership  relation,  81. 


GUARANTY, 

by  firm  terminated  by  dissolution,  599, 
contracts  by  managing  partners,  417. 

by  single  partner,  454. 
power  of  partnership,  268. 


GUARANTY  INSURANCE, 
insurance  of  firm,  301. 


H 


HABENDUM  CLAUSE, 
form,  1175. 


HANDBILLS, 

evidence  to  establish  partnership,  896. 


HEBREWS, 

ancient  Jewish  laws  of  partnership,  3. 


HEIRS, 

parties  to  actions  for  accounting,  719. 
to  equitable  suits  generally,  815. 
rights  and  liabilities  on  continuation  of  firm  business,  639. 
rights  of  heirs  of  deceased  partner  in  firm  realty,  627,  628. 
right  to  accounting,  657. 


HIRING, 

property  by  single  partner,  446. 


1642  GENERAL    INDEX 

[References  are  to  sections — Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

HISTORICAL, 

early  forms  of  partnership,  1-8. 
origin  of  limited  partnerships,  1002. 

HOLDING  OUT, 

effect  to  fix  partnership  relation,  Zl,  476. 

effect  under  Uniform  Partnership  Act,  12. 

nominal  partners,  921. 

partner  after  dissolution,  608. 

partnership  liability  imposed,  475. 

proof  to  show  partnership  relation,  905-908. 

reliance  on  as  estoppel,  93. 

HOMESTEAD, 

rights  in  partnership  property,  296,  625. 
waiver  of  exemption  by  partner,  425. 

HORSERACING, 

validity  of  partnership  engaged  in  business,  172. 

HOTELS, 

partnership  in  operation,  217. 

HOUSEKEEPING  SOCIETIES, 
members  not  partners,  166. 

HUSBAND  AND  WIFE, 

capacity  as  partners,  191. 

marriage  of  woman  partner  as  ground  for  dissolution,  578. 

notice  of  dissolution  of  firm  by  marriage  of  female  partner,  594. 

power  to  enter  into  partnership  with  each  other,  191. 

wife  as  necessary  party  to  actions,  807, 

wife  as  party  to  husband's  conveyance  of  firm  realty,  625. 


ILLEGAL  PARTNERSHIP, 
accounting,  655,  656. 

ILLEGAL  TRANSACTIONS, 

ground  for  dissolution  of  partnership,  577. 
subject  of  partnership,  170,  175-177. 


GENERAL    INDEX  1643 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


ILLINOIS, 

profit  sharing  test  of  partnership,  56. 


IMPEACHMENT, 

fraud  in  confession  of  judgment,  457. 
private  settlement  of  firm  affairs,  675. 

IMPLIED  CONTRACTS, 

formation  of  partnership,  213. 
payment  of  partner  for  services,  354. 


IMPROVEMENTS, 

lien  where  firm  funds  used  on  partner's  property,  277, 


INCAPACITY, 

dissolution  for  incapacity  of  partner,  583,  584. 


INCOMING  PARTNERS, 

See    Change  of  Membership. 
liability  for  obligations  of  old  firm,  561. 

INCREASE  OF  CAPITAL  STOCK, 

effect  of  creating  partnership  relation  where  unauthorized,  234. 
provision  in  contract  for  increase  of  capital,  1077. 


INDEFINITE  TERM, 

dissolution  of  partnership  by  express  will  of  single  partner,  573. 


INDEMNITY, 

assumption  on  dissolution,  676. 

conditions  precedent  to  action  by  retiring  partner,  564. 

costs  where  suit  commenced  by  one  partner  without  authority,  456. 

effect  of  contract  on  liability  of  partner  to  firm  creditors,  564. 

power  of  partnership  to  execute  contract,  268. 

provisions  against  individual  debts  in  partnership  contract,  1107. 

to  partner  for  loss  caused  by  copartner,  366. 

to  retiring  partner,  1134. 


INDIANA, 

profit  sharing  as  test  of  partnership,  55. 


1644  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

INDIVIDUAL  DEBTS, 

assumption  by  firm,  270. 

INDIVIDUAL  LIABILITY,  * 

for  debts  of  partnership,  28. 

INDORSEMENT, 

notes  by  single  partner,  427. 
to  transfer  firm  paper,  430. 

INFANTS, 

authority  of   agent  of  infant  to  bind  him  under  partnership  agree- 
ment, 199. 
capacity  as  partners,  188. 

continuance  of  business  for  infant  heirs  of  deceased  partner,  615. 
effect  of  misrepresentation  of  age  to  gain  admission  to  partnership,  188. 
election  to  avoid  contracts,  188. 
liability  as  partner  to  firm  creditors,  188. 
limited  partners,  1017. 
right  to  raise  question  personal  to  infant,  188, 


INFLUENCE, 

improper  use  by  partner,  393. 

INFORMATION, 

improper  use  by  partner,  393. 

provision  in  partnership  contract  regulating  giving  of  information,  1106. 

right  of  partner,  346,  347. 


INJUNCTION, 

against  conduct  of  competitive  business,  786. 
enforcement  of  judgment,  828. 
injury  to  firm  property  by  partner,  787. 
injury  to  good  will,  787. 
limited  partnerships,  1031. 
misuse  of  firm  property  by  partner,  786. 
wrongful  exclusion  of  partner,  786. 
between  partners,  780, 

to  prevent  breach  of  agreement,  781. 
to  prevent  change  in  business,  783. 
to  prevent  commencement  of  actions,  784. 
to  prevent  dissolution,  785. 


GENERAL    INDEX  1645 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

INJUNCTION— Co«/inM^J. 

to  restrain  change  in  application  of  profits,  782. 
in  action  involving  partnership,  823. 
interference  with  firm  business  by  partner,  787. 
remedy  in  action  for  accounting  and  dissolution,  720. 
to  prevent  interference  with  firm  business,  823. 


INSANE  PERSONS, 

capacity  as  partners,  189. 

dissolution  for  insanity  of  partner,  189,  583. 

one  partner  as  ground  for  assignment  for  creditors,  458. 

partner  as  ground  for  receivership,  721. 

powers  of  guardians,  189. 

temporary  insanity  to  dissolve  partnership,  583. 


INSOLVENCY, 

See   Application  of   Partnership   Assets;    Bankruptcy;    Dissolution; 
Receivers. 

dissolution  by  bankruptcy,  580. 

fact  to  put  purchaser  on  notice,  432. 

inability  to  pay  debts  as  act  of  bankruptcy,  702. 

limited  partner  as  creditor,  1034. 

limited  partnerships,  1023,  1024. 

power  of  partner  to  administer  firm  affairs,  598. 

power  of  surviving  partner  to  execute  assignment  for  creditors,  621. 

test  of  solvency  under  bankruptcy  laws,  686. 


INSPECTION, 

books  by  partners,  727,  910. 
notice  of  demand,  1143. 

INSTRUCTIONS  TO  JURIES, 

actions  involving  partnerships,  825. 

INSURANCE, 

authority  of  single  partner  to  consent  to  cancelation  or  surrender,  447. 

to  consent  to  settlement,  447. 
firm  property  by  single  partner,  447. 
insurable  interest  in  firm  property,  298. 
ownership  clause  in  policies,  299. 
partnership  property,  298-300. 
sale  of  policy  by  single  partner,  444. 


1646  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

INSURRECTION, 

validity  of  partnership  to  trade  in  states  in  insurrection,  172. 


INTENTION, 

basis  of  agreement  of  partnership,  43-47,  65,  66,  113,  213. 

element  of  partnership  ownership  of  property,  282. 

evidence  to  establish  partnership,  904. 

of  parties  in  construction  of  partnership  agreement,  386. 

proof  to  show  partnership  relation,  904. 

surrounding  circumstances  of  execution  of  articles  to  show  intention 

of  partners,  386. 
test  of  partnership  in  America,  88,  89. 

in  England,  87. 

under  civil  law,  (^,  90. 

INTERDICTS, 

See  Insane  Persons. 

INTEREST, 

accounting  on  death  of  partner,  636. 

charge  against  partner  after  dissolution,  601. 

effect  of  declarations  of  partner  as  affected  by  interest,  891,  892. 

insurable  interest  in  lives  of  partners,  298. 

liability  of  surviving  partner,  dZd. 

on  advances,  665,  668. 

to  joint  adventure,  986. 
on  money  borrowed  by  partner,  668. 
on  unwithdrawn  profits,  360. 
payment  as  creating  partnership  relation,  80. 
payment  on  dissolution,  668. 

provision  for  interest  on  capital  in  partnership  contract,  1079. 
right  of  partner,  359-363. 
settlement  of  joint  adventure,  986. 

INTERNAL  REVENUE, 

liability  of  good  will  to  assessment,  324. 

INTERSTATE  BUSINESS, 

partnership  liability  where  corporation  organized  in  one  state  to  do 

business  in  another  state,  249. 

INTOXICATING  LIQUORS, 

accounting  for  profits  of  illegal  dealing,  655. 

partnership  liability  for  violation  of  regulatory  laws,  518. 


GENERAL   INDEX  1647 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

'intoxicating  LIQVORS— Continued. 

rights  of  partner  to  accounting  where  license  in  name  of  deceased 

partner,  173. 
sales  by  unlicensed  partners,  200. 


•INTOXICATION, 

habitual  intoxication  of  partner  as  ground  for  dissolution,  585. 


INVENTIONS, 

See  Patents. 

right  to  use  inventions  of  partner,  277. 

sharing  profits  as  royalty  to  create  partnership  relation,  78. 

subject  of  joint  adventure,  980. 

transfer  consideration  for  stock,  232. 


IOWA, 

principle  of  equitable  conversion,  290. 

sharing  losses  as  test  of  partnership  relation,  71. 


ISSUES, 

proof  and  variance,  861. 

stock  of  joint  stock  company,  1055. 


ITALIAN  LAW, 

partnership  a  juristic  person,  122. 


JAPANESE  CODE, 

partnership  as  juristic  person,  122. 


JEWISH  LAW, 

conformity  of  ancient  to  modern  partnership,  3. 
earliest  Jewish  laws  of  partnership,  3. 
rescue  of  firm  property  from  robbers,  3. 
right  to  take  into  firm  follower  of  other  creed,  3. 

JOINDER, 

partners  in  bankruptcy  petition,  692. 


1648  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.1 

JOINT  ADVENTURE, 

abandonment  of  venture,  981, 
actions  between  adventurers,  748,  990,  991. 
actions  by  or  against  third  persons,  995. 
adventurer's  lien,  989. 
agreement  and  consideration,  976. 
contribution,  984. 
defined,  160,  975. 
dissolution,  988. 

distinguished  from  limited  partnerships,   1001. 
from  ordinary  partnership,  124,  160,  168. 
establishment  by  parol  agreement,  976. 
evidence  in  actions  between  adventurers,  994. 
form  of  agreement,  1180. 
good  faith,  341,  978. 

judgment  in  actions  between  adventurers,  994. 
limitation  of  actions,  992. 
nature  and  characteristics,  160. 
particular  cases,  977. 

parties  and  pleadings  in  actions  between  adventurers,  993. 
pooling  agreements,  977. 
power  to  bind  coadventurers,  980. 
property  involved,  979. 
repayment  of  capital,  357. 
right  to  profits,  982. 
set  off  in  actions,  992. 
settlement,  985,  987. 
sharing  losses,  983. 
syndicates,  977. 
termination  and  duration,  988. 


JOINT  AND  JOINT  AND  SEVERAL  CONTRACTS, 
defined,  489. 

judgment  against  or  settlement  with  one  partner  as  release  of  all,  499. 
liability  for  torts,  506. 
liability  of  partners,  489-495. 


JOINT  BONDS, 

partnership  liability,  490. 


JOINT  BUSINESS, 

common  ownership  of  profits  as  test  of  partnership,  67. 


GENERAL    INDEX  1649 

[References  are  to  sections— Vol.  I,  J§  1-608;  Vol.  II,  §§  615-1195.] 

JOINT  CONTRACTORS, 

levy  on  partner's  property  for  firm  debt,  497. 
liability  of  partners,  490. 

partnership  liability  on  defective  incorporation,  230. 
statutes  making  joint  obligations  joint  and  several,  496. 


JOINT  OWNERSHIP, 

as  creating  relation  of  partnership,  159. 
does  not  presume  partnership,  878. 
test  of  partnership,  159. 


JOINT  PURCHASE, 

distinguished  from  partnership,  124. 


JOINT  STOCK  COMPANIES, 

actions  by  or  against,  1058. 

agreements  limiting  liabihty,  147. 

articles  of  association,  constitution  and  by-laws,  1052, 

capital  stock,  1055. 

conditions  precedent  to  membership,  1053. 

definition,  1045. 

dissolution,  1059. 

distinguished  from  corporations,  1046. 

from  limited  partnerships,  1001. 

from  ordinary  partnerships,  1047. 

from  mining  companies,  1048. 
division  of  capital  stock,  1045. 
effect  on  creditors  of  change  of  membership,  540. 
election  of  officers,  1054. 

execution  of  contracts  by  officers  and  directors,  1057. 
issue  and  transfer  of  certificates,  1055. 
legal  status,  1049. 
liability  for  debts,  1045. 
meetings  and  election,  1054. 
membership  and  its  incidents,  1053. 
name,  1045. 

nature  and  characteristics,  147. 
no  delectus  personarum,  201. 
organization,  1054. 
origin  during  middle  ages,  6. 
parties  in  actions,  1058. 
personal  taxation  of  members,  1046. 


1650  GENERAL    INDEX 

[References  are    i  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

JOINT  STOCK  COMPANIES— CoMfmM^J. 
power  to  make  contracts,  1057. 
property  and  funds,  1056. 
similarity  to  mining  partnerships,  152. 
statutory  provisions,  1051. 
taxation,  943,  1050. 


JOINT  TENANCY, 

distinguished  from  partnership,  125. 


JUDGES, 

election  of  attorney  as  dissolution  of  his  law  firm,  577. 


JUDGMENTS, 

See  Decrees. 

actions  between  joint  adventurers,  994. 

between  partners,  772. 
admission  by  judgment  as  evidence,  893. 

against  one  joint  obligor  as  release  of  others,  492,  496,  507. 
application  of  firm  property  to  satisfaction,  533. 
assignment  by  surviving  partner,  620. 
by  default  against  firm,  826. 
collateral  attack  for  nonjoinder  of  parties,  796. 
collateral  attack  on  judgment  against  firm,  826. 
conclusiveness  in  accounting  and  dissolution  proceedings,  7ZZ. 
condition  precedent  to  injunction,  823. 
confession  by  single  partner,  457. 

after  dissolution,  599. 
dissolution  by  judicial  decree,  582. 

effect  of  purchase  of  judgment  against  firm  by  partner,  390. 
impeachment  for  fraud  in  confession  by  single  partner,  457. 
in  actions  involving  partnership,  826. 
injunction  against  enforcement,  828. 
merger,  496,  826. 

motion  for  judgment  on  pleadings,  864. 
power  of  single  partner  to  sell,  444. 
process  to  support,  826. 
rendition  against  individual  partners,  826. 
vacation  for  invalidity,  826. 
validity  where  partnership  sued  as  corporation,  824. 


GENERAL    INDEX  1651 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


JURISDICTION, 

action  for  accounting  and  dissolution,  716. 
bankruptcy  proceedings,  703. 


JUSTINIAN, 

code  as  basis  of  modern  partnership  law,  4. 


K 


KENTUCKY, 

tests  of  partnership  relation,  71. 


KINDS  OF  PARTNERS  AND  PARTNERSHIPS, 

See  Partners;  Partnership. 

clubs  and  societies,  157. 

defective  incorporations,  155. 

dormant  or  secret  partners,  139. 

general  classification,  135,  141. 

general  partners,  136,  143. 

joint  adventures,  160. 

joint  ownership  as  partnership,  159. 

joint  stock  companies,  146. 

legal  and  illegal  partnerships,  154. 

limited  partnerships,  146. 

loose  classification,  145. 

mining  partnerships,  152,  153. 

nominal  or  ostensible  partners,  138. 

partnership  associations,  148. 

partnership  by  representation,  158. 

silent  partners,  140. 

special  or  particular  partnerships,  144. 

special  partners,  137. 

sub-partnerships,  149,  170. 

trading  and  nontrading  partnerships,  151. 

unincorporated  associations,  156. 

universal  partnerships,  142. 


KNOWLEDGE, 

See  Notice. 

definition  in  uniform  partnership  act,  595. 

essential  to  validity  of  ratification  of  unauthorized  acts,  472. 


1652  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

L 

LACHES, 

bar  of  actions  by  representatives  of  deceased  partners,  836. 

bar  to  action  for  accounting,  718. 

effect  on  actions  between  partners,  765. 

ground  of  denial  of  right  to  question  settlement,  675. 

loss  of  right  to  object  to  defective  finding,  729. 

LANDLORD  AND  TENANT, 

See  Leases. 

partnership  relation  from  profit  sharing  as  payment  of  rental,  79. 

partnership  relation  under  Babylonian  law,  2. 

power  of  partnership  to  lease,  268. 

relation  distinguished  from  partnership,  126. 

renewal  of  leases  in  name  of  individual  partner,  394. 

tenancy  in  partnership  property,  293. 


LARCENY, 

firm  property  by  partner,  405. 


LAW  MERCHANT, 

basis  of  partnership  law,  6. 
entity  relation  of  partnership,  122. 


LEADING  CASES, 

Beecher  v.  Bush,  65,  89. 
Bloxham  v.  Pell,  36. 
Bullen  V.  Sharp,  45. 
Chaff^raix  v.  Lafitte,  66. 
Cox  V.  Hickman,  43,  44. 
Darby  v.  Darby,  623. 
Eastman  v.  Clark,  58-64. 
Grace  v.  Smith,  38. 
Harvey  v.  Childs,  85. 
Leggett  V.  Hyde,  54,  74. 
Lord  V.  Proctor,  53. 
Mason  v.  Eldred,  496. 
Meehan  v.  Valentine,  67. 
Mollwo  V.  Court  of  Wards,  46. 
Pellans  v.  Harkness,  775. 
Polk  V.  Buchanan,  88. 


GENERAL    INDEX  1653 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

LEADING  CASES— Continued. 
Smith  V.  Wright,  52. 
Trego  V.  Hunt,  317. 
Walden  v.  Sherburne,  52. 
Waugh  V.  Carver,  39,  40. 
Wilcox  V.  Wilcox,  624. 
Young  V.  Axtell,  37. 


LEASEHOLDS, 

as  part  of  good  will,  315. 
assignment,  1174. 

LEASES, 

See  Landlord  and  Tenant. 

evidence  to  establish  partnership,  924. 

execution  by  single  partner,  446. 

fraudulent  renewal  by  partner  as  ground  for  accounting,  715. 

individual  partner's  leases  taken  over  by  firm,  277. 

joint  and  several  liability,  496. 

renewal  by  partner  in  individual  name,  394. 


LEGACY, 

contribution  to  firm  capital,  278. 


LEGATEES, 

admission  into  firm,  1162. 


LENDING  NAME, 

effect  to  fix  partnership  relation,  39. 

LETTERHEADS, 

evidence  to  show  partnership,  887,  896. 

LEVY, 

See  Attachment;  Execution;  Process. 

attachment  or  execution  to  dissolve  partnership,  581. 

LEWIS, 

argument  for  uniform  act,  10. 

influence  in  codification  of  uniform  act,   10. 


1654  GENERAL    INDEX 


IReferenceg  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

LIBEL  AND  SLANDER, 
parties  to  action,  805. 
partnership  liability,  513. 

for  criminal  libel,  518. 
slanderous  remarks  about  competitors,  512. 


LICENSES, 

partnership  in  business  requiring  license,  200. 

right  to  recovery  in  actions  by  unlicensed  partnerships,  200. 


LIENS, 

See  Mortgages. 
adventurer,  989. 

creditors  without  liens  on  firm  assets,  526. 
for  advances  or  balances  on  dissolution,  669. 
judgment  against  firm,  827. 

not  prevented  by  receivership,  722. 
loss  of  lien  of  partner  on  assets,  554. 
partner's  lien,  371,  669. 

for  advances,  537. 


LIMITATION  OF  ACTIONS, 

accounting  and  dissolution,  718. 

action  against  surviving  partner,  643,  644. 

actions  between  partners,  766. 

between  joint  adventurers,  992. 
admissions  of  partner  to  take  matter  out  of  statute,  468,  927. 
against  trust  estates,  644. 

authority  of  partner  to  make  new  promise  after  dissolution,  600. 
defense  raised  by  only  one  member  of  firm,  824. 
time  when  firm  may  be  adjudged  bankrupt,  700. 


LIMITED  LIABILITY, 
special  partners,  137. 


LIMITED  PARTNERSHIPS, 

See  Special  Partnerships,  144. 

acknowledgment  of  certificate,  1009. 

actions  by  or  against,  1030. 

affidavit  of  payment  of  contribution  of  partner,  1011. 


GENERAL    INDEX  1655 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615r,LlS5.] 

LIMITED  PARTNERSHIPS— Co«^mM^(f. 
alteration  of  certificate,  1013. 

application  of  law  of  corporations  to  subject,  1001. 
assignment  for  creditors,  1033. 
causes  for  dissolution,  1035. 
certificate  of  partnership  contract,  1007. 
change  of  membership  and  nature  of  business,  1027. 
changing  general  to  limited  partnership,  1029. 
commencement  and  termination,  1014. 
construction  of  statutes,  1005. 
contents  of  certificate,  1008. 
contribution  of  partner,  1015. 

dealings  between  general  and  limited  partners,  1025. 
defined,  146,  1000. 

dissolution  by  change  of  membership,  1027. 
distinguished  from  joint  adventure,  1001. 

from  joint  stock  companies,  1001. 

from  other  partnerships,  1000. 
duration  set  out  in  certificate,  1014. 

effect  of  attempted,  98.  / 

effect  of  noncompliance  with  statute,  1021. 
estoppel,  1022. 

filing  and  recording  certificate,  1010. 
firm  name  and  sign,  1019. 
form  of  agreement,  1183. 
governed  entirely  by  statute,  1003. 
impairment  of  capital,  1028. 
infant  as  partner,  1017. 
injunctions,  1031. 
insolvency,  1023,  1024. 
kind  of  property  contributed,  1016. 
laws  governing  rights  of  partners,  1004. 
liability  of  partners  on  contracts,  1020. 
limited  partner  as  creditor,  1034. 
nature  and  characteristics,  146. 
nature  of  business  allowed  by  law,  1006. 
origin  and  history,  1002. 
pleadings,  1031. 

preferences  in  assignment  for  creditors,   1033. 
publication  of  notice,  1012. 
receivers,  1031. 
renewal,  146,  1026. 

rights  and  liabilities  of  partners,  1036. 
rights  of  creditors,  1032. 
rights  of  partners  on  dissolution,  1037. 

54 — Row.  ON  Partn. — Vol.  2 


1656  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

LIMITED  PARTNERSUIFS— Continued. 
services  of  limited  partner,  1015. 
use  of  word  "limited,"  1018. 
when  they  become  general  partnerships,  146- 


LINDLEY, 

definition  of  partnership,  25. 

influence  of  work  on  present  law  of  partnership,  8. 


LIQUIDATING  PARTNER, 

on  dissolution,  607. 


LITERARY  SOCIETIES, 

charter  not  broad  enough  to  organize  rifle  club,  247. 


LOANS, 

See  Borrowing  Money. 


LOBBYISTS'  SERVICES, 

validity  of  partnership  to  render  lobbyist  services,  173. 


LORD  ELDON, 

definition  of  good  will,  315. 


LOSSES, 

See  Profits  and  Losses. 

ground  for  dissolution,  588. 


LOTTERIES, 

accounting  between  partners  in  business,  655. 
validity  of  partnership  engaged  in  business,  172. 


LOUISIANA, 

tests  of  partnership,  66. 


LUMBER, 

manufacture  and  sale  subject  of  commercial  partnership,  426. 


GENERAL    INDEX  1657 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

M 

MAIL, 

carrying  subject  of  partnership,  426. 


MAJORITY, 

authority  to  contract,  416. 

provision  for  majority  rule  in  partnership  contract,  1111. 
without  power  to  change  articles  or  scope  of  business,  416. 
without  power  to  change  capital,  416. 


MALICIOUS  PROSECUTION, 
partnership  liability,  512. 


MALICIOUS  TORTS, 

partnership  liability,  512. 


MALPRACTICE, 

partnership  liability  for  malpractice  of  one  partner,  509. 


MANAGEMENT, 

right  of  participation  by  partner,  344. 


MANAGING  PARTNER, 

authority  to  bind  firm,  417. 

compensation,  350. 

execution  of  notes,  427. 

power  to  assign  for  creditors,  458. 

provision  in  partnership  contract,  1095. 

under  laws  of  middle  ages,  6. 

use  of  position  to  defraud  copartner,  384. 


MANUFACTURERS'  ASSOCIATIONS, 
members  not  partners,  167. 


MARRIAGE, 

necessity  of  notice  of  dissolution  for  marriage  of  female  partner,  594. 
woman  partner  as  ground  for  dissolution,  578. 


1658  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195-1 

MARRIED  WOMEN, 

See  Husband  and  Wife. 

capacity  as  partners,  190. 

dower  right  in  firm  property,  627. 

joinder  of  wives  of  partners  in  conveyances,  296. 

right  to  enter  into  partnership  with  another  than  husband,  191. 


MARSHALING  ASSETS, 

partnership  liability  on  joint  contracts,  497. 

rights  of  partnership  creditors  in  assets  of  individual  partners,  535. 


MARSHALL, 

views  of  Chief  Justice  on  agency  of  partners,  41. 


MASSACHUSETTS, 

principle  of  equitable  conversion,  290. 
rule  of  taxation,  940. 


MASTER  AND  SERVANT, 

effect  of  death  of  partner  in  firm  of  employers,  619. 
effect  on  employment  of  dissolution  of  firm,  619. 
negligence  of  partner  acting  as  firm  employe,  509. 
provision  in  partnership  contract  for  hiring  employes,  1105. 


MEASURE  OF  DAMAGES, 

See  Damages. 

MECHANICS  LIENS, 

authority  of  single  partner  to  perfect,  456. 
fraud  in  obtaining  release,  451. 
on  interest  of  partner  in  firm,  291. 


MECHEM, 

definition  of  partnership,  25n. 


MEETINGS, 

directors  of  joint  stock  companies,  1054. 

joint  stock  companies,  1053. 

provision  for  meetings  in  partnership  contract,  1090. 


GENERAL    INDEX  1659 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

MEHAN  V.  VALENTINE, 

common  ownership  of  profits  as  test  of  partnership,  67. 


MEMBERSHIP, 

See  Change  of  Membership;  Partners. 

joint  stock  companies,  1053. 


MERCANTILE  AGENCIES, 

reliance  on  reports  of  existence  of  partnership  relation,  476. 


MERCANTILE  PARTNERSHIP, 

See  Partnership. 
forms  of  agreements,  1149-1151. 


MERGER, 

individual  in  partnership,  28. 
judgments,  826. 

in  action  against  one  partner  on  joint  obligation,  496. 

MEXICAN  LAW, 

partnership  a  juristic  person,  122. 

MICHIGAN, 

rule  of  taxation,  941. 

MINES, 

partnership  in  sales,  168. 

MINING  PARTNERSHIP, 

creation  and  dissolution,  153. 
dissolution,  962,  1048. 

distinguished  from  joint  stock  companies,  1048. 
from  ordinary  trading  partnerships,  152. 
effect  of  death  of  partner,  579. 
nature  and  characteristics,  152. 
no  delectus  personarum,  201. 
origin  and  nature,  1048. 
sale  of  partner's  interest,  152. 


1660  GENERAL    INDEX 

[References  are  to  sections— Vol.  I.  §§  1-608;  Vol.  II,  §§  615-1195.1 

MINORITY, 

protection  on  change  to  corporation,  952. 
rights  in  firm  transaction,  416. 


MINORS, 

See  Infants. 


MISAPPROPRIATION, 

by  partner  of  goods  bought  for  firm,  445. 


MISCONDUCT, 

efifect  on  right  to  discharge  in  bankruptcy,  707. 
ground  for  appointment  of  receiver,  789. 
partner  as  ground  for  dissolution,  585. 


MISMANAGEMENT, 

ground  for  receivership,  721. 


MISREPRESENTATION, 

effect  between  partners,  384. 
effect  on   estoppel,  95-97. 


MISSISSIPPI, 

tests  of  partnership,  68. 


MISTAKE, 

ground  to  set  aside  private  settlement,  675. 
liability  of  partner  for  mistakes  of  judgment,  383. 


MOLLWO  V.  THE  COURT  OF  WARDS, 
intention  as  test  of  partnership,  46. 


MONOPOLIES, 

validity  of  partnership,  172. 


MONTANA, 

definition  of  partnership,  115. 


GENERAL    INDEX  1661 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  61S-119S.1 

MORALITY, 

partnership  in  matters  oflFending  morality,  173. 

MORTGAGES, 

See  Chattel  Mortgages. 

assent  of  partners  to  mortgage  on  firm  property,  301. 

assignment  to  firm  as  security  for  firm  debts,  443. 

bona  fide  holders  of  mortgage  on  firm  property,  442. 

by  one  partner  of  undivided  interest,  830. 

by  partner  of  separate  property  for  firm  debt,  537. 

execution  by  single  partner,  440-442. 

firm  property  by  partners,  529. 

form  of  mortgage  of  partner's  interest,  1176. 

of  firm  property  by  surviving  partner,  620. 

on  firm  property  in  individual  names  of  partners,  440n. 

on  interest  of  partner  in  firm,  291. 

partnership  equities  under  mortgage  given  by  single  partner,  302. 

partnership  property,  301-304. 

to  secure  individual  debt  of  partner,  441. 


MOTIONS, 

judgment  on  pleadings,  864. 


MUSICAL  CLUBS, 

not  strictly  partnerships,  166. 

MUTUAL  AGENCY, 

absence  from  crop  sharing  relation,  126. 
element  of  partnership,  85,  114,  151. 

MUTUAL  ASSENT, 

formation  of  partnership,  214. 

MUTUAL  DEBTS, 

set  off  in  actions  between  partners,  764. 


N 
NAMES, 

See  Firm  Name. 

absence  of  firm  name  under  ancient  Jewish  laws,  3. 

effect  of  doing  business  under  assumed  corporate  name,  249. 


1662  GENERAL   INDEX 

[References  are  to  sections— Vol.  I.  §§  1-608;  Vol.  II,  §§  615-1195.] 

NAMES — Continued. 

effect  of  doing  business  under  fictitious  corporate  name,  245. 
firm  containing  nominal  or  ostensible  partners,  138. 
joint  stock  companies,  1045. 


NEGLIGENCE, 

liability  of  firm  for  act  of  partner  dependent  on  scope  of  authority,  509. 
liability  of  joint  adventurers,  983. 
liability  af  partner,  382. 

loss  of  partner's  share  in  assets  by  negligence,  382. 
partnership  liability  generally,  509. 

right  of  partner  to  sue  firm  or  copartner  for  negligence  as  to  indi- 
vidual property,  368. 


NEGOTIABLE  PAPER, 

See  Bills  and  Notes. 


NET  AND  GROSS  PROFITS, 

fund  on  which  creditor  relies  for  payment,  59. 

net  profit  rule  criticized,  58. 

net  profit  rule  not  needed  to  prevent  fraud,  62. 

net  profit  rule  not  needed  to  reach  ostensible  partner,  64. 

net  profits  defined,  41,  982. 

test  of  partnership,  41. 


NEW  FIRMS, 

See  Change  of  Membership. 

NEW  PROMISE, 

authority  of  partner  after  dissolution,  600. 


NEWSPAPERS, 

advertisements  to  show  partnership,  887,  896. 
partnership  liability  for  libel,  513. 
partnership  relation  of  publishers,  71. 
publication  of  notices  of  dissolution,  596. 


NEW  YORK, 

law  governing  firm  name,  264. 

profit  sharing  as  test  of  partnership,  S4. 


GENERAL    INDEX  1663 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

NOMINAL  PARTNERS, 
definition,  920. 

evidence  to  establish  liability,  920,  921. 
liability  on  firm  contracts,  486. 
nature  and  character,  138. 
parties  defendant,  810. 
parties  plaintiff,  797. 


NONJOINDER, 

method  of  raising  question,  796. 


NONRESIDENCE, 

ground  for  attachment,  820. 


NONSURVIVORSHIP, 

origin  of  doctrine  under  law  merchant,  7. 


NONTRADING  PARTNERSHIP, 

agency  relation  of  partners,  412. 

authority  of  partner  to  execute  paper,  426. 

borrowing  money,  424. 

enumeration,  151. 

execution  of  notes  by  partners,  425. 

mortgage  by  single  member,  440. 

nature  and  characteristics,  151. 

power  of  single  partner  to  sell  property,  444. 

power  to  make  negotiable  paper,  426. 


NOTICE, 

actual  notice  under  uniform  partnership  act,  595. 
authority  of  partner  to  third  persons,  470. 
by  dormant  partner  of  dissolution,  594. 
character  of  notice  of  dissolution,  596. 
demand  for  inspection  of  business,  1143. 
desire  to  sell,  1140. 
dissolution,  594,  1144, 

by  publication,  596. 

of  firm  by  change  of  name,  596. 

of  firm  for  indefinite  term,  573. 
dissolution  of  limited  partnership,  1035. 
dissolution  under  uniform  partnership  act,  594. 
dormant  partners  to  creditors,  563. 


1664  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-119S.] 

NOTICE — Continued. 

duty  of  third  persons  to  take  notice  of  customs  and  usages,  414. 
fact  of  insolvency  as  notice  to  purchaser  of  firm  note,  432. 
facts  putting  bona  fide  purchaser  of  firm  paper  on  inquiry,  432. 
implied  notice  of  dissolution  from  notoriety,  596. 
intention  to  expel,  1142. 
to  purchase,  1141. 
to  withdraw,  1139. 
knowledge  of  restriction  on  partner's  authority,  418. 
limited  partnership,  1012. 
meaning  under  uniform  partnership  act,  595. 
meetings  of  joint  stock  companies,  1054. 
necessity  of  formal  where  there  is  actual  notice,  594. 
necessity  of  notice  of  dissolution  to  persons  without  knowledge  of 

partnership,  594. 
necessity  where  dissolution  from  marriage,  bankruptcy  or  war,  594. 
necessity  where  dissolution  is  by  operation  of  law,  594. 
oral  notice  of  restrictions  on  partner's  authority,  419. 
partnership  equities  under  mortgage  given  by  single  partner,  302. 
partnership  liability  on  failure  to  publish  notice  of  incorporation,  231. 
partnership  liability  where  corporation  defective  for  failure  to  publish 

notice,  237. 
persons  entitled  to  notice  of  dissolution,  596. 
proof  of  notice  of  dissolution,  926. 
publication  of  notice  of  dissolution,  596. 
redemption  from  tax  sale,  944. 
retirement  of  partner,  1145. 

retiring  partner  against  liability  for  future  debts,  563. 
sale  of  business,  1146. 

sufficiency  of  notice  of  dissolution  to  agent,  596. 
to  bind  purchaser  on  assumption  of  debts  of  old  firm,  558. 
to  firm  debtors  after  dissolution,  1147. 
to  partner,  468. 
trust  to  one  partner,  469. 
under  bankruptcy  laws,  691. 


NOVATION, 

change  of  membership  of  firm,  562. 


O 


OFFERS, 

necessity  of  acceptance  to  form  partnership,  214. 


GENERAL    INDEX  1665 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


OFFICE  EXPENSES, 

reimbursement  of  partner,  349. 


OFFICERS, 

joint  stock  companies,  1054. 

partnership  in  public  office,  174. 

pretended  officers  of  corporation  liable  as  partners,  246. 


OFFICIAL  AND  COURT  FEES, 

validity  of  partnership  to  purchase,  173. 

OLD  CUSTOMERS, 

right  of  retiring  partner  to  solicit,  317-319. 


OPTION, 

form  of  option  to  buy  partnership  property,  1177. 
partnership  in  transactions  involving  contracts,  168. 
subject  of  joint  adventure,  981. 


ORGANIZATION, 

joint  stock  companies,  1054. 


OSTENSIBLE  PARTNERS, 

nature  and  characteristics,  138. 
priority  of  creditors,  541. 


OUTLAWRY, 

actions  by  creditors  against  firm,  502. 


OVERDRAWING  ACCOUNTS, 

clause  in  partnership  contract,  1086. 


PARENT  AND  CHILD. 

provision  for  admission  of  partner's  son  into  firm,  1115,  1160. 


1666  GENERAL   INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II.  §§  615-1195.] 

PAROL  EVIDENCE, 

to  clear  ambiguities  in  partnership  articles,  881. 
to  establish  partnership,  886. 


PARSONS, 

definition  of  partnership,  25n. 


PARTICULAR  PARTNERSHIPS, 
nature  and  characteristics,  144. 


PARTIES, 

See  Bankruptcy. 

action  on  contract  made  in  name  of  one  partner,  802. 
actions  against  partnership  in  firm  name,  502. 
actions  between  joint  adventurers,  993. 
actions  by  or  against  joint  companies,  1057. 
actions  for  accounting  and  dissolution,  719. 
actions  involving  partnerships,  795. 
actions  on  joint  and  several  contracts,  492. 
collusion  of  third  parties  and  partners,  800. 
defendants  in  actions  against  firms,  806-813. 
dormant  and  nominal  partners  as  defendants,  810. 

as  plaintiffs,  798. 
equitable  suits  involving  partnerships,  815. 
executory  partnership  agreements,  221. 
inclusion  in  caption,  846. 
joinder  of  partners  in  actions  for  tort,  506. 
limited  partners,  1030. 
nominal  partners  as  plaintiffs,  797. 
nonjoinder  in  actions  in  tort,  812. 

on  contract,  811. 
one  partner  suing  for  all,  801. 

outgoing  and  incoming  partners  as  defendants,  809. 
plaintiffs  generally,  796. 

in  tort  actions,  805. 
plaintiffs  v^^here  firm  contract  assigned,  803. 
pleading,  845. 

proper  and  necessary  parties,  795. 
representatives  of  deceased  partner  as  defendant  808 
surviving  partner  as  plaintiff,  804. 
wife  as  party  defendant,  807. 
wrongdoing  partners  as  plaintiffs,  799. 


GENERAL    INDEX  1667 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


PARTITION, 

actions  between  partners,  757. 

firm  property  on  dissolution,  601,  672. 

real  estate  on  death  of  partner,  628. 


PARTNERS, 

administration  on  death  of  partner,  615-644. 

admission  of  new  partners,  1158,  1159. 

aliens,  186. 

apparent  scope  of  authority,  487. 

authority  after  dissolution,  925,  927. 

authority  of  agent  to  make  principal  member  of  firm,  199. 

capacity  generally,  185. 

of  infant,  188. 
change  of  limited  partnership,  1027. 
corporation  as  partner,  193-197. 
dealings  between  copartners,  399. 

between  partner  and  firm,  398. 
equality  of  power  in  management,  416. 
felons  and  convicts,  187. 
firm  as  creditor  of  individual  partner,  538. 
firms  requiring  license,  200. 
husband  and  wife,  191. 

individual  property  used  in  firm  business,  277. 
interest  in  firm  property,  291,  292. 
liquidating  partner  on  dissolution  of  firm,  607. 
married  women,  190. 
partnership  as  partner,  192,  268. 
power  of  managing  partner,  417. 
presumption  of  authority,  919. 

of  single  partner,  919. 
proportionate  shares  of  firm  property,  295. 
right  of  choice,  200. 

right  of  one  partner  to  bind  firm  under  laws  during  middle  ages,  6. 
rights  as  firm  creditor,  537. 

right  to  hold  membership  in  dififerent  firms,  397. 
right  to  possession  of  firm  property,  294. 
right  to  transfer  firm  property,  307. 
tenants  in  common,  198. 

title  of  property  in  partners  as  individuals,  283. 
transfer  of  firm  property  to  partner,  307. 
trustee  relation  toward  other  members  of  firm,  342. 
who  may  be  partners,  185-201. 


1668  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-119S.] 

PARTNERSHIP, 

See  Kinds  of  Partners  and  Partnerships. 

accounting,  settlement  and  distribution,  650-677. 

actions  between  partners,  740-789. 

actions  for  accounting  and  dissolution,  715-733. 

administration  of  affairs  after  death  of  partner,  615-644. 

agreements  for  formation  of  firm,  210-222. 

application  of  partnership  assets,  525-541. 

authority  of  partner  to  bind  firm,  43. 

Babylonian  law,  2. 

bankruptcy  of  partnership,  685-708. 

between  corporations,  25. 

between  Jew  and  unbeliever,  forbidden  by  Jewish  law,  3. 

by  estoppel,  49. 

by  representation,  158. 

capital  and  property,  275-307. 

change  of  membership,  550-564. 

change  of  partnership  to  corporation,  950-968. 

changing  general  to  limited  partnership,  1029. 

Chinese  law,  5. 

contracts  between  firms  having  common  partner,  420. 

creation  and  duration  of  relation,  223-225. 

definition,  25-28,  115. 

in  ancient  Roman  law,  4. 

in  English  Partnership  Act,  48. 
dissolution  of  partnership,  570-608. 

partnership  at  will,  573. 
distinguished  from  joint  stock  companies,  1047. 
duties  and  liabilities  of  partners  inter  sese,  380-405. 
essential  elements  and  nature,  110-128. 
evidence  in  actions  involving,  875-929. 
examples  of  commercial  partnerships,  426. 
executory  agreements,  221. 

existence  a  mixed  question  of  law  and  fact,  879. 
existence  as  issue  under  pleading,  854. 
existence  from  earliest  times,  1. 
firm  name,  260-266. 
good  will,  315-331. 
insurable  interest  in  property,  298. 
involves  trust  relation,  28. 
Jewish  law,  3. 
joint  adventures,  975-995. 
joint  stock  companies,  1045-1059. 
kinds  as  affecting  authority  of  partner  to  bind  firm,  412. 


GENERAL    INDEX  1669 

[References  are  to  sections— Vol.  I,  §§  1  -6C8;  Vol.  II,  §§  615-1195.] 

PARTNERSHIP— ConhnM^rf. 

land  purchased  by  partnership  dealing  in  real  estate,  285. 

law  merchant,  6. 

liability  of  partners  to  third  persons,  485-518. 

liability  of  partners  under  criminal  laws,  518. 

liability  on  defective  incorporation,  230-254. 

liability  to  third  persons  where  relation  does  not  exist,  901. 

limited  partnerships,  1000-1037. 

nature  of  partner's  interest  under  Uniform  Act,  12. 

pleading  in  actions  involving  partnership,  845-866. 

power  of  partner  to  bind  firm  in  contract,  410-476. 

powers  of  firm  as  a  whole,  267-270. 

priority  of  creditors  on  change  of  membership,  540. 

purchase  of  partner's  interest  by  third  party  not  effective  to  make  him 

member  of  firm,  552. 
purposes  and  subject-matter,  165-177. 
right  of  partner  in  firm  property,  345. 

rights  of  creditors  of  different  firms  having  common  partner,  539. 
rights  of  partners  inter  sese,  340-371. 
Roman  law,  4. 
status  after  dissolution,  592. 
suits  by  foreign  partnership,  863. 
taxation  of  firm  property,  306. 


PARTNERSHIP  ARTICLES, 

See  Articles  of  Partnership. 


PARTNERSHIP  ASSOCIATIONS, 
nature  and  characteristics,  148. 


PARTNERSHIP  CAPITAL  AND  PROPERTY, 

See  Capital  and  Property. 


PARTNERSHIP  FUNDS, 

clandestine  use  by  partner,  392. 


PARTNERSHIP  LIABILITY, 
general  aspects,  28. 
real  question  in  determining  partnership  relations,  27. 


1670  GENERAL    INDEX 

•[References  are  to  sections— Vol.  I,  §§  1-608;  Vol,  II,  §§  615-1195.] 

PARTNER'S  LIABILITY  TO  THIRD  PERSONS, 

actions  and  other  legal  measures  against  partnership,  502. 

actions  on  joint  and  joint  and  several  contracts,  493,  494. 

acts  against  positive  law,  SIS. 

apparent  scope  of  partner's  authority,  487. 

commencement  and  termination  of  partnership  liability,  498. 

contracts  binding  on  partnership,  486 

conversion,  511. 

criminal  liability,  518. 

dormant  partners,  500. 

effect  of  death  of  joint  contractor,  492. 

extent  of  partnership  liability  in  contract,  497. 

fraudulent  misrepresentations,  508. 

incoming  partner's  liability  for  prior  firm  debts,  498. 

joint  and  several  contracts  distinguished,  489. 

judgment  against  or  settlement  with  one  partner  to  release  all,  499. 

liability  in  tort  generally,  503-518. 

liability  of  joint  obligors,  490. 

liability  of  partners  on  firm  contracts,  495,  496. 

libel  and  slander,  513. 

misapplication  of  trust  funds,  517. 

nature  of  liability  of  partner  in  contract,  488. 

negligence  generally,  509. 

property  wrongfully  obtained,  516. 

recovery  by  creditor  on  firm  negotiable  paper,  501. 

release  of  one  as  release  of  all  partners,  507. 

release  of  one  joint  obligor  as  release  of  all,  491. 

torts  in  collection  of  debts,  514. 

trespass,  510. 

wilful  and  malicious  torts,  512. 


PARTNER'S  POWER  TO  BIND  FIRM, 

accommodation  paper,  427. 

acknowledgments  and  affidavits,  453. 

acts  creating  individual  liability,  465. 

acts  which  prevent  accomplishment  of  purposes  of  partnership,  415. 

admissions  and  representations,  466-468. 

after  dissolution,  438,  592-608. 

alteration  of  contracts,  452. 

alteration  or  renewal  of  note,  437. 

appointment  of  agents,  448. 

arbitration,  459-462. 

assignment  for  creditors,  458. 

authority  based  on  agency,  411. 

bona  fide  purchasers  of  paper,  429. 


GENERAL    INDEX  1671 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PARTNER'S  POWER  TO  BIND  FIRM— Continued. 

of  firm  mortgages,  442. 
borrowing  money,  424. 
collection  and  payment  of  debts,  450. 
confession  of  judgment,  457. 

contracts  between  firms  having  common  partner,  420. 
contracts  requiring  consent  of  all  partners,  415. 
customs  and  usages  as  affecting  authority,  414. 
dormant  partners,  464. 
employment  of  servants,  449. 
estoppel  to  question,  475,  476. 
execution  of  instruments  under  seal,  422. 
firm  liability  on  individual  note  of  partner,  433. 
firm  signature,  421. 

form,  437. 
fraudulent  transfer  of  paper,  431. 
individual  contracts  of  partners,  419. 
institution  of  litigation,  456. 
insurance  of  firm  property,  447. 
kind  of  partnership  as  affecting  authority,  412. 
lease  of  property  for  firm,  446. 
managing  partner,  417. 
mortgage  of  firm  property,  440. 

to  secure  individual  debt,  441. 
negotiable  paper,  425,  426. 
notes  as  discharging  debt,  434. 

notice  of  authority  of  partner  as  affecting  rights  of  third  parties,  470. 
notice  to  partner,  469. 

payment  of  individual  debt  from  firm  assets,  455. 
pledge  of  firm  property,  443. 
power  of  majority,  416. 
power  over  partnership  realty,  463. 
power  to  give  firm  note  for  individual  debt,  435. 
power  to  incur  firm  debt,  423. 
power  to  make  sealed  note,  436. 
presentment  and  protest,  439. 

presumptions  as  to  firm  notes  given  by  one  partner,  428. 
purchase  of  property,  445. 
ratification  of  acts  of  partner,  471-474. 
releases,  settlements  and  compromises,  451. 
restrictions  on  authority,  418. 
sale  of  firm  property,  444. 
scope  of  business,  413. 
suretyship  and  guaranty,  454. 
transfer  of  firm  paper,  430. 
what  will  put  purchaser  of  partnership  paper  on  inquiry,  432. 

55 — Row.  ON  Partn. — Vol.  2 


1672  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PARTNER'S  RELATIONS  INTER  SESE, 

arbitration  of  dififerences  between  partners,  370. 

bad  judgment,  383. 

compensation  for  services  for  firm,  350. 

after  dissolution,  352. 
compensation  for  services  rendered  in  other  capacity  than  partner,  355. 
compensation  to  surviving  partner,  353. 
compensation  where  services  are  unequal,  351. 
construction  of  partnership  agreement,  386. 
crimes  against  firm,  405. 
dealings  between  copartners,  399. 

between  partner  and  firm,  398. 
diversion  of  profits  from  copartner,  391. 
duty  of  good  faith,  341,  342,  381. 
duty  to  conform  to  partnership  agreement,  385. 
duty  to  consult  on  firm  matters,  402. 
duty  to  devote  time  and  skill  to  business,  387. 
duty  to  estate  of  copartner,  403. 
duty  to  keep  partnership  accounts,  388. 
duty  to  secure  personal  benefits  belonging  to  firm,  389. 
entering  into  competitive  business,  396. 
fraud  as  to  firm  or  copartner,  384. 
good  faith  in  purchase  of  copartner's  interest,  40Q 
implied  contract  for  compensation,  354. 
indemnity  from  loss  caused  by  copartner,  366. 
information  received  by  partner,  347. 
liability  for  torts,  404. 
lien,  371. 
negligence,  382. 

participation  in  management,  344. 
partner  failing  or  refusing  to  perform  services,  356. 
partnership  in  different  firms,  397. 

purchase  of  claim  or  title  against  firm  or  partner,  390. 
reimbursement  for  expenses,  349. 
renewing  leases  or  contracts  in  individual  name,  394. 
repayment  of  advances,  358. 

of  capital,  357. 
rights  in  firm  property,  345. 
right  to  conduct  other  business,  348. 

to  contribution,  364,  365. 

to  information  about  business,  346. 

to  interest,  359-363. 

to  keeping  of  accounts  and  accounting,  369. 

to  subrogation,  367. 

to  sue  firm  or  copartner  for  negligence  as  to  individual  prop- 
erty, 368. 


GENERAL    INDEX  1673 

■     [References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PARTNER'S  RELATIONS  INTER  SESE— Continued. 
secret  commissions,  395. 
secret  use  of  partnership  funds,  392. 
sharing  outlays  and  losses,  401. 
sharing  profits,  343. 
use  of  influence  or  information,  393. 


PART  PERFORMANCE, 

sale  of  lands  by  realty  firm,  219. 


PATENTS, 

clause  in  contracts  relating  to  property  in  patent,  1078. 
contribution  on  purchase  of  worthless,  364. 
partnership  in  letters  patent,  217. 
partnership  in  manufacture  of  patented  article,  216. 
property  in,  279. 

PAWNBROKERS, 

partnership  requiring  license,  200. 

PAYMENT, 

application  of  payments  on  firm  debts  after  change  of  membership,  562. 

authority  of  partner  to  accept,  450. 

claim  against  firm  by  purchase  by  partner,  390. 

firm  debts  by  single  partner,  450. 

individual  debts  with  firm  assets,  455. 

partner  after  dissolution,  602. 

to  and  by  surviving  partner,  622. 


PECUNIARY  PROFIT, 

associations  for  purpose  other  than  pecuniary  profit,  166. 
purpose  of  partnership,  165. 

PENALTIES, 

violation  of  statutes  governing  firm  names,  262. 


PENNSYLVANIA, 

first  state  to  adopt  Uniform  Partnership  Act,  53. 
test  of  profit  sharing  to  determine  partnership,  53. 


1674  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PERSONAL  PROPERTY, 

conversion  of  realty  on  death  of  partner,  623,  624. 
lands  for  sale  by  real  estate  firm,  218. 
mortgage  of  partnership  personalty,  304. 
partner's  interest  in  firm  property,  552. 
when  partnership  realty  so  considered,  281. 


PERSONAL  REPRESENTATIVE, 

rights  in  firm  property  on  decease  of  partner,  627. 


PERSONAL  SKILL, 
as  good  will,  323. 


PERSONS, 

partnerships  under  special  statutes,  121. 
term  includes  partner  under  uniform  act,  123. 


PETITION, 

See  Pleading. 


PHYSICAL  INCAPACITY, 

ground  for  dissolution,  584. 


PHYSICIANS, 

business  subject  of  partnership,  426. 

damages  for  breach  of  partnership  agreement,  768. 

disposal  of  good  will  of  business,  331. 

employment  by  single  member  of  firm,  449. 

evidence  to  show  partnership  relation,  901. 

partnership  liability  for  malpractice  of  one  partner,  509. 


PLACE, 

See  Venue. 

authority  of  single  partner  to  change  place  of  payment  of  note,  437. 
clause  in  contract  governing  place  of  business,  1071. 
commencement  of  bankruptcy  proceedings,  703. 
implied  disposal  of  good  will  by  sale  of  place  of  business,  328. 
taxation  of  partnership  property,  306,  937-939. 


GENERAL    INDEX  1675 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PLAINTIFFS, 

See  Parties. 

PLEADING, 

action  by  partner  for  accounting,  850. 

action  by  partner  for  dissolution,  850. 

action  for  breach  of  noncompetitive  agreement,  8SL 

actions  between  joint  adventurers,  993. 

actions  between  partners,  767. 

actions  involving  limited  partnerships,  1031. 

allegation  of  partnership  relation,  848. 

answers  generally,  854. 

in  actions  between  partners,  855. 
attachment  of  exhibits,  850. 
averments  as  to  parties,  845. 

names  of  firm  in  petition,  795. 
caption,  846. 
complaint  against  partnership,  848. 

against  surviving  partner,  849. 

in  suits  between  partners,  850. 
compliance  with  formalities,  847. 
cross-complaints,  856. 

cure  of  defect  in  parties  by  amendment,  796. 
defenses  in  suits  between  partners,  858. 
demurrer,  863. 

to  raise  question  of  proper  parties,  796. 
denial  of  existence  of  partnership,  854. 
departure,  860. 

effect  of  pleading  irrelevant  matters,  853. 
extent  of  defense,  857. 
form  of  captions,  1187. 

of  answers,  1194,  1195. 
in  former  cases  as  evidence,  894. 
legal  conclusions,  852. 
material  matters,  853. 
motion  for  judgment  on  pleadings,  864. 
partnership  relation  in  complaint,  847. 
petition  for  accounting,  1188. 

for  dissolution,  1189. 
proof  and  variance,  861. 
questions  for  court,  825. 
reply,  859. 

separate  pleading  by  one  partner,  862. 
some  particular  examples,  851. 
summons,  865. 
verification,  851,  866. 


1676  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PLEA  IN  ABATEMENT, 

method  of  raising  question  of  proper  parties,  796. 


PLEDGE, 

firm  credit  by  single  partner,  455. 

firm  property  by  single  partner,  443. 

firm  property  by  survivor,  620. 

firm  property  for  individual  debt,  443. 

provision  in  contract  for  pledging  credit,  1102. 


POLICIES, 

See  Insurance, 

POLLOCK, 

definition  of  partnership,  25n. 


POOLING  AGREEMENTS, 
nature,  977. 


PORTUGUESE  LAW, 

partnership  a  juristic  person,  122. 


POSSESSION, 

firm  property  as  among  partners,  294. 


POSTOFFICE, 

carrying  mail  subject  of  partnership,  426. 


POWERS, 

See  Partner's  Power  to  Bind  Firm. 


POWERS  OF  FIRM  AS  A  WHOLE, 

assumption  by  firm  of  partner's  individual  debts,  270. 
general  powers,  268. 
parties  to  deeds,  269. 
scope  of  partnership,  267. 


GENERAL    INDEX  1677 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PREFERENCE, 

creditors  by  estoppel,  541, 
creditors  by  limited  partnership,  1023,  1032. 
creditors  in  cases  of  ostensible  partnership,  541. 
assignment  for  creditors  by  limited  partnership,  1033, 
firm  creditors  in  partnership  assets,  534. 
individual  creditors  in  partner's  separate  estate,  536. 
right  should  not  make  creditor  a  partner,  60. 
under  bankruptcy  laws,  693. 


PREJUDICIAL  CONDUCT, 

ground  for  dissolution,  585. 

PRELIMINARY  AGREEMENTS, 
actions  on,  747. 

PREMIUM, 

for  admission  to  firm,  215. 

PRESENTMENT, 

power  of  single  partner,  439. 

access  to  firm  books,  915. 

authority  of  partner,  919. 

continuance  of  partnership  relation,  570,  878. 

correctness  of  firm  books,  727. 

equal  interest  of  partners,  878. 

execution  of  firm  contracts  in  individual  name  of  partners,  421. 

execution  of  note  in  furtherance  of  firm  business,  428. 

firm  liability  on  notes,  876. 

firm  note  given  by  single  partner,  428. 

firm  ownership  of  property,  689. 

joint  contracts,  494. 

liability  for  debts  on  change  to  corporation,  960. 

partnership  matters  generally,  878. 

partnership  relation  from  sharing  profits,  70. 

power  of  partner  to  execute  paper,  426. 

profits  of  joint  adventure,  994. 

purchase  of  property  with  firm  funds,  275. 

sharing  losses  from  agreement  to  share  profits,  71, 

that  partners  are  agents  of  the  firm,  852. 

that  partners  contribute  equally,  275. 

title  of  realty  deeded  to  firm,  624. 


1678  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


PRIMITIVE  CIVILIZATION, 
existence  of  partnerships,  1. 


PRINCIPAL  AND  AGENT, 

See  Agency. 

mutual  agency  as  test  of  partnership,  85. 
partnership  relations,  28. 


PRINCIPAL  AND  SURETY, 

See  Suretyship. 


PRINCIPAL  TRADER, 

test  of  partnership,  86. 


PRIORITIES, 

See  Application  of  Partnership  Assets. 

creditors  where  business  continued  by  receivers,  823. 


PRIVATE  SETTLEMENT, 
conclusiveness,  675. 
firm  affairs,  675. 


PROCEDURE, 

See  Actions;  Bankruptcy. 

proceedings  for  accounting  and  dissolution,  723. 


PROCESS, 

actions  against  joint  stock  companies,  1058. 

actions  involving  partnerships,  817,  865. 

actions  on  joint  or  joint  and  several  obligations,  493. 

inclusion  of  names  of  all  partners,  817. 

liability  on  issuance  and  service  of  void  w^rit,  505. 

new  summons  on  amendment  of  pleading,  866. 

service  by  publication,  817. 

sufficiency  of  service,  817. 

use  of  firm  name,  796. 


GENERAL    INDEX  1679 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.J 


PROFESSIONAL  PARTNERSHIPS, 

forms  of  partnership  agreements,  1152. 
good  will,  331. 


PROFITS  AND  LOSSES, 

accounting  for  profits  from  independent  transactions,  654. 

for  profits  on  death  of  partner,  636. 

for  profits  in  competitive  business,  654. 

for  secret  profits,  652,  653. 
additions  of  profits  to  capital,  673. 

common  ownership  of  profits   in  joint  business  as   test  of   partner- 
ship, 67. 
determination  for  purposes  of  distribution,  662. 
division  of  profits  on  dissolution,  673,  674. 
duty  of  partner  to  share  outlays  and  losses  of  firm,  401. 
exceptions  to  rule  of  profit  sharing  as  test  of  partnership,  74. 
ground  for  dissolution  that  business  carried  on  at  loss,  588. 
injunction  to  prevent  misapplication  of  profits,  782. 
in  what  firm  profits  consist,  673. 
joint  adventures,  982,  983. 

liability  of  partner  for  diversion  of  profits  from  copartner,  391. 
loss  of  right  to  share  in  profits,  674. 

majority  without  power  to  change  application  of  profits,  416. 
modified  statement  of  profit  sharing  test,  83. 
mutual  agency  as  test  of  partnership  relation,  85. 
partnership  in  sales  of  real  estate,  169. 
partner's  right  to  share,  343. 
principal  trader  test  of  partnership  relation,  86. 

profits  as  measure  of  damages  for  breach  of  partnership  agre-ement,  769. 
profits  dependent  upon  payment  of  debts,  40. 
profit  sharing  as  evidence  of  partnership,  104,  897-900. 

as  interest,  80. 

as  payment  of  rental,  11 . 

as  test  of  partnership,  36-40,  42,  51-64. 
profits,  how  determined,  40. 

provision  for  division  in  partnership  contract,  1083. 
provision  for  guaranty  of  profits  in  partnership  contract,  1084. 
right  of  partner  to  share  profits,  343. 
right  to  demand  accounting,  82. 

as  fixing  partnership  relation,  82. 
right  to  profits  in  another  firm  to  which  partner  belongs,  397. 
sharing  as  element  of  partnership.  111,  112. 
sharing  gross  receipts  as  test  of  partnership,  81. 
sharing  losses  alone  as  test  of  partnership  relation,  IZ. 
sharing  losses  only  as  test  of  partnership,  IZ. 


1680  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  61S-119S.] 

PROFITS  AND  LOSSES— CoM^mw^d 

sharing  prima  facie  but  not  conclusive  evidence  of  partnership,  48. 
sharing  profits  as  compensation  for  services,  75. 

as  a  royalty,  78. 

as  compensation  eo  nomine,  76. 

as  fee  or  commission,  77. 

feature  of  earliest  form  of  partnership,  1. 

under  ancient  Jewish  laws,  3. 

under  ancient  Roman  law,  4. 

under  Babylonian  law,  2. 
sharing  profits  but  not  losses  as  test  of  partnership  relation,  70. 
sharing  profits  of  crime,  172. 
subject  of  articles  of  partnership,  211. 
tests  of  partnership,  69-80,  881. 

under  Uniform  Partnership  Act,  84. 
tests  of  partnership  relation  dependent  on  net  and  not  gross  profits,  41. 


PROMOTERS, 

agreement  with  partners  to  form  corporation,  1183. 
partnership  liability,  244. 

PROOF, 

See  Evidence. 

debts  under  bankruptcy  laws,  694,  697,  698. 


PROPERTY, 

See  Capital  and  Property;  Personal  Property;  Real  Estate. 

alienation  on  death  of  partner,  620. 

control  on  death  of  partner,  617. 

involved  in  joint  adventure,  979. 

joint  stock  companies,  1056. 

power  of  partner  over  property  after  dissolution,  601. 

subject  of  accounting,  659. 

PROSPECTUS, 

liability  for  misstatements,  980. 

PROSTITUTION, 

accounting  for  profits  in  business,  655. 

validity  of  partnership  to  rent  houses  for  purpose,  173. 


GENERAL    INDEX  1681 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

PROTEST, 

notice  to  one  partner,  469. 
power  of  single  partner,  439, 


PUBLICATION, 

See  Notice. 

notice  of  dissolution,  596. 
service  of  process  on  firm,  817, 


PUBLIC  LANDS, 

accounting  for  profits  of  illegal  dealing,  656. 

partnership  in  lands,  276. 

validity  of  partnership  to  deal  in  mineral  lands  in  public  domain,  172. 


PUBLIC  OFFICE, 

partnership  in  office,  174. 


PUBLIC  POLICY, 

defense  in  actions  between  partners,  161. 
partnership  against  public  policy  void,  171. 


PUBLIC  WELFARE, 

partnership  in  matters  against  public  welfare,  173. 
PURCHASES, 

by  single  partner,  445. 


PURPOSE  OF  PARTNERSHIP, 

See  Subject-Matter  of  Partnership. 
clause  in  contract  stating  purposes  of  partnership,  1072. 


Q 


QUASI-CORPORATIONS, 

joint  stock  companies,  1045,  1046. 
partnership  under  uniform  act,  123. 


1682  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

QUESTIONS  OF  LAW  AND  FACT, 
partnership  existence,  879. 
partnership  relation,  877. 
pleadings  question  for  court,  825. 
test  of  partnership,  103. 


R 

RAILROADS, 

See  Carriers. 

partnership  liability  of  purchasers  at  execution  sale,  253. 
partnership  liability  under  interchange  of  traffic  contracts,  196. 

RATIFICATION, 

acts  of  partner,  471. 

beyond  scope  of  business,  413,  924. 

by  failure  to  repudiate,  473. 

by  receipt  of  benefits,  472. 
appointment  of  agent  by  single  member  of  firm,  448. 
authority  of  surviving  partner  to  act  as  agent,  597. 
by  infant  partner,  188. 

by  principal  of  agent's  assent  to  partnership,  214. 
by  retiring  partner,  474. 

contracts  between  firms  having  common  partner,  420.. 
execution  of  paper  after  dissolution,  605. 
execution  of  sealed  instrument  by  single  partner,  422. 
firm  liability  for  ratified  acts,  485. 
firm  note  given  for  partner's  individual  debt,  435. 
fraudulent  misrepresentations  of  partner,  508. 
parol  adoption  of  unauthorized  act  of  one  partner,  471. 
partnership  agreement,  884. 

submission  to  arbitration  by  single  partner,  461. 
torts  of  one  member  of  firm,  509. 
unauthorized  agreements  of  agents,  199. 
unauthorized  confession  of  judgment,  457. 
unauthorized  contract  of  guaranty  or  suretyship,  454. 
unauthorized  execution  of  paper,  425. 
unauthorized  mortgage  by  member  of  firm,  301. 

REAL  ESTATE, 

See  Mortgages. 

as  partnership  property,  281,  285-287. 

business  of  sale  subject  of  commercial  partnership,  426. 


GENERAL    INDEX  1683 

IReferences  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-119S.] 

REAL  ESTATE— Continued. 

conveyance  of  firm  realty  by  single  partner,  415. 
conveyance  to  partnership  in  fictitious  firm  name,  284. 
dealing  subject  of  partnership,  169. 
descent  on  death  of  partner,  627. 
duty  to  include  in  accounting,  658. 

firm  realty  subject  to  payment  of   debts   on   exhaustion   of  person- 
alty, 626. 
fraudulent  misrepresentations  in  sale  by  partner,  508. 
intention  as  test  of  partnership  ownership,  282. 
joint  purchase  not  a  partnership,  169. 
ownership  by  joint  stock  company,  1056. 

parol  agreements  for  partnership  to  deal  in  real  estate,  218,  219. 
partition  between  partners,  757. 

partnership  in  deahng  dependent  on  intention  of  parties,  169. 
partnership  in  option  transactions,  168. 
partnership  in  single  transaction,  168. 

partnership  relations  dependent  on  sharing  profits  and  losses,  169. 
personalty  where  held  by  partners  as  tenants  in  common,  281. 
power  of  single  partner  over  realty,  463. 

to  sell  firm  realty,  444. 
right  of  partnership  to  take  title,  118. 
rights  of  heirs  and  surviving  partner  in  surplus  realty,  628. 
status  on  death  of  partner,  623-629. 
title  in  firm  name,  284. 
title  of  partners  as  individuals,  283. 
unauthorized  sale  outside  scope  of  firm  business,  413. 


RECEIPTS, 

authority  of  single  partner  to  give,  451. 
after  dissolution,  602. 


RECEIVERS, 

appointment  as  equivalent  of  assignment  for  creditors,  823. 
appointment  at  request  of  creditors,  721. 

in  actions  between  partners,  788,  789. 
appointment  in  action  for  accounting  and  dissolution,  721. 

in  actions  involving  partnership,  823. 
appointment  to  prevent  waste,  789. 

appointment  to  wind  up  partnership  on  death  of  partner,  616. 
appointment  where  dissolution  not  asked,  788. 
collection  of  indebtedness  to  firm,  727. 
death  of  partner  as  ground,  721. 


1684  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

RECEIVERS— Con  h'nM^rf. 

discretion  of  court  to  appoint  in  action  for  accounting,  721. 
duties  in  accounting  and  dissolution  proceedings,  722. 
duty  as  to  continuing  business,  823. 

to  account,  722. 
for  limited  partnerships,  1031. 

grounds  for  appointment  in  action  for  accounting,  721. 
insanity  of  partner  as  ground,  721. 
mismanagement  as  ground,  721. 
partnership  to  save  good  will,  327. 
power  to  carry  on  firm  business,  722, 
receivership  as  dissolution,  297. 
right  to  possession  by  receiver  of  one  partner,  294. 
right  to  sue,  722. 
sale  of  good  will,  327. 
trustees  for  all  partners,  722. 


RECOGNITION. 

effect  to  bind  new  firm  for  old  firm's  debts,  558. 


RECORD, 

certificate  of  limited  partnership,  1010. 
in  former  cases  as  evidence,  894. 
partnership  articles,  885. 


REDEMPTION, 

from  tax  sales,  944. 


REFERENCE, 

actions  for  accounting  and  dissolution,  725. 


REFORMATION, 

partnership  contract,  778. 


REFORM  CLUBS, 

members  not  partners,  166. 


REFRIGERATORS, 

manufacture  subject  of  commercial  partnership,  426. 


GENERAL    INDEX  1685 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 


REGISTRATION, 

firm  names,  262,  263. 
universal  partnerships,  142. 


REIMBURSEMENT, 

advances  made  by  partner,  358. 
partner  for  expenses,  349. 

/ 
RELEASE, 

by  payment  of  specific  share  of  partner,  491. 

covenant  not  to  sue,  491. 

effect  of  consent  on  release  of  all  by  release  of  one,  491. 

execution  by  single  partner,  451. 

judgment  against  one  partner  to  release  all,  499,  507. 

necessity  of  release  under  seal,  491. 

one  joint  debtor  as  release  of  all,  491. 

payment  of  proportion  of  debt  by  partner,  497. 

provision  in  partnership  contract  for  release  of  debts,  1104. 

RELIANCE, 

element  of  estoppel,  476. 


RELIGIOUS  SOCIETIES, 

members  not  partners,  166. 

partnership  of  members  in  building  church,  144. 

REMEDIES, 

See  Actions. 

RENEWAL, 

continuance  of  partnership  where  business  not  concluded,  225. 

firm  leases  and  contracts  by  individual  partners,  394. 

firm  notes  by  partner,  437. 

limited  partnerships,  1026. 

notes  after  dissolution,  925. 

partnership,  225. 


RENT, 

See  Landlord  and  Tenant;  Leases. 

provision  in  contract  for  payment  to  partner,  1080. 
reimbursement  of  partner,  349. 


1686  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

RENTALS, 

sharing  as  creating  partnership  relation,  79. 


REPAIRS, 

reimbursement  of  partner,  349. 

REPLEVIN, 

action  between  partners,  759. 


REPLY, 

pleadings  involving  partnerships,  859. 


REPRESENTATIONS, 
as  evidence,  890-892. 
by  single  partner  to  bind  firm,  466-468. 


REPUDIATION, 

ratification  by  failure  to  repudiate,  473. 


REPUTATION, 

proof  to  show  partnership  relation,  910. 


RESCISSION, 

annulment  of  partnership,  590. 

authority  of  single  partner  to  rescind  firm  contract,  452. 

partnership  contract,  775. 

party  dealing  with  corporation  believing  it  a  partnership,  253. 


RESIDENCE, 

to  determine  venue,  816. 


RESTRAINT  OF  TRADE, 

partnership  in  contracts,  172. 


RETIRING  PARTNER, 

actions  on  indemnity  contracts,  564. 

firm  liability  on  breach  of  agreement  to  assume  firm  obligation,  564. 


GENERAL   INDEX  1687 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.J 

RETIRING  PARTNER— Continued. 
fraud  in  settlement,  554. 
liability  for  obligations  of  old  firm,  356. 

on  obligations  of  new  firm,  563. 
notice  of  retirement  of  partner,  1145. 
retirement  as  dissolution,  550. 
right  in  assets  of  old  firm,  554. 
rights  in  assets  on  distribution,  554. 
right  to  enter  into  employ  of  competitor,  321. 
surety  on  obligations  of  old  firm,  558. 

REVENUE, 

See  Taxation. 

REVENUE  LAWS, 

partnership  liability  for  violation,  518. 


RHODE  ISLAND, 

modification  of  joint  liability  rule,  496. 


ROMAN  LAW, 

classification  of  partnerships,  142. 
general  partnerships,  143. 
intention  as  test  of  partnership,  90. 
kinds  of  partnerships  recognized,  4. 
law  of  partnership,  4. 
partnership  not  an  entity,  122. 
universal  partnerships,  142. 


ROUMANIAN  LAW, 

partnership  a  juristic  person,  122. 

ROYALTY, 

sharing  profits  as  royalty,  78. 

RUSSIAN  LAW, 

partnership  a  juristic  person,  122. 


S 

SALARIES, 

provisions  for  payment  in  partnership  contract,  1096. 

56 — Row.  ON  Partn. — Vol.  2 


1688  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

SALES, 

agreements  for  purchase  of  shares  on  retirement  of  partner,  1163. 
dissolution  by  transfer  of  partner's  interest,  591. 
effect  of  transfer  of  partner's  interest  to  copartner,  551. 
firm  property  after  dissolution,  601. 

by  single  partner,  444. 
good  will  at  involuntary  sale,  321. 
good  will  in  absence  of  restrictive  covenants,  316. 
implied  disposal  of  good  will  by  sale  of  place  of  business,  328. 
interest  of  partner  in  firm,  291,  292. 
notice  by  partner  of  desire  to  sell,  1141. 
notice  of  sale  of  firm  business,  1146. 

partnership  realty  by  surviving  partner  to  pay  individual  debt,  626. 
power  of  single  partner  to  sell  firm  property,  444. 

provision  in  partnership  contract  for  sale  of  partner's  interest,   1113, 
right  of  purchaser  of  partner's  interest  to  enter  firm,  552. 
secret  profits  on  sales  by  partner,  652. 
transfer  of  firm  property  to  partner  or  new  firm,  531. 
transfer  of  partner's  interest  to  third  party,  552. 
warranty  by  one  partner,  444. 

SCOPE  OF  AUTHORITY, 

firm  liability  for  acts  of  partner,  486. 

SCOPE  OF  BUSINESS, 

evidence  to  show,  267. 

power  of  majority  to  change,  416. 

power  of  single  partner  to  bind  firm,  413. 


SCOTTISH  LAW, 

partnership  a  juristic  person,  122. 


SEALED  INSTRUMENTS, 

necessity  that  authority  to  execute  should  be  under  seal,  436. 


SEALS, 

necessity  of  release  under  seal,  491. 

power  of  partner  to  execute  contract  under  seal,  422. 


SECONDARY  CREDITORS, 

partners  as  firm  creditors,  537. 


GENERAL   INDEX  1689 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

SECRET  COMMISSIONS, 

collection  by  partner,  395. 


SECRET  PARTNERS, 

See  Dormant  Partners. 


liability  on  firm  contracts,  486. 

nature  and  characteristics,  139. 

term  synonymous  with  dormant  partner,  139. 

what  constitutes,  38. 


SECRET  PROCESS, 

bond  to  protect,  1171. 


SECRET  PROFITS, 

accounting,  389,  652,  653. 

liability  of  partner  under  Uniform  Act,  12. 

necessity  that  they  should  have  been  made  in  firm  business,  653. 

rights  in  joint  adventure,  978. 


SECRET  RESTRICTIONS, 

on  power  of  partner  in  scope  of  firm  business,  413. 


SECRET  USES, 

partnership  funds  by  partner,  392. 


SEPARATE  ENTITY, 

See  Entity. 

SERVICE, 

See  Process. 

SERVICES, 

action  on  personal  promise  of  pay  for  services,  750. 
compensation  to  partner,  350-355. 


SET-OFF  AND  COUNTERCLAIM, 

actions  between  joint  adventurers,  992. 
actions  between  partners,  764. 


1690  GENERAL    INDEX 

[References  are  to  sections — Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

SET-OFF  AND  COUNTERCLAIM— Con/mw^rf. 
against  individual  partner,  857. 
individual  debt  of  partner,  455. 
partner's  individual  note  for  firm  debt,  496. 

SETTLEMENT, 

See  Accounting;  Accounting,  Settlement  and  Distribution. 

by  single  partner,  451. 

fraud  in  settlement  with  retiring  partner,  554. 

joint  adventure,  985-987. 

private  settlement  on  dissolution,  675. 

with  one  partner  as  release  of  all,  499. 

SHARES, 

See  Stock. 
in  joint  stock  companies,  147,  1045. 
proportionate  share  of  partners,  295. 

SHARING  PROFITS, 

See  Profits  and  Losses. 


SHIPPING, 

business  subject  of  partnership,  426. 
partnership  liability  for  negligent  navigation,  509. 
sharing  profits  as  test  of  partnership,  38. 


SICK  BENEFIT  ASSOCIATIONS, 
sometimes  partnerships,  167. 


SIGNATURES, 

form  of  firm  signature  to  notes,  437. 
individual  signatures  to  bind  firm,  421. 


SIGNS, 

change  of  firm  name  as  notice  of  dissolution,  596. 
evidence  on  question  of  partnership,  887,  896. 
limited  partnerships,  1019. 


SILENCE, 

as  element  of  estoppel,  475. 


GENERAL    INDEX  1691 

[Referenceg  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

SILENT  PARTNERS, 

See  Dormant  Partners. 
defined,  140. 

nature  and  characteristics,  140. 
right  to  accounting,  657. 


SINGLE  TRANSACTIONS, 

whether  subject  of  partnership,  168. 


SITUS, 

See  Place. 

taxation  of  firm  property,  937-939. 


SKILL, 

duty  of  partner  to  exercise  in  interest  of  firm,  387, 
lack  by  partner  as  ground  for  dissolution,  584. 


SLANDER, 

See  Libel  and  Slander. 


SLEEPING  PARTNERS, 
defined,  140. 


SMUGGLING, 

partnerships  in  business,  172. 


SOCIETAS, 

form  of  partnership  in  middle  ages,  6. 


SOCIETIES, 

nature  and  characteristics,  157. 


SOLE  TRADER, 

married  woman,  190. 

SOLIDARY  OBLIGATION, 

synonymous  with  joint  contract,  489n. 


1692  GENERAL    INDEX 


[References  are  to  sections— Vol.  I.  §§  1-608;  Vol.  II,  §§  615-1195.] 


SPANISH  LAW, 

partnership  a  juristic  person,  122. 


SPECIAL  PARTNERS, 

See  Limited  Partnerships. 

death  as  dissolution  of  firm,  579. 
nature  and  liabilities,  149,  150. 
nature  of  liability,  137. 
under  Roman  law,  4. 


SPECIFIC  DENIAL, 

form  of  pleading,  1195. 


SPECIFIC  PERFORMANCE, 

partnership  contract,  778,  779. 


SPECULATION, 

by  partner  with  partnership  fimds,  392. 

joint  purchase  of  realty  for  speculative  purposes  a  partnership,   169. 


STAGE  COACHES, 

partnership  liability  for  negligent  operation,  509. 


STAPLE  COURTS, 

jurisdiction  of  partnership  matters  under  early  English  law,  7. 


STATUTE  OF  FRAUDS, 

assumption  of  debts  by  succeeding  corporation,  961. 
formation  of  partnership,  218,  219. 
necessity  for  written  agreement  of  partnership,  212. 
necessity  of  written  assumption  of  debts  of  old  firm,  559. 
parol  agreements  of  partnership  to  deal  in  realty,  218,  219. 
part  performance  of  contract  of  realty  firm  to  sell,  219. 


STATUTE  OF  LIMITATIONS, 

See  Limitation  of  Action. 


GENERAL    INDEX  1693 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

STATUTES, 

joint  debtor  acts,  494,  496. 
limited  partnership,  1003,  1005. 
making  joint  obligations  joint  and  several,  496. 
modifj'ing  liability  of  joint  contractors,  494. 

partnership   liability   of   corporators   who    failed   to   comply   with    re- 
quirements, 235. 
provisions  relating  to  joint  stock  companies,  1051. 
regulation  of  firm  names,  262. 
retroactive  effect  of  statutes  imposing  partnership  liability  for  defective 

incorporation,  235. 
special  acts  creating  joint  stock  companies,  1051. 


STEAMBOATS, 

liability  of  corporate  partner  for  injuries  to  passenger,  194. 


STEVEDORES, 

business  subject  of  partnership,  426. 


STOCK, 

division  on  formation  of  corporation,  952. 

issue  and  transfer  in  joint  stock  companies,  1055. 

transferability  in  joint  stock  companies,  146. 


STOCKHOLDERS, 

See  Corporations  ;  Defective  Incorporation. 


STOCKHOLDERS'  LIABILITY, 
extent  under  statutes,  236. 

on  defective  incorporation,  236. 


STORY, 

definition  of  partnership,  25n. 


SUBJECT-MATTER  OF  PARTNERSHIP, 

association  for  purpose  other  than  pecuniary  profit,  166. 

dealing  in  real  estate,  169. 

duty  to  turn  over  proceeds  of  illegal  transaction,  177. 


1694  GENERAL   INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.1 

SUBJECT-MATTER  OF  PARTNERSHIP— Con/mMcd 
grounds  of  illegality,  171. 
illegal  contracts  and  their  severance,  176. 
illegality  and  right  to  demand  accounting,  175. 
illegal  purpose  or  business,  170. 
offenses  against  morality  or  public  welfare,  173. 
partnership  as  to  single  transaction,  168. 
partnership  in  public  office,  174. 
purpose  must  be  for  gain,  165. 
sharing  profits  of  crime,  172. 
voluntary  associations  for  mutual  relief,  167. 


SUBMISSION, 

firm  matter  to  arbitrators  at  instigation  of  single  partner,  459-462. 


SUBROGATION, 

right  of  partner,  367. 

right  of  subrogation  of  ostensible  partner,  94. 

SUBSCRIPTIONS, 

partnership    liability    of    subscribers    of    stock    in    defective    corpora- 
tion, 230. 
shares  of  joint  stock  company,  1053,  1055. 


SUBSTITUTION, 

See  Novation, 

SUMMONS, 

See  Process. 

actions  involving  partnerships,  865. 


SURETYSHIP, 

assumption  on  dissolution,  676. 

contract  by  single  partner,  454, 

power  of  partnership  to  act  as  surety,  268. 

power  of  partner  to  bind  firm,  427. 

regulation  in  partnership  articles,  1100. 

release  of  all  sureties  by  release  of  one,  491n. 

retiring  partner  as  surety  on  old  firm's  obligations,  558. 

sureties  on  firm  bonds,  837. 

surety  on  partnership  bond,  837. 


GENERAL    INDEX  1695 


SURRENDER, 

insurance  policy  by  single  partner,  447. 


SURVIVING  PARTNER, 

See  Death  of  Partner. 

actions  against  estate  of  deceased  partner,  631. 

actions  by  or  against,  835. 

administration  of  firm  affairs  on  death  of  partner,  598. 

admissions  as  evidence,  928. 

compensation,  353. 

for  conducting  business,  636. 
continuation  of  business,  638. 
duty  to  account,  641,  658. 
duty  toward  estate  of  copartner,  403. 
general  characteristics,  616. 
liability  for  interest  and  profits,  636. 
ownership  of  firm  property  on  death  of  partner,  617. 
party  plaintiff  on  firm  contracts,  804. 
payments  to  and  by,  622. 
pleadings  in  actions  by  or  against,  849. 
power  to  bind  cosurvivors,  635. 
power  to  make  assignment  for  creditors,  621. 
provisions  for  purchase  of  shares  by  survivor,  1117. 
quitclaim  deeds,  626. 
right  in  firm  realty,  626. 
right  in  good  will,  326. 
rights   and   liabilities   with   reference   to   estate   of   deceased   partner, 

630,  631. 
right  to  maintain  action  against  administrator  of  deceased  partner,  836. 
right  to  purchase  interest  of  deceased  partner,  635. 
trustee  for  deceased  partner's  estate,  631. 


SURVIVORSHIP, 

provisions  in  partnership  articles,  1116. 
right  between  partners,  125. 


SWISS  LAW, 

actions  by  and  against  partnerships,  122. 


SYMBOLIC  NAME, 
use  by  firm,  260. 


1696  GENERAL    INDEX 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  11,  §§  615-1195.] 


SYNDICATES, 

agreements  for  formation,  976. 
form  of  agreement,  1180. 


TAXATION, 

after  dissolution,  942. 

domicil  of  partnership,  121. 

effect  of  failure  to  pay  license  tax,  200. 

firm  property  in  exclusive  possession  of  one  partner,  306. 

in  partnership  name,  935. 
good  will,  324,  936. 
individual  liability  for  firm  tax,  306. 
joint  stock  companies,  1050. 
listing  of  partnership  property,  121. 
Massachusetts  rule,  940. 
Michigan  rule,  941. 

partnership  at  place  where  business  conducted,  938. 
partnership  property  generally,  306. 
'  place  of  taxation,  121,  937-939. 

of  banks,  939. 

of  vessels,  939,  941. 
priority  on  distribution,  662. 
property  of  joint  stock  association,  943. 
redemption  from  sale,  944. 
sale  of  partner's  interest  for  his  taxes,  938. 


TAX  TITLES, 

partnership  in  purchase  and  sale,  216. 


TELEPHONE  ASSOCIATIONS, 

members  not  partners,  166,  167. 


TEMPORARY  INSANITY, 

partner  as  ground  for  dissolution,  583. 


TENANCY, 

in  partnership  property,  293. 


GENERAL    INDEX  1697 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  61S-1195.] 

TENANCY  IN  PARTNERSHIP, 

new  name  for  holding  of  partner  under  Uniform  Act,  12. 


TENANTS  IN  COMMON, 

capacity  as  partners,  198. 

community  of  interest  by  ownership  as  creating  partnership,  115. 

corporations  with  individuals,  197. 

distinguished  from  partnership,  125. 

tenancy  between  partners,  759. 


TENDER, 

effect  of  waiver  by  one  member  of  firm,  469. 


TENURE, 

partnership  relation,  223-225. 


TERMINATION, 

See  Dissolution. 

dissolution  by  express  will  of  partner  for  indefinite  term,  573,  574. 
expiration  of  term  to  dissolve  firm,  572. 
joint  adventure,  988. 


TESTS  OF  PARTNERSHIP, 

American  cases  opposing  net  profit  rule,  57,  68. 
attempted  limited  partnership,  98. 
common  ownership  of  profits  in  joint  business,  67. 
creditors  need  not  rely  on  profits,  59,  60. 
criticism  of  test  of  intention,  47. 
English  law  test  of  profit  sharing,  36-40. 
English  partnership  act,  48. 
estoppel,  49. 

under  Uniform  Partnership  Act,  101. 
fallaciousness  of  usury  argument,  61,  63,  64. 
former  partnership,  99. 
general  principles,  35. 
intention,  43,  44,  46,  47,  904. 
intention  test  in  England  and  America,  87-90. 
intention  test  under  American  law,  65,  66. 
modified  statement  of  profit  sharing  test,  83. 
nature  of  act  and  conduct  creating  estoppel,  92. 


1698  GENERAL   INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

TESTS  OF  PARTNERSHIP— Conh'HM^J. 

necessity  that  creditor  be  misled  by  act  or  misrepresentation,  95-97. 

net  and  gross  profits,  41. 

net  profit  rule  criticized,  58. 

net  profit  rule  needed  to  prevent  fraud,  62. 

partnership  under  agreement  to  incorporate,  100. 

profit  sharing  as  necessity,  80. 

profit  sharing  as  payment  of  rental,  79. 

profit  sharing  under  American  law,  51,  56. 

reliance  on  the  holding  out,  93. 

right  to  demand  accounting,  82. 

sharing  gross  receipts,  81. 

sharing  profits  and  losses,  42,  69-76. 

sharing  profits  as  a  royalty,  78. 

as  compensation  eo  nomine,  76. 

as  fee  or  commission,  77. 
subrogation  of  ostensible  partner,  94. 
summary  of  English  law,  50. 
summary  of  tests,  102-104. 
test  of  mutual  agency,  85. 

test  of  partnership  liability  arising  by  estoppel  generally,  91. 
test  of  profit  sharing  under  Uniform  Partnership  Act,  84. 
the  principal  trader  test,  86. 
time  of  making  representations,  96. 


TESTS  OF  SOLVENCY, 

under  bankruptcy  laws,  686. 


THEATERS, 

management  subject  of  commercial  partnership,  426. 
nontrading  partnerships,  151. 
operation  as  joint  adventure,  977,  978. 


TIME, 

accrual  of  action  for  accounting  or  dissolution,  718. 

authority  of  single  partner  to  change  time  of  payment  of  note,  437. 

conversion  of  realty  on  death  of  partner,  625. 

duration  of  partnership,  224. 

duty  of  partner  to  devote  to  firm  business,  387. 

provision  for  time  of  partner  to  be  devoted  to  firm,  1092. 

renewal  or  continuation  of  firm,  225. 

when  partnership  relation  begins,  223. 


GENERAL    INDEX  1699 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  61S-119S.] 

TITLE, 

interest  of  partner  in  firm  property,  291. 

partnership  realty  taken  in  name  of  individual  partners,  283. 
taken  in  firm  name,  284. 

TORTS, 

See  Injunction  ;  Negligence. 

actions  between  partners,  758. 

corporate  liability  for  torts  of  agents  and  servants,  504. 

joint  and  several  liability  of  partnership,  506. 

liability  of  joint  tort-feasors,  505,  506. 

liability  of  partner,  404. 

liability  of  partners  for  torts  of  member  after  dissolution,  599. 

parties  to  actions  for  joint  torts,  805. 

partnership  liability  generally,  503-517. 

for  torts  of  agents  and  servants,  504. 

for  wilful  and  malicious  torts,  512. 
plaintiffs  in  tort  action,  805. 
suits  against  partners  after  dissolution,  599. 


TRADE-MARKS, 

'  implied  disposal  by  sale  of  place  of  business,  328. 
licensed  use,  279, 

necessity  of  mention  in  sale  of  firm  effects,  328. 
ownership  by  individual  partners,  279. 
partnership  property  in,  279. 
transfer  on  dissolution  of  firm,  279. 


TRADE  SECRETS, 

enforcement  of  contract  not  to  divulge,  779. 

partnership  rights,  330. 

provisions  in  partnership  contract,  1108. 


TRADING  PARTNERSHIPS, 
enumeration,  151. 
nature  and  characteristics,  151. 
scope,  268. 

TRANSFER, 

See  Change  of  Membership. 

certificates  of  joint  stock  company,  1055. 
change  of  partnership  to  corporation,  956-958. 


1700  GENERAL    INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  11,  §§  615-1195.] 

TRANSFER— Continued. 

dissolution  of  firm  by  transfer  of  partner's  interest,  591. 
firm  paper  by  single  partner,  430-432. 
shares  of  joint  stock  company,  1055. 

TRANSPORTATION, 

See  Carriers. 


TRESPASS, 

actions  between  partners,  759. 

firm  liability  for  cutting  trees  by  one  partner,  515. 

partnership  liability  generally,  510. 


TRIAL, 

See  Actions. 

in  action  involving  partnership,  825. 

instructions  to  juries,  825. 

procedure  in  action  for  accounting  and  dissolution,  723. 

questions  for  court  and  jury,  825. 

setting  aside  verdicts  in  actions  involving  partnerships,  825. 


TROVER, 

actions  between  partners,  759. 


TRUSTEE, 

appointment  in  bankruptcy  proceedings,  688,  705. 


TRUSTS, 

accounting  on  theory  that  surviving  partner  is  trustee,  716. 
analogy  to  interest  of  surviving  partner  in  firm  property,  644. 
application  of  statute  of  limitations,  644. 
declaration  to  create  partnership,  128. 
distinguished  from  partnership,  128. 
partner  as  trustee,  28. 

for  other  partners,  116. 
partnership  liability  for  misapplication  of  trust  funds,  517. 
partnership  relation,  28,  128,  342,  653. 
partner  trustee  under  firm  lease  in  individual  name,  394. 
receiver  trustee  for  all  partners,  722. 
trust  relation  element  of  partnership,  116. 


GENERAL    INDEX  1701 

IReferences  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

U 

ULTRA  VIRES, 

articles    of    incorporation    sole   criterion    as   to    purpose    of    corpora- 
tions, 250. 
effect  of  performance  of  acts  to  invalidate  incorporation,  247. 
partnership  between  corporations,  193. 
partnership  liability  for  ultra  vires  acts,  250. 


UNDISCLOSED  PRINCIPAL, 

application  of  doctrine  to  dormant  partner,  500. 
firm  in  relation,  486. 


UNDUE  INFLUENCE, 

inducing  assent  to  formation  of  partnership,  214. 


UNFAIR  COMPETITION, 
use  of  firm  name,  266. 


UNIFORM  PARTNERSHIP  ACT, 

accounting  for  secret  profits,  652. 

accrual  of  actions  on  death  of  partner,  643. 

administration  of  firm  affairs  on  dissolution,  598. 

amendment,  595. 

application  of  assets  to  payment  of  debts,  525. 

assignment  for  creditors  by  one  partner,  458. 

authority  of  corporation  to  enter  into  partnership,  194. 

authority  of  one  partner  to  submit  to  arbitration,  459. 

binding  force  of  admissions  and  representations  of  single  partners,  466. 

changes  made  in  existing  partnership  law,  12. 

charging  partner's  interest,  821. 

commencement  and  termination  of  partner's  liability,  498. 

compensation  of  surviving  partner,  353. 

confession  of  judgment,  457. 

continuation  or  renewal  of  firm,  225. 

contracts  requiring  unanimous  consent,  415. 

contribution  between  partners,  364. 

contributions  by  partners,  401. 

conversion  of  firm  realty  on  death  of  partner,  623. 

conveyance  of  partnership  property,  305. 

declaration  of  agency  relation  of  partners,  411. 


1702  GENERAL    INDEX 

[References  are  to  sections— Vol,  I,  §§  1-608;  Vol.  II,  §§  615-1195.1 

UNIFORM  PARTNERSHIP  ACT— Continued. 
definition  of  notice  and  knowledge,  595. 
definition  of  partnership,  25. 

dissolution  by  conveyance  of  partner's  interest,  225. 
dissolution  by  transfer  of  partner's  interest,  591. 
duty  of  partner  to  account  for  benefits,  389. 
effect  of  admission  of  partner  after  dissolution,  600. 
effect  of  change  of  membership  of  firm,  540. 
effect  of  transfer  of  partner's  interest  to  third  partner,  552  . 
entity  of  firm,  123. 
firm  liability  for  misapplication  of  trust  funds,  517. 

for  torts,  503, 
insanity  as  ground  for  dissolution,  583 
joint  liability  for  torts,  506. 
liability  of  continuing  partner,  560. 

liability  of  incoming  partner  for  debts  of  old  firm,  561. 
notice  to  partner,  469, 
omissions,  11. 
partnership  property,  280. 

realty,  287. 
proof  of  debts  in  bankruptcy  proceedings,  694. 
proof  of  partnership,  883. 

proof  of  partnership  relation  by  estoppel,  909. 
provision  as  to  joint  liability,  496. 

interest  to  partner  on  advances,  361. 

majority  rule,  416. 
provision  governing  capacity  of  partners,  185. 
purpose  of  partnership,  165. 
reasons  for  existence,  10. 
regulation  of  conveyances  by  or  to  firm,  269. 
reimbursement  of  partner  for  advances,  357. 
rescission  of  partnership  agreement,  776. 
restrictions  on  partner's  authority,  418. 
right  of  partner  to  information,  346. 

to  the  keeping  of  accurate  accounts,  369. 
rights  in  firm  realty  on  death  of  partner,  629. 
rights  of  deceased  partner's  estate  on  continuance  of  business,  639. 
rights  of  firm  creditors  in  firm  assets,  534. 
right  to  accounting,  651. 
rules  for  accounting  on  dissolution,  663. 
rules  requiring  consent  to  admission  of  new  members,  201. 
scheme  of  treatment,  13. 
scope  of  American  act,  11. 
test  of  profit  sharing,  84. 
text,  pp.  1561-1581. 


GENERAL   INDEX  1703 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

UNIFORM  PARTNERSHIP  ACT— Continued. 
theory  that  partnership  not  an  entity,  123. 
transfer  of  partner's  interest  as  dissolution,  550. 

UNINCORPORATED  ASSOCIATIONS, 

See  Joint  Stock  Companies. 

embezzlement  of  funds,  405. 
nature  and  characteristics,  156. 


UNIVERSAL  PARTNERSHIPS, 
evidence  to  estabhsh,  880. 
nature  and  characteristics,  142. 
necessity  of  registration,  140. 


UNLAWFUL  CONTRACTS, 

power  of  single  partner  to  bind  iirm,  413. 

USAGES, 

See  Customs  and  Usages. 


USURY, 

early  test  of  partnership,  36. 
reimbursement  to  partner  paying,  727. 
test  of  partnership,  61. 


V 
VACATIONS, 

provisions  for,  in  partnership  contract,  1093. 

VARIANCE, 

between  pleading  and  proof,  861. 


VENUE, 

actions  against  joint  stock  companies,  1058. 

actions  between  partners,  766. 

actions  for  accounting  and  dissolution,  716. 

actions  involving  partnerships,  816. 

place  of  commencing  bankruptcy  proceedings,  703. 

57 — Row.  ON  Partn. — Vol.  2 


1704  GENERAL   INDEX 

[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  SS  615-1195.] 

VERBAL  AGREEMENTS, 

See  Statute  of  Frauds. 
effect  of  statute  of  frauds  on  formation  of  partnership,  212,  218. 


VERIFICATION, 

pleadings,  851,  866. 

by  one  partner,  866. 


VESSELS, 

place  of  taxation,  939,  941. 


VIRGINIA, 

profit  sharing  as  test  of  partnership,  56. 


VOLUNTARY  AGREEMENTS, 

See  Articxes  of  Partkebship. 

VOLUNTARY  ASSOCIATIONS, 

See  Associations. 

for  mutual  relief,  167. 

sick  benefit  association  sometimes  a  partnership,  167. 


VOLUNTARY  TRANSFER, 

firm  property  to  single  partner,  307. 


VOTING  TRUSTS, 

change  of  firm  to  corporation,  952. 


W 
WAIVER, 

defect  of  parties,  796. 

defects  in  process  by  appearance,  818. 

protest  of  paper  by  single  partner,  439. 

right  to  accounting,  657. 

tender  by  one  member  of  firm,  469. 


GENERAL   INDEX  1705 


[References  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  S§  615-1195.] 


WALL  V.  CARVER, 

English  test  of  profit  sharing,  39,  40. 


WAR, 

capacity  of  alien  enemies  as  partners,  186. 

existence  as  ground  for  dissolution,  577. 

necessity  of  notice  of  dissolution  on  account  of  war,  594. 

validity  of  partnership  to  trade  in  states  in  insurrection,  172. 


WARRANTY, 

power  of  partner  to  sell  firm  personalty  with  warranty,  444. 


WASTE, 

receivership  to  prevent  waste  by  partner,  789. 

threatened  waste  as  ground  for  appointment  of  receiver,  721. 


WATSON, 

author  of  first  English  treatis*  on  partnership,  8. 


WHO  MAY  BE  PARTNERS, 

See  Partkers. 

WIDOW, 

rights  in  firm  to  which  husband  belonged,  627. 


WILFUL  MISCONDUCT, 

of  partner  as  ground  for  dissolution,  585-587. 


WILFUL  TORTS, 

partnership  liability,  512. 


WILLISTON, 

argument  for  codification  of  laws,  10. 


WILLS, 

bequest  of  membership  in  firm,  201. 


1706  GENERAL    INDEX 

[Refereaces  are  to  sections— Vol.  I,  §§  1-608;  Vol.  II,  §§  615-1195.] 

WINDING  UP, 

See  Dissolution. 

accrual  of  action,  643. 

business  on  death  of  partner,  635. 

clubs  and  societies,  157. 

compensation  to  surviving  partner,  dZl. 

continuance  of  partnership  on  death  of  partner,  615. 

duty  of  surviving  partner,  616. 

limited  partnerships,  1037. 

provision  in  partnership  articles,  1128. 

under  Uniform  Partnership  Act,  12. 


WITHDRAWAL, 

notice  of  partner  of  intention,  1140. 

provision  in  contract  for  withdrawal  of  partner,  1119. 


WORK  AND  LABOR, 

sharing  of  profits  as  compensation  for  services,  75. 
sharing  profits  as  compensation  eo  nomine  to  create  partnership  rela- 
tion, 16. 


YOUNG  V.  AXTELL, 

English  test  of  profit  sharing,  11. 


LAW  LITERARY 


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UNIVERSITY  OF  CALIFOBMA 
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